Maintaining financial stability can be challenging after a separation or divorce. When dividing marital property between divorcing spouses, Florida follows the concept “equitable distribution”. This consists of allocating marital assets on the basis of each spouse’s overall contribution to the total amount of marital property. This could result in a significant decline in the standard of living enjoyed previously by the spouse who was not the primary earner in the household. So, it is important that before signing any divorce agreement, you assess your financial needs in terms of the four fundamental concerns listed below.
1. How Will You Pay for Your Children’s Education?
Your divorce agreement should outline how your children’s education will be paid for and how each parent will contribute. By and large, you should avoid using your pension funds to finance your children's education simply because this money can be extremely difficult, if at all possible, to replace before you retire.
2. Will You Be Able to Afford Health Insurance?
If you foresee any difficulties with being able to pay for health care for yourself and your children after your divorce, the cost of health care should be included in your child support calculations.
As a rule, the parent who enjoys access to the most affordable healthcare should keep the children on their health insurance policy.
Also, keep in mind that if your spouse's employer employs more than twenty individuals, the company must enable the spouses of its employees to be insured under the same policy for a minimum of three years after they divorce.
3. Can You Afford to Keep the House?
In the event that you get primary custody of your children in your divorce settlement, you would probably want to stay in your marital home. Aside from not wanting to disrupt your children’s lives any further, you may want to hold on to the house simply because it is a particularly valuable asset to possess.
Then again, maintaining a house can be costly with respect to mortgage payments, taxes, utilities and routine maintenance. Therefore, you must first determine if staying in the home would be a wise financial decision.
Will it be too much of a financial burden to keep? Would it not be better to sell it and split the proceeds with your spouse? How do the costs associated with acquiring another place for your family to live compare to the cost of keeping the home? These are amongst the many questions that you should answer even before you begin to discuss receiving the home in your divorce negotiations.
4. Will Your Tax Liability Increase?
Your divorce agreement can appreciably increase your tax liability if you are not careful. In particular, capital gains, alimony and your change in filing status can dramatically affect the amount of income taxes you will have to pay after your divorce.
Alimony and Filing Status - Alimony and the change in your filing status that accompanies your divorce will usually have the greatest effect on your income taxes. As a rule of thumb, any alimony that you receive will increase your taxable income and any alimony that you pay can be used to reduce your taxable income.
With regards to your filing status, you can save a considerable amount in taxes if you and your spouse wait until after December 31st to get divorced and agree to file a joint tax return for the previous year. Even if you get divorced before December 31st, you may lessen your tax burden if you file as head of household instead of single. In either case, however, it would be best to discuss these options with a competent tax adviser before deciding how you will file.
Capital Gains Taxes - It is advisable to assess potential capital gains and liabilities when your marital assets are being divided. You should make certain that any assets you receive in your divorce settlement will not come with a high tax burden.
If you anticipate your marital home being sold at a considerable profit, you might want to give some thought to selling it prior to filing for divorce, this way you can benefit from the capital gains tax exclusion which is available to married couples.
Conclusion
The issues discussed in this article are but a few of the numerous concerns that you should take into account before signing a separation or divorce agreement. For a more in depth look at the issues highlighted here, as well as any other issues concerning your divorce or separation, you should sit down with a credible Divorce Attorney who can help you determine what would be best for you and your family.
