Unpacking the Financial Implications of a Divorce Decree

When a marriage ends, many expenses arise. You may need to pay alimony or child support, close joint accounts and open new ones, change your name, start a budget, and consider other costs like moving expenses and setting up utilities in a new home. Additionally, divorce may impact your credit. Whether a debt is considered separate or community property may impact your credit score.

Child Support

A divorce decree typically stipulates which parent must pay child support. It can also set forth how much that support will be and how long it should be paid. This type of support ensures that one parent does not unfairly end up bearing the burden of all the children’s financial needs.

To determine the amount of child support, a judge looks at several different aspects, including income, need, the standard of living, length of marriage, age and health of both parties, and the ages and needs of the children. A judge may also consider the debts of both parents.

Joint debts, such as mortgages, do not automatically disappear when a couple divorces. These debts will remain on the credit report of both parties, and they must be paid as agreed.

The paying parent may sometimes argue that the receiving party uses their child support check for personal expenses rather than child-related expenses. However, unless there is clear evidence that this is occurring, convincing the court to change the amount of child support payments more quickly may be challenging.

Property Division

Property division involves deciding who gets what regarding real estate, bank accounts, investments, and debts. It can be decided in a negotiated settlement or by a judge if the case is contested.

Certain states have equitable-distribution laws, which divide assets and debts according to the contributions each partner made to the union and the standard of living they both enjoyed. This method differs from community property states, which divide all assets and earnings accumulated during the marriage equally.

Separate property includes any items one party owned before the marriage, personal injury lawsuit awards, and any asset a person acquired during a legal separation period that did not become commingled with shared assets, such as an inheritance.

Generally, the separate property becomes marital property if used to purchase shared assets or pay for a mutual debt, such as a mortgage. Homes are often the most significant asset in a divorce. The responsibility for the home’s mortgage debt is usually divided between the two parties depending on the terms of a negotiated settlement or a judge’s ruling in a contested case.

Child Custody

If you and your spouse have children, you must decide how to share the legal responsibility of making major decisions for them. It includes where they will live, what kind of religious training they will receive, and whether they will have surgery. It also involves deciding who will pay child support. The courts base these decisions on state laws and a formula considering both parents’ incomes. A divorce decree may specify which partner is responsible for certain joint debts, but that won’t necessarily stop creditors from coming after both parties. If you and your ex-spouse disagree on handling a creditor, it may take time to resolve the issue, and you could lose your credit score in the process.

When navigating through divorce proceedings, understanding Virginia child custody laws for fathers becomes imperative, especially regarding major decisions about where their children will reside, their religious upbringing, and medical procedures.

Similarly, if you and your ex-spouse disagree on handling a future expense, you must devise a communication system. That might include a regular financial check-in via email. That way, you can document any agreed-on next steps. 

Alimony

The financial repercussions of divorce extend beyond child support and property division. Alimony, also known as spousal support, is a regular payment made to a former spouse to assist them in maintaining the lifestyle they had while they were married.

Judges determine whether or not a spouse is eligible for alimony and if it should be paid in a lump sum or continuingly. They also set how long a person should receive payments and under what circumstances they should stop, such as when the paying spouse remarries, or the recipient spouse reaches retirement age.

One way to limit the financial impact of a divorce is to work with an ex-spouse to reach an agreement on how to manage shared debt. If both of your names are on a credit card or mortgage, it is a good idea to transfer that debt into one person’s name before finalizing a divorce decree. If you can’t agree to split the debt, make paying off joint debt a priority so your credit is not negatively affected. It will be simpler to start over with clean credit following a divorce.

Visitation

In most divorce cases, one or both spouses want to continue to play a role in their children’s lives and have as much time with them as possible. It is often reflected in the final child custody arrangement set forth by the judge. The divorce decree can specify when noncustodial parents can see their kids, including weekends, holidays, and summer vacations.

It can also outline visitation restrictions or special conditions. Joint responsibilities like a mortgage or credit card debt don’t disappear once the marriage ends. Depending on the details in your divorce decree, it may stipulate which partner is responsible for making payments or which name to use when contacting service providers.

Everyone involved in a divorce experiences an emotional and financial roller coaster. Working with financial professionals can help you determine how spousal support and child support will affect your income and how to prepare for the economic ripple effects of a divorce. If you own a business, it’s essential to understand how the division of assets and potential spousal support payments might impact your company’s future.