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Spotlight: Financial Resources


Introduction: Finances & Your Divorce

One of the most pressing matters in any divorce is the finances. Those going through divorce typically worry about the overall impact the proceedings will have on their personal finances and the resources they’ll receive from their soon-to-be ex. 

Unfortunately afterward, each party’s wealth will drop. According to one study, dissolution post-age 50 can result in a 50-percent decrease. Another study tracked married couples from their 20s into their early 40s, observing divorced partners experienced wealth declines four years prior to beginning divorce proceedings. Plus, they had an average drop of 77 percent once the dissolution was final. However, the numbers aren’t the same for men and women. The latter’s income typically falls 41 percent and credit scores drop dramatically post-divorce. 

Although this is largely due to asset splitting and disproportionate individual incomes, the cost of divorce plays a significant role as well. Legal-, financial-, real estate-, and mental health-related divorce expenses can range from $8,500 to $100,000, resulting in major income losses. 

Such statistics and studies underscore the importance of understanding how divorce impacts your finances, alimony and child support costs, and taxes. Plus, it emphasizes the need for a certified divorce financial analyst to assess your financial health and protect your finances.


man-sneaking-money-out-of-money-jarAssessing Your Financial Health During Divorce

It’s essential you assess your financial health pre-, post-, and during divorce to ensure you’re fiscally stable throughout the entire process. Before dissolution—even when you’re just starting to think about it as a possibility—it’s critical you prepare your finances, especially if you have remained uninformed throughout the marriage. Begin by organizing your financial portfolio and gathering essential paperwork such as tax returns, paystubs, and more. Schedule meetings with a finance professional to create short- and long-term plans. Open a bank account and apply for a credit card so you have separate access to money. Throughout the process, stay conservative: Don’t make large purchases or dip into joint accounts for unnecessary expenses.

During the dissolution, you and your spouse will be splitting assets, making decisions about the children, and working with professionals such as attorneys, real estate agents, and finance specialists. You’ll need to pay for legal costs, split assets and debt, discuss tax issues, and decide on child and spousal support.

Once the divorce is behind you, don’t stop assessing your finances. This ensures you’re set up for success in the future. Make any necessary document or account changes, and develop a financial plan for the short- and long-term. Finally, invest any additional money you have for retirement savings. 

While you’re assessing your financial situation, how do you protect your assets?


business-man-using-calculator-working-on-financial-documentsHow to Protect Your Finances

There are several actions you can take to protect your finances when going through a divorce, including:

File Before Your Spouse

By filing first, you’ll have a leg up on your spouse, providing you with additional time to secure an expert divorce team, and more. 

Establish Legal Separation

This ensures your money is protected after the established separation date.

Identify Your Assets

Gather all financial documentation and information. Ensure you clarify what is yours vs. your ex’s.

Liquify Assets

Ensure you have separate accounts and cash flow in case you’re cut off from joint accounts. You don’t want to be in a bind when it comes time to pay your lawyer. 

Cancel Joint Cards

Save your credit score from dropping by cancelling joint credit cards. You don’t want your ex to spitefully wrack up thousands of dollars on the accounts. 

Understand State Laws

Because every state follows different divorce laws, it’s important you understand which your state recognizes. This will help when determining assets and debt. 

Secure Personal Property

In some cases, exes have damaged or stolen the other’s property. To ensure this doesn’t happen to you, secure any valuable or sentimental items.

Reduce Unnecessary Expenses

During this time, you may need to be a little frugal so you can get back on your feet and meet your short- and long-term financial goals.

The final piece of advice? Understand how divorce can impact your taxes.


Woman-consulting-with-a-female-financial-manager-at-the-bankEverything You Should Know About Divorce & Taxes

Not many think divorce will impact their taxes, however, divorce can influence tax filing status, credits, and deductions. For instance, when you get divorced you may change your last name, which means it will need to be revised on several official tax documents. 

When filing taxes, the final divorce date plays a major role. Your status—joint or single—is determined by whether the IRS recognizes your dissolution. If not finalized by December 31 of the tax year, you’re still married in the eyes of the IRS—meaning you need to file a joint return. However, you’re eligible for a higher standard deduction. If the IRS does recognize your divorce, you’ll file as single or head of household if you meet certain criteria. 

When filing your taxes, you may be wondering: Who claims the children? If you have one child, only one parent can do so. However if you have multiple, each parent can claim half. Both parents cannot claim the same child. When claiming a child, you can file for head of household status, making you eligible for child tax credits. 

Other tax issues you should consider include:
  • Child support and alimony are not taxable or deductible.
  • Legal and divorce expenses are non-deductible.
  • IRA contributions are non-deductible if the divorce is finalized by the end of the tax year.
  • If assets are transferred to you, you don’t have to pay additional taxes on it.


parents-holding-their-childs-handFactors Impacting Alimony & Child Support Assessment

There are many factors impacting your final alimony and child support payments. Each state has its own list of indicators to consider when determining the amount paid for each, so be sure to discuss the laws with your attorney and financial advisor.  

Factors impacting alimony include:
  • Standard of Living
  • Duration of Marriage
  • Financial Resources & Conditions
  • Physical & Emotional Conditions
  • Contribution to the Marriage
  • Reasonable Needs Calculation
  • Property & Expenses
Considerations used to determine child support include:
  • Parental Income -Including Salary, Bonuses & Commissions
  • Number of Dependents
  • Health Care Costs
  • Child Care Expenses
  • Living Arrangements & Custody
  • Necessary Costs

For information on how to appeal paying spousal support after a divorce, check out our blog here.



businessmen-looking-at-financial-data-togetherWhy You Should Hire a Certified Divorce Financial Analyst

The best way to guarantee a fair financial split is engaging a Certified Divorce Financial Analyst (CDFA). These professionals are tasked with achieving an equitable divorce settlement and division of assets for both parties. Because a 50/50 split isn’t always the most fair way to divide assets, a CDFA can uncover true equity that ensures both parties remain financially stable in the short and long term. Check out an example of this from the national Institute for Divorce Financial Analysts here

CDFAs should be able to assist you and your soon-to-be ex with property valuations and split, tax issues, retirement fund and pension divisions, child support costs, alimony costs, and payment for children’s basic needs such as education or medical treatment. They’ll identify the short- and long-term impacts of dividing assets in various ways for each spouse. 

The major benefits of hiring a CDFA include:
  • Helping you avoid long-term financial difficulties related to the divorce
  • Assisting with financial decision-making
  • Reducing your stress, anxiety, and confusion about financial aspects of divorce
  • Appearing as an expert witness
  • Aiding in mediation cases
  • Knowledge of tax laws related to divorce


If you’re interested in hiring a Certified Divorce Financial Analyst to assist with your finances during the divorce process, simply browse DivorceForcePRO—a resource packed with professionals throughout the nation. They can assist you with all the aforementioned subjects, including tax issues, child and spousal support, financial health, and much more. 

Hire a CDFA today!