How Does Divorce Affect My Financial Status?

When you decide that your marriage is over, your thoughts likely go straight to filing for a divorce. For many couples, divorce is the only way that they can handle the situation. There are some very specific ways that divorce can affect filers’ finances in California that must be carefully considered. Because every situation is different, these basic answers might not be the full extent of how divorce can affect you.

How will divorce affect my taxes?

There are several ways that divorce can affect your taxes. Spousal support, for example, is taxed as income for the receiving spouse but isn’t taxed for the spouse paying the spousal support. When the divorce is finalized, your filing status for taxes will likely change. That can have an effect on your liability or refund.

What about our debts?

Dividing debts is part of a divorce settlement. When it comes to debts, such as credit card debt, divorce settlements might cause problems. The credit card companies and other creditors aren’t bound by divorce agreements if you and your spouse both applied for the account. This means that if you or your ex-spouse doesn’t pay for a bill, the other one might still be held liable for the debt.

How are pensions handled?

The way pensions are handled depends on the situation. You and your ex-spouse might each be able to keep your own pension. It is important, however, to have an accurate value for pensions so that the value can be considered during the property division phase of your divorce.

Anything that has to do with finances can be affected by divorce. For this reason, you should make sure that you fully understand how each decision you make and how each aspect of the divorce will affect your financial status.

Source: California Courts, “FAQ” Sep. 19, 2014