How would your life change if you were to lose 50 percent or more of your net income in a divorce? The decision to separate from your spouse is not an easy one, and the outcome will not only affect you, but your family—especially if young children are involved.
Despite the emotional chaos you feel if you are considering a divorce, you must be clear about the financial consequences it may entail. It’s also important to prepare for the proactive changes that will make your transition into single life easier. Financial planning can help you map your future.
When going through a divorce, the first step you need to take regarding finances is understanding where your state stands on the division of marital property.
Community Property States — If you live in Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, or Wisconsin, property acquired by you or your spouse during your marriage is split equally, 50/50. No matter who earned the money or whose name is on the car title, deed, pension plan, IRA, etc., you will get half.
Equitable distribution states. In the other 41 states, you may or may not receive 50 percent of marital assets. The law recognizes the spouse named on titles, documents and deeds as the owner. However, the other spouse may still seek fair and equitable distribution. “Equitable” does not mean equal or morally entitled—the court will look at a number of factors to consider how to split everything. Adultery, for example, does not figure into property distribution unless it has caused a depletion of joint assets.
The object of equitable divorce is for each spouse to achieve a standard of living as close to that established during marriage as possible.
Some factors that may affect the court’s distribution include:
- Contribution of each spouse to the marriage, whether financial or child/ home care
- Career interruption caused by marriage or the financing of the education of one spouse by the other
- Projected financial needs of each spouse after the divorce
- Income and earnings potential of each spouse
Length of marriage
Courts have wide discretion in the division of marital assets. Frequently, the spouse in the more difficult financial position is favored. Regardless of whether you are the breadwinner or “less moneyed” partner, it’s important to educate yourself regarding your legal rights.
This is just the first step in a long process, but knowing what to expect will help you feel more prepared during this emotional time in your life.
Loretta Hutchinson is a member of the DailyWorth Connect program. Read more about the program here.