Financial issues are always present even when marriages are not ending. But couples undergoing a divorce typically face these additional financial matters.
Couples must first decide how they will divide the property they acquired. Spouses can agree to dividing their assets or follow a court order made under Michigan law.
Bartering is an effective technique. A spouse may take the home, and, for example, the other spouse receives retirement assets in return. Another method is to sell property and divide the sale proceeds.
First, determine how much is owed and to whom. Obtaining a credit report may be essential.
Review the credit report and other information and find out which debt is shared, and which is held only by one spouse. This is a good time to cancel joint credit cards and keep one card in your name for emergencies. Make sure debt does not increase.
Also, take steps to decide who is responsible for specific debts. There are several options.
If you have savings or property that you can sell, pay off debt now so you do not have to worry that your spouse will leave you responsible for the debt. A spouse may also assume responsibility for debt in exchange for receiving more assets during property division.
Both spouses can also agree to share debt equally. This poses risks because you are still liable for joint debt that your spouse does not pay regardless of any signed divorce agreement.
Typically, retirement plans are divided equally. These funds may be used for retirement or for a down payment on a house.
Retirement assets may have been sufficient for the couple’s joint retirement needs. But individual requirements may be much greater. In addition to deciding the division of these assets, a spouse will also plan for future contribution to assure a secure retirement.
Custody, support, and property division can have tax consequences. These issues include:
- Which spouse receives the tax exemption for dependents.
- Which spouse may claim head of household status.
- Assuring that maintenance payments are tax deductible.
- Taking steps for deductibility of child support.
- Tax liability for assets such as the home.
- Penalties for early withdrawal from retirement plans.
Attorneys can help determine your financial needs. They may assist you in seeking a divorce decree that meets these needs and which is fair and reasonable.