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Considering some important financial issues in divorce negotiations, P.2

Last time, we began discussing some of the important issues that need to be considered when dealing with the financial aspects of divorce. As we noted, there is the importance of taking stock of one’s own financial situation and ensuring that one’s spouse is fully disclosing his or her assets. This is particularly important for the financially weaker party or the party who will have primary custody of the children. Negotiation fits within the laws of the state concerning property division as well as the terms of any valid agreement between the spouses.

In negotiating the division of property, couples need to be mindful not only of the value of the property in question, but also the costs associated with the property, particularly taxes. Some assets will have high capital gains tax associated with a later sale, which can prove costly for the spouse who eventually sells the property. Other future taxes can also make a difference in the desirability of certain assets. 

Credit health is another important area of consideration. For some couples, divorce can be associated with a significant drop in their credit score. This can happen because of defaults on mortgage or credit card payments, for instance. Couples should keep an eye on their credit score in and after divorce to ensure there are no unknown debts or liens on their record. If there are, they should deal with them as soon as possible.

Important to remember is that, regardless of what agreements a couple comes up with in the divorce process, creditors really only care about whose name or names are on the account. If both parties are listed on an account, a creditor has the right to collect the full debt from either party. The solution is to split up joint accounts and financially separate from one’s spouse as far as possible. This can be a difficult issue when it comes to the family home, since it will not always be possible for both parties, or either party for that matter, to buy the other party out and obtain a new mortgage.

In our next post, we’ll look at several other financial issues divorcing couples should keep in mind. 

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