In addition to stress and host of other emotions, a divorce will likely raise a number of financial concerns. Lawyers and financial planners can partner to help clients navigate the divorce process and build a strategy for their financial future. Although each circumstance is unique and requires specific consideration and analysis, the five commonly asked questions below can assist financial planners in understanding the divorce process and the role that finances play.
- Which state laws govern the divorce process? As you may be aware, divorce laws vary from state to state. This means that what may be applicable in one state may be not in the next, so it is critical for financial planners to follow the individual state’s specific procedure when advising on divorce-related matters. This includes determining: (i) residency requirement (if any), (ii) how long spouses must be separated before a divorce, (iii) the grounds for divorce, (iv) how marital property is defined and divided and (v) eligibility for spousal support or alimony and the duration of eligibility.
- Does the length of the marriage matter? The timing of a divorce may be critical for any number of reasons. For example, in some states the eligibility period for alimony is tied to the length of the marriage. In addition, a party to a divorce may be eligible to receive Social Security benefits under his or her former spouse’s record if the marriage lasted 10 years or longer.
- When is the divorce decree issued? It can be important to know when, during the divorce process, the divorce decree is issued. In some states, such as Delaware, the divorce decree is issued before the court turns its attention to the division of the marital estate. When the decree issues first, spouses who are divorced may still be the joint owners of assets. In other states, the decree may not issue until the property division is complete. The distinction can impact many financial considerations, including how income or losses from marital assets are claimed for tax purposes.
- How is child support determined? Each state has its own guidelines to determine how much, if any, child support is owed. In addition, a child support order may determine if private school tuition is included in support. For more information about the specific guidelines by state, please visit the National Conference of State Legislatures.
- Are parents obligated to pay for college? As with the amount of support, each state determines whether a parent has an obligation to pay for college. In Delaware, for example, a parent’s obligation to provide support terminates when a child has reached age 18 and is no longer in high school, or 19, whichever occurs first. There is, therefore, no obligation for a parent to pay college tuition. In other states, there is an obligation to pay for college, however, each state may require child support to include all or a portion of college tuition.
An understanding of the divorce process is key to helping separating and divorcing spouses during a time of change. Perhaps the most important thing to know is that the process is generally a marathon, not a sprint. A knowledgeable team of legal and financial advisors can be essential in getting a husband or wife to the finish line.