8 Things You Need to Know About Divorce Finances

Every situation is unique - it pays to understand how.
By:
Chelsea Williams
August 2, 2021
N

o matter what your income or financial situation looks like when you’re married, there’s a good chance something will change when you comb through the details of your divorce finances. After you’ve combined at least some of your assets and liabilities over the years, it can take time to disentangle yourself financially from your former spouse.

If you’re on the verge of the divorce process, you may find you need a bit of real-world guidance in addition to what you’d get from the professionals you might be consulting, such as a divorce attorney or financial advisor.

You need tips from a divorcee who’s been there!

I’ve been through the process of removing myself from joint accounts, deciding who gets to keep a family home, and many other money-related elements of divorce. I’m here to share some lesser-known things you might not hear anywhere else.

Keep reading to explore:

  • Why you might not have to hire that pricey divorce attorney
  • Why child support is not a given in every divorce involving children
  • How your good credit score can survive the divorce process
  • How to adjust your budget post-divorce

1. You May Not Need a Divorce Attorney

Three people in a discussion

It’s true that divorce proceedings can be quite expensive and take a lot longer than you’d expect. However, it’s also true that they can sometimes be simplified if you do your research.

Some jurisdictions allow divorcing couples — especially those without children — to do everything through mediation. Most also offer free or reduced cost legal aid services. If you don’t have a complicated financial situation, these may be options you want to explore.

I’m not advising that you don’t consult with an attorney at all, but if finances are a concern, there may be a way to avoid paying exorbitant divorce attorney fees.

I’ve gone to court both with an attorney and without, and there are pros and cons to both.

Pros of being self-represented:

  • If you have very few elements of the divorce to settle, you can simplify the process
  • You won’t need to explain your situation to an attorney and their staff
  • There’s often less paperwork to complete, since the court won’t need to stay abreast of your attorney’s professional details
  • If your former spouse also chooses to self-represent, the case can be more balanced than if only one of you had an attorney
  • You might feel more eager to keep things amicable and therefore encounter less stress
  • You can save a ton of money

Cons of being self-represented:

  • Walking yourself through the process can be time-consuming and require research
  • Your case might move through the system slower without an attorney who has existing relationships with judges and other court employees
  • There might be some complicated paperwork you have to fill out
  • You’ll need to stay on top of filing deadlines and learn how to file with your local court
  • You could feel intimidated and stressed if you have to appear in court, especially if your former spouse has representation
  • If your case is complex or unusual, you won’t have an expert on your side to answer questions

Family law varies by state, so being self-represented may be easier in some states than others. I recommend looking into the process in your local area, and perhaps speaking to other people who have been through a divorce with and without legal representation. Online support groups could be wonderful resources.

There is no right or wrong answer, and you can change your mind about representation at any time during your case. Before deciding whether to hire an attorney, it’s helpful to tune in to what will make you feel most comfortable.

2. Child Support Isn’t Involved in Every Case With Children

divorce finances: dad and daughter playing

If you have children and co-parenting details are part of your divorce negotiation, it’s best to go into the case with an open mind regarding child support. While many people assume it’s a given that support will be exchanged between co-parents, that’s not always true.

There could be a lot of reasons for this. Sometimes, a judge determines there are extenuating circumstances that make child support unnecessary or not applicable to the case. Other times, the parents make nearly the same amount of money and share 50/50 time with the child. In still other cases, parents mutually agree not to factor child support into their co-parenting equation.

The same uncertainty applies to spousal support or alimony. Every state has different parameters for when these apply to a divorce, and it’s often up to a judge to decide if you’ll pay or receive this type of financial support.

Both child support and alimony can sometimes be negotiated in exchange for one party providing things like health insurance or life insurance. Some divorced couples end up splitting real estate or investment account ownership.

Try not to get attached to any outcome before a judge reviews your case. Even if you think you understand how divorce finances work, the outcome could surprise you.

3. Your Credit Score Doesn’t Have to Suffer

happy woman checking something on her laptop

Unfortunately, it’s common for people to struggle to maintain good credit post-divorce. This can be due to the complications of adding and removing names from the accounts that show up on a credit report. It can also stem from disputes about joint debt or simply not being financially stable enough to continue paying bills on time.

There are a few things you can do to protect your credit before and after you’ve agreed upon all the financial issues in your divorce proceedings.

Before or during your divorce:

  1. Contact companies with whom you have joint accounts, such as credit cards, to let them know about changes regarding who can access the account.
  2. Set up automatic payments whenever possible, especially if you’re stressed and busy during this time. This will help you avoid accidental late payments.
  3. Try not to accumulate additional debt or open new credit accounts during this transitional time.

After your divorce is finalized:

  1. Get in touch with the three major credit bureaus to notify them of any name changes post-divorce and to dispute any details on your report that are no longer accurate. You might have to be patient with this part — it takes 30-60 days for credit report changes to show up.
  2. Make a list of all the accounts you have and contact each company if any personal details, such as your home address, have changed.
  3. Consider a secured credit card or small credit builder loan if your credit has already been affected negatively by the divorce.

Credit is just one factor in the overall picture of your financial health. A great credit report can help you more smoothly set up your new financial situation.

Still, there’s no need to worry if you can’t make it through the divorce process with perfect credit. The good news is that a less-than-stellar credit score can be increased with patience and solid habits.

4. Money Talk With Your Co-Parent Can Be Amicable

divorce finances: mother and daughter working together

Divorce finances can be a bit more complicated for co-parents. You have to figure out how to take care of shared expenses until your children become young adults.

No matter how you split these expenses, clear communication is the key to effective expense management with your co-parent. Luckily, there are now convenient tools like Onward to facilitate financial communication amongst divorced parents.

With the app (which you can download for both iOS and Android) you’ll always know how much you owe for your portion of that dentist appointment or summer camp, and vice versa. There’ll also be a much lower chance of having a disagreement over last-minute changes or new expenses, since you can send proposals to each other in just a few seconds.

Modern solutions like apps have changed what’s possible for co-parents trying to keep the peace.

5. You Don’t Have to Hire a Financial Planner, But It’s a Good Idea

two people in a discussion

There will be things about the divorce process that you may not expect. Having someone neutral to help you navigate any unexpected expenses is beyond helpful.

Should you decide to hire a certified divorce financial analyst or a similar professional, here are a few questions to ask them:

  • How many dependents should I now list on my W-4?
  • What’s a fair way to split our marital assets?
  • How should I request that the other parent take care of their portion of our joint debt? What steps can I take to protect myself and my credit if they don’t pay as agreed?
  • What areas of financial planning will be important for my post-divorce life?
  • What’s the smartest thing to do with my spousal support or divorce settlement?
  • Do I need a new kind of insurance policy after a divorce?
  • How will my divorce affect my retirement plan?
  • What records do I need to keep if I’m receiving or paying child support?
  • Should I open a certain type of savings account if I’ll be losing health care coverage?

Even if some of the above questions don’t apply to you, you’d probably be surprised at how many of the financial elements of divorce you may not remember to consider without outside guidance.

6. Tax Returns Might Get More Complicated

divorce finances: woman looking through some paperwork

Complex finances can last even into your children’s young adulthood. Your children could be considered your dependents for quite some time after high school, especially for things like health insurance plans.

To avoid major confusion and filing delays every year, you’ll want to know who will be claiming the children and whether it’s something you’ll alternate each tax year.

TIP: Remember, a tax year is the year previous to the one when you’re filing! If your divorce decree says you claim the child in odd-numbered years, that means you actually claim them when you’re doing your taxes in the spring of every even-numbered year. Don’t worry if you and your co-parent ever accidentally claim your child in the same year. It’s easy to amend.

Here’s how to prepare for tax season as a co-parent:

  • Make sure both you and your co-parent know your children’s Social Security numbers. It’s a pain to get started filing your taxes and then realize the other parent has the numbers but you don’t.
  • Consult with a Certified Public Accountant (CPA) the first time you do your taxes post-divorce, even if you aren’t going to use one to file your taxes every year.
  • Keep track of your personal child care, medical bills, and any other tax-deductible expenses related to parenting. Onward can help you do this.
  • Research any supplemental tax forms you may need from the other parent (or forms you’ll need to give them) if one of you provides health insurance for your children.
  • Double check that you have shared the correct bank account with your tax preparer and the IRS if you’re expecting a refund. If it’s an old joint account and doesn’t match the names on your current return, you may experience unnecessary delays.

As you can see, it’s about a lot more than simple income tax when you’re divorced with children. Yet, the widespread availability of online tax services and e-filing makes taxes much less of a headache than they were for divorced parents in the past.

7. Your Financial Situation Could Improve After Divorce

man holding his credit card while checking something on his laptop

Many people assume that conflict and divorce go hand-in-hand. However, some aspects of life after divorce can actually improve. Finances are one area in which some divorcees experience relief.

Even if money was a sore subject in your marriage, that doesn’t have to be true when you’re no longer living together. If you carefully consider all of the above and do plenty of research before making any big financial moves, you could set yourself up for better finances when you’re single.

Of course, a positive change in your financial situation doesn’t necessarily mean you’ll have excess money at your disposal. You could be forced to drastically change how you manage your money. This could feel odd if you aren’t experienced at budgeting.

You could also be in a tough financial scenario in which you need to find new employment or take on a second job to make ends meet. This was the case for me, and it wasn’t easy to re-enter the workforce after having stayed home with young children for several years.

If you have tight finances as a single parent, my best advice is to protect your mental health by avoiding the “struggle story.” You aren’t destined to struggle, unlike the message our culture typically sends about how rough single parenthood has to be. You might work harder for the time being, but you can ultimately build a better life for yourself and your children.

8. Your Divorce Finances Will Be Unique

divorce finances: woman filling out forms

The outcome of your divorce case will be heavily determined by divorce laws in your state.

For example, if you and your former spouse were homeowners, you might have to wait for your home to sell or negotiate which of you stays in it, whereas a divorced couple that was renting an apartment might simply be able to transfer or end a lease. Or, if you had shared retirement accounts, you may have a lot more paperwork to do than a couple who had individual ones.

From the advice I’ve given above, I recommend taking what fits with your situation and leaving what doesn’t. Everyone’s experience with divorce finances is unique, and no singular advice will cover all the bases you need.

I encourage you to trust yourself and your financial decisions.

You Can Start Your New Life Without Financial Issues

Divorce offers you the chance to look at your personal finances in detail and start afresh. Sure, this process can be stressful, but it’s also potentially revitalizing. When you use the forced change as a time to reevaluate your financial future, you’ll give yourself the gift of knowing right where you stand as you begin your new life.


Chelsea Williams

Chelsea is a twice-divorced mom of two boys. She is happily single parenting and doing her best to balance two simultaneous co-parenting relationships. Despite the complications, Chelsea can see the beauty in her story and believes healing is possible for the whole family.