INDUSTRY INSIGHT
D
ivorce can be a scary prospect
for many but fear can be reduced
if you are prepared. Your inquiry
may start with confiding in a friend,
a therapist or family member about
what to do, how to do it and when
to get started. Some people are able
to have a meaningful and productive
conversation with his/her spouse
on how to settle issues while others
need to go to court to have a judge
intervene. Many are choosing other
forms of alternate dispute resolution
by going through mediation or the
collaborative process which can often
times be less expensive than litigation.
One of the most important things
you can do is get as educated as you
can on your family’s finances (incomes,
assets, debts). You should gather as
much financial information as you can
before moving forward with the divorce
because you may end up having
trouble accessing financial statements
from the bank or financial investments
once the case begins. Documents like
W-2’s, tax returns and paystubs can also
be very helpful moving forward.
Next, you will want to figure
out how decisions will be made
while proceeding with the
divorce process. Will you both
remain in the marital residence?
Who will be paying which bills? If
you have joint accounts, will you
continue to deposit funds into
these accounts? Some people
choose to maintain a “status
quo” and essentially continue
managing the finances as they
always had while working
through the divorce.
Determining the Separation
Date is also an important issue.
The date of separation can
determine the value of marital
assets vs. separate assets and can
often make a big difference in
any ultimate settlement or court
award. Income earned or assets
acquired post-separation may be
yours, and yours alone and may
not be able to be claimed by your
spouse.
From a financial perspective,
there are a number of issues you
will need to think about. Parties
often forget that joint accounts
may need to be re-titled or
closed out. You will also want
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to discuss how to value retirement
and investment accounts, as there are
typically tax consequences associated
with these types of accounts. Any
debt must also be considered when
proceeding. You should discuss who
will be responsible for paying what.
Keep in mind that if one party assumes
more of the debt, that spouse may
receive more assets to make up for it.
Another hot topic is taxes. Will
you continue to file jointly while
you are going through the divorce
process? Who will claim any children
once you have divorced and begin
filing separately? Alimony payments
are taxable as income to the spouse
who receives the support, and tax
deductible for the paying spouse. For
some, these types of decisions can have
a big impact on ultimate tax liability.
It may be helpful to consult with your
accountant to better understand these
issues and the effect they may have.
Alimony, spousal support and child
support are crucial to consider if you are
going to be the payor or the recipient
of the support. It may be helpful to
create a budget for yourself
and your children to determine
what an appropriate amount of
support would be. For children,
items like tuition, unreimbursed
medical expenses, child care,
and extracurricular activities are
all factored in when calculating
child support. Retrieving relevant
documentation for these
expenses can make calculations
that much easier and accurate.
Being prepared is empowering
which is key when you are going
through a major life transition
like divorce.
This Industry Insight was written by
Brooke B. McMorrow.
Attorney Brooke McMorrow is the
founding member and Managing Attorney
of McMorrow Law, LLC located in Wexford,
Pennsylvania. McMorrow Law focuses
on family law matters such as divorce,
custody, child support, guardianship,
estate planning, and probate/estate
administration in Pittsburgh and the
surrounding counties. Attorney McMorrow
is collaboratively trained and a certified
mediator. She is also a founding member
of Collaborative Solutions North. She is
licensed to practice in Pennsylvania and
New York. For a free initial consultation
call 724.940.0100 or visit the website at
www.mcmorrowlaw.com.
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