Facing the possibility of a divorce is never easy, especially as the year comes to a close.
Divorce isn’t just a legal process. It’s a financial and emotional turning point. Before December 31 rolls around, you should consider some practical steps to help protect your interests, position yourself for a smoother process, and begin the new year – and your next chapter – on a strong note.
1. Review Your Finances Before Year-End
Understanding your financial picture is probably the single most important step you can take before anyone files for divorce. And the end of the year is the perfect time to create a complete record of your finances.
- Collect all your financial statements. Gather your bank statements, credit card statements, mortgage records, and loan documents for the entire year. Having access to all your statements provides a reliable financial baseline for your attorney and the court.
- List all your income sources. Include your salary, any bonuses, business income, rental income, and investment dividends. Documenting every source of income will help determine potential child or spousal support and ensure nothing is overlooked during property division.
- Track your monthly expenses. Review and categorize your spending on essentials, such as housing, utilities, insurance, and food, and your discretionary spending, such as entertainment and travel. This information is critical for supporting any requests for child and spousal support as well as creating a post-divorce budget.
- Gather supporting records. Keep copies of your tax returns, pay stubs, and end-of-year investment statements. These help create a snapshot of your household finances and can save time (and legal fees) later on.
By compiling this information now, you’ll avoid the scramble of gathering documents after a divorce petition is filed.
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2. Consider Tax Implications
The timing of your divorce will directly affect how you will file your taxes and which credits or dependents you’ll be able to claim.
- Your marital status as of December 31 controls your tax filing status. If you are married on the last day of the year, even if you separated earlier, you must file as “married,” either jointly or separately.
- Evaluate joint vs. separate filing options. Filing jointly can reduce your tax burden and provide simplicity, but it also means both spouses are responsible for any tax or penalties owed. If one spouse has unpaid taxes or questionable deductions, you may want to consider filing separately.
- Determine who will claim dependents if filing separately. Credits such as the Child Tax Credit, the Child and Dependent Care Credit, and education-related credits can significantly reduce your tax liability. Only one parent may claim dependents per year if filing separately.
Consult a tax professional before year-end to fully understand how the timing of your divorce and the allocation of dependents and credits will affect your current and future returns.
3. Understand and Make Smart Decisions About Property, Assets, and Debts
Dividing your marital property and debts is often one of the more complicated aspects of a divorce. Get ahead by reviewing both what you own and what you owe before the year ends.
- Identify what is marital vs. separate property. Marital property generally includes assets and income acquired during the marriage, regardless of whose name appears on the account. Separate property usually includes assets owned before the marriage, unless those assets have become commingled.
- Address your marital debt. Marital debt typically includes any debt incurred during the marriage, even if only one name appears on the account. List all debts and avoid taking on new joint obligations before divorce proceedings begin.
- Document retirement or investment contributions. Contributions made during the marriage are often subject to division. Keep accurate records of these deposits.
- Avoid major financial moves. Do not sell, transfer, or hide assets before consulting your attorney. These actions could complicate proceedings or lead to court sanctions.
Understanding the scope of your marital assets and debt now will give you and your attorney the information you need to protect your share.
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4. Consider Your Health Insurance and Benefits
Health insurance is often overlooked until after a divorce is underway, but planning ahead is essential so you aren’t left without coverage.
- Plan for your own coverage. If you are on your spouse’s employer-sponsored health plan, you will lose coverage once the divorce is final. Research your options, such as COBRA continuation, your own employer’s plan, or private health insurance.
- Decide who will cover your children. Determine whether you or your spouse will provide health insurance for your children post-divorce. This also affects child support calculations.
- Act quickly on qualifying events. Divorce is considered a qualifying event for new insurance enrollment, but there are strict timelines for applying.
Researching and making these decisions early avoids gaps in coverage and protects your family’s health care needs.
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5. Retirement and End-of-Year Contributions
Retirement accounts are often among the most significant marital assets, and year-end is a critical time to review them.
- Maximize contributions. If your joint income allows, make any final 401(k) or IRA contributions before December 31 to capture available tax advantages.
- Track employer matches and profit-sharing. These contributions are considered marital property and will need to be valued and divided.
- Understand QDROs. A Qualified Domestic Relations Order (QDRO) allows division of retirement accounts without tax penalties. Your attorney can help ensure this process is handled properly.
By reviewing retirement accounts now, you ensure these long-term assets are accurately valued and divided.
6. Custody Planning and Parenting Arrangements
Whether you expect a straightforward parenting arrangement or a custody dispute, thinking through custody options early can prevent unnecessary conflict and provide stability for your children.
- Understand custody types. Legal custody involves decision-making authority; physical custody involves where the child resides. These can be joint or sole, depending on circumstances.
- Focus on your child’s best interests. Courts make decisions based on what benefits the child’s well-being and stability.
- Begin discussing a parenting plan. Start outlining schedules, transportation, and care responsibilities with your spouse to reduce future disputes.
- Keep communication respectful. Keep discussions civil and use co-parenting apps if direct communication is difficult.
Starting these conversations before filing sets a constructive tone for future co-parenting.
7. Surround Yourself with Good Support
Divorce is legally, financially, and emotionally complex. Build a team of trusted professionals to support you.
- Meet with a family law attorney. Early legal guidance helps you avoid costly mistakes and plan strategically.
- Consult a CPA. Understand how divorce will affect tax deductions, credits, and exemptions for the current and upcoming year.
- Work with a financial planner. Plan for your future on one income and set realistic goals.
Moving Forward from a Position of Strength
Preparing for divorce can feel overwhelming, but taking these steps now gives you a head start and a stronger legal footing. Preparation allows you to make decisions from knowledge rather than urgency, protecting your assets and supporting your children effectively.
At Melone Hatley, P.C., our experienced family law attorneys guide clients through every stage, from pre-divorce planning through final judgment. We provide skilled legal insight and compassionate support. To schedule a free consultation with one of our Client Services Coordinators, call 800-479-8124 or visit www.melonehatley.com.
Schedule a call with one of our client services coordinators today.
