Law Office of Joanne Kleiner

Finance

Aug 05

How Will a Divorce Impact My Financial Future?

How Will Divorce Affect My Finances?

Money is among the top three reasons why people choose to divorce. Unfortunately, the process of divorce itself can cause significant financial difficulties for one or both parties, as net worth typically drops by at least 50%. Divorce has immediate, short-term and long-lasting impacts on your finances, but working with a divorce lawyer and using an out-of-court mediation or collaborative process may help mitigate the effects of divorce on your bottom line.

Paying for a Divorce

Using an alternative dispute resolution process helps you stay out of the courtroom during divorce proceedings. However, you’ll still have to pay for legal representation, court fees and other expenses related to the divorce, such as document preparation fees. Depending on the length of your divorce process, how long it takes you and your spouse to agree to terms and whether or not there are child custody issues, paying for a divorce may be a considerable expense. Some people need to take out personal loans in order to pay for these costs.

Increased Costs of Living on Your Own

During a marriage, the costs of housing, utilities and food are typically shared. Maintaining two separate households costs more than one larger household in most situations. After a divorce, at least one party typically moves out of the family home. If you’re the one moving into a new residence, you’ll have to come up with the funds for a security deposit, utility deposits and more.

Lower Standard of Living

After a divorce, your standard of living is likely to drop. You may have less disposable income for restaurants, clothing and other niceties. Many people have to downgrade their vehicles, move to a lower-cost neighborhood or a smaller home and forego services, such as cable, television subscriptions or gym memberships. If you were a stay-at-home parent, your lifestyle could change drastically if you have to search for a job after being out of the workforce for a while.

Decrease of Your Net Worth

Your net worth includes real estate, investments, vehicles, jewelry, cash and other items of value. In most divorces, those assets are split between the two parties. Your net worth may drop by 50% or more. If you must pay spousal or child support, or if the court awards your ex-spouse more than 50% of the marital assets, your net worth could drop even further. With a lower net worth, you might find it more difficult to borrow money for personal needs, take on a mortgage or secure a business loan.

Difficulty With Sudden, Unexpected or Large Expenses

Married couples often have two incomes, which makes a sudden or unexpected expense less of a catastrophe. For example, when a married couple needs to replace the roof on their home, securing a loan or paying for the roof with monthly payments or cash on hand is usually a doable situation. If you had to pay to replace a leaking roof on just one income, the situation could be more challenging. You’ll also need to consider how divorce will impact other large expenses, such as paying for a child’s college education, replacing a vehicle or getting a new furnace.

Depleted Savings and Investments for Retirement

Pensions, Social Security benefits, stocks, investments and retirement accounts are all counted by the court when determining assets. Your ex-spouse may claim part of your pension funds, leaving you with less money for retirement. Many people dip into their 401(k) accounts in order to pay for their legal expenses or to purchase a new residence after a divorce. Depleting your retirement account may incur penalties and fees, especially if you’re younger than age 59 1/2. Your emergency fund may be depleted, and restoring it on your income alone could be a difficult task.

If you’re considering a divorce and have concerns about the financial impacts, you may benefit from an appointment with a Pennsylvania divorce lawyer. Call the Law Office of Joanne Kleiner at (215) 886-1266, or fill out our contact form to request a confidential consultation today.

Oct 28, 2012

Division of Marital Property in Pennsylvania (PA)

Dividing marital assets and liabilities in a divorce can be a difficult, challenging process wrought with financial concerns and clouded by emotions. It is helpful to understand the property division laws in Pennsylvania, so that you can make wise, sound decisions as you transition into your next phase of life.

Marital assets are divided equitably in Pennsylvania between the two divorcing spouses. This does not mean that assets, property, and liability are divided evenly. It means that they are divided fairly between both spouses. Additionally, the courts in Pennsylvania will take into consideration the contributions, both financial and otherwise by each of the divorcing partners.

Asset Valuation

Asset valuations, or discerning the value of involved assets, are determined in most situations at the time the asset is being divided.

General Points to Consider With Equitable Division

Length of marriage, degree of education, and age of divorcing spouses are all factors that the courts take into account when determining how to divide property. Additionally, the health, ability to earn a living, and the standard of living that has been the status quo of the marriage are all taken into account.

Pensions

Pensions that will be subject to equitable property division include the amount that was acquired during the time of the marriage up to the separation, in most cases. In some cases, disability pensions may not be considered as marital property.

Gifts and Inheritances

Those gifts and/or inheritances that were given specifically to one spouse during the marriage will generally not be subject ot marital division. Again, it will depend on the specifics of your individual situation.

Sacrifice of Spouse

Here the question becomes whether one spouse did give up a potentially lucrative career to support the other spouse in his or her career efforts or to provide a stable home for the children. If one spouse did sacrifice in manners like these, the sacrifice can potentially be compensated for and monetized upon division of property.

Custodial Parent and Children’s Financial Needs

This issue becomes especially important when a divorce involves a special needs child or a child with serious health problems.

Pre-Nuptial Agreements

Agreements like these could have excluded some assets, including a business, from property division.

Marital Misconduct

Although indeed troubling, misconduct does not impact equitable distribution in Pennsylvania.

Talk Your Situation Over With a Family Law Attorney – Abington, PA

In any divorce proceeding, equitable division can become a difficult, upsetting process. Having an experienced family law attorney who knows how to protect your rights and help you understand consequences of your decisions can make a world of difference in how you proceed with your life after the divorce. Contact the Abington law firm of Joanne E. Kleiner & Associates or call (215) 886-1266 to schedule a consultation with an experienced family law attorney. We represent clients throughout Southwestern PA.