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How a divorce impacts your financial state · Family Law Talk

0:01
Speaker 1: Welcome to Family Law Talk.
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Speaker 2: Family Law Talk.
0:05
Speaker 1: Presented by Kirk Stangy of Stangy Law Firm PC. Stangy
0:09
Law Firm is a multi state.
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Speaker 2: Family law firm.
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Speaker 1: Now here's your host, Kirk Stangy.
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Speaker 2: Welcome to Family Law Talk. We have an interesting topic today.
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The topic is how a divorce can impact your financial state.
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And this episode today is based on an article on
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our blog, Tulsadivorce lawyersblog dot com dated May eighth, twenty
0:34
twenty four, and the title of that article is how
0:37
divorce affects your Finances. So, as a follow up to
0:40
the episode today, go out over to that blog and
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check out the article on the same topic for more information.
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But let's go ahead and jump on in. The reality
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of the situation is is that divorce can impact somebody's
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finances and it can do it in a real significant
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way with an impact that is not only short term,
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but it can be long term. And so for lots
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of parties, you know, they might come in to a
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divorce in a certain financial state, but coming out of it,
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it could be a totally different ballgame, and it can
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really be stressful. It can cause a party to have
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to kind of reorganize their life in terms of their
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spending and maybe the lifestyle that they had before. And
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I know for lots of individuals that might not be
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what they want to hear. But the truth of the
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matter is a divorce is a really traumatic event that
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can really impact somebody's financial state. Now, look, if an
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individual is smart about what they do, if they hire
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competent legal counsel, and they take the appropriate steps, then
1:37
maybe they can come out a little bit better than
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they would have otherwise. But certainly for individuals going into divorce,
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it's important to be very proactive in terms of how
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they deal with certain issues in terms of the divorce
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itself and their finances. So let's go ahead and jump
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into some of the financial effects that divorce can have
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on an individual. Obviously, one of the big ones is
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the divorce proceedings itself. Hiring an attorney can be expensive
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and certainly in some cases expert witnesses are needed. There
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might be a guardian that lightem there could be court costs,
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things like deposition costs, sub peda cost, you name it.
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And so the divorce itself can be hurtful to somebody's finances,
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just in terms of the cost of the divorce itself.
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So it's important for a party to really think this
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through out of the gates. Who do they want to
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hire to be their lawyer, what are their rates, what
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approach they want to take to the case itself, because
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that decision can be a real big one. Certainly out
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of the gates. One of the big financial hits can
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be the cost of hiring a lawyer. Okay, what are
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the other effects of a divorce? Can be the property division. Obviously,
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coming into a divorce, most individuals have some property and debt.
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Obviously some have more property and debt than others. But
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coming out of a divorce, obviously that marital property and
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that marital debt is going to be divided in an
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equitable manner. So for most parties coming out of a divorce,
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they come out with less than what they had coming in,
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and that can ultimately have a big financial impact on
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an individual moving forward. Support payments can be a big
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issue that can cause a financial impact on an individual.
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Take an individual who has to make child support payments
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or spousal maintenance payments. That can significantly impact somebody's finances
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coming out of a divorce. So it's really important to
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really think that component through in terms of the disposition
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of the case. If child support is going to be awarded,
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or spousal maintenance is going to be awarded, it's important
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to really sit down with your lawyer, go through the finances,
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and it might make sense to sit down with a
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financial advisor or whoever advises somebody in terms of money issues.
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Some families have kind of like an informal CFO, somebody
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who advises them on finances. To really think of that through.
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Going through that with somebody coming up with a plan
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can be very important because ultimately, look, if an individual
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is losing half of their assets or a significant portion
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of their assets because it's being awarded the other spouse.
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Now they're paying child support, now they're paying spouse of maintenance.
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That can have a big impact on an individual's finances.
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One of the other things that individuals probably don't think
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about enough, but in a divorce, again the marital property
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and the marital debt, it's going to be divided, and
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that oftentimes means the four to one k is divided
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in some manner. If there's an investment account, maybe that's
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divided in a certain manner. Certainly individuals who have pensions
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stuff like that through their employers. Maybe that gets subject
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to a quadrille, which is known as a qualified domestic
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relations order. And so the impact that can come into
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play for some individuals is they might have had a
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certain date in mind where they planned on retiring, you know,
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maybe they wanted to retire early, let's say, and they'd
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built up some assets. I mean, the truth of the
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matter is after divorce, assets get depleted on attorney fees,
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the marital property and debt is divided. If there's child
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support and spousal maintenance, and now the retirement plans have
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been split. It's unfortunate, but for some individuals they might
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have to end up working longer than they originally wanted
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to prior to the divorce. And that is just an
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unfortunate reality. But the truth for many individuals, all right,
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some individuals suffer lowered income after the divorce itself. And
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think about this for a moment. If it's a marriage
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where both individuals are working and then you've got this
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combined income, then the standard of living is higher. But
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once you encounter a situation where now you don't have
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two incomes coming in, you got one income coming in.
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That can result in a lower income, which can cause
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a party to have to kind of change the way
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they spend money and do things in their life. So
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that would be scenario one. And then obviously we talked
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about before, if a person's making a certain amount of
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money and now child support and spousal maintenance is coming
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out of it, they've got a lowered income and they
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have to kind of restructure what they're doing. This is
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why some individuals, you know, after divorce have to do
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all kinds of things, you know, even during the divorce,
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like sell the house and get a smaller house, do
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things to sort of change that standard of living to
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fit in terms of where an individual is at financially.
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Speaker 1: Now.
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Speaker 2: Obviously, divorce can have some tax consequences too. So obviously
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when people are married they file a joint tax return,
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there could be some benefits to that as opposed to
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when somebody's filing separately. Certainly being able to claim the
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kids can have an impact as well. So if an
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individual is able to claim the kids and maybe they're
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not able to now that can have a tax consequence too.
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So the taxes can be another issue coming out of
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a divorce that can really impact things all right, so
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you know past that, then what lots of individuals ask is, well,
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how can I protect myself? What are the steps I
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should take in order to protect myself through the divorce
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and come out in the best possible way that I can.
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That's a question a lot of individuals have. I mean,
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in other words, how do I minimize the damage? Okay,
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and again this list isn't all inclusive, but these are
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just some tips that might fit for certain individuals that
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are listening to this podcast today. But one of the
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big things is looking at the assets that you have
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going into the divorce and really determining what did you
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have coming into the marriage, because assets that were acquired
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prior to the marriage are separate property. But what ends
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up happening in a lot of instances is the longer
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term the marriage is these assets often get commingled, so
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separate property gets commingled with marital property. But being able
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to trace out the separate property can be could be
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really important for a lot of individuals that it might
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mean hiring a forensic account and there's some kind of
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financial expert to come in and be able to trace
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out from an investment account or a four to one
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K or other assets what the value was at the
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time of the marriage, and trying to get credit for
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that off the top before these assets are just split
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in an equitable manner in the divorce. Okay, another good
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step to take is save money where you can, so
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maybe spend differently. If there's things you spend money on
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in your life and you don't need it, maybe it's
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the time to cut it out. Maybe you can do
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other things to save some money as well. Like I said,
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sell the house, get a cheaper house, you know, maybe
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shop in different places that are less expensive. Maybe cut
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back on travel a little bit. Maybe you know, buy
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an automobile that cost less. But really trying to tweak
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that budget to fit for the state that an individual
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is in could be really important because the truth is,
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you know, lots of individuals can't spend after the divorce
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like they spent before. All Right, It's also important to
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list the likely legal cost of the divorce and trying
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to come up with a plan in terms of how
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those are going to get paid, so that can be
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a big key out of the gates. And again, making
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a smart decision about the attorney an individual is hiring
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can be a big key too, all right, out of
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the gates, trying to really look at the marrow assets
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and come up with a plan for what it is
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you want and what it is maybe you don't want
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that you would be fine with this other spouse getting
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in the divorce That can be key. And then maybe
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there's some stuff where you're on the fence on but
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really coming up with a plan out of the gates
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to give to the attorney can be a big key.
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You know, what assets do you really want? What assets
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are you not really worried about, and what assets are
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you on the fence, Because the truth is not everything
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is necessarily just divided in half. Oftentimes that isn't the
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case at all. As long as it comes to a
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roughly proportionate distribution when you total each party's columns, that
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can work. But coming up with a plan can be
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a key. Again, gather relevant financial information and create a
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new personal budget, big big key, come up with a budget,
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be conservative and that could be a huge key when
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going into a divorce and really coming out of a
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divorce as well. All Right, other questions individuals have on
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this topic, which are how are assets and debts divided
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in a divorce? And the reality is that most states
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in the United States are what are called equitable distribution states.
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And if you are in a state which is an
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equitable distribution state, what it means is the court divides
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marital property and debt and adjust manner when considering all
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the statutory factors. Now, just manner doesn't necessarily mean equal.
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Lots of individuals assume that everything is going to be
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divided fifty to fifty maybe, but not necessarily. It just
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has to be a division. So I mean, there could
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be cases where it's fifty five, forty five, sixty forty.
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I mean, it's hard for a judge to make things
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exactly equal. But just division is how most states divide
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marital property and debt in terms of what a party
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is entitled to in a divorce, in terms of some
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of the relevant issues like property and debt, division, child
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support and spousal support. Will look, we've talked about property
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and debt. That's equitable division. Child support. There's going to
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be a formula in your state, and the key is
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going to be sitting down with a lawyer and going
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through the child support formula. But to do a child
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support formula, you have to have accurate information on income
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and expenses for the kids and health insurance and whatnot. Typically,
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but really computing the child support charts can be a
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key out of the gates, so you know generally what's
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going to happen. And then in terms of spousal maintenance,
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this is going to very big time based on what
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states you're in. Some states keep it pretty open for
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judge to make a determination based on income and expenses.
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Other states have kind of moved more toward formula driven
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spousal maintenance, much like child support. So you want to
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speak to a lawyer to determine how that is determined
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in your particular state. All right, Another question individuals have
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is you know, ultimately how financially damaging is a divorce?
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How bad can it be? And the truth is it
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can be bad. I mean, there's no reason to sugarcoat it.
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I mean, when you're paying for lawyers, attorney fees, court costs,
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filing fees, deposition costs of pena fees, all these things,
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it can be quite expensive. And then when you're dividing
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your assets in half and now you know maybe income
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has dropped, it can be really quite damaging. So individuals
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should at least consider and contemplate alternative dispute resolution like
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mediation and collaborative divorce. You know, where it's possible, it
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could be a good thing. Obviously, it's not always possible,
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but to the extent that it is, it's worth trying
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for a lot of individuals that can keep the attorney
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fees down and result in disposition that both parties can
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at least live with. But you know, it's easier said
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than done for a lot of individuals, but it's definitely
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something to at least consider. Again. Another question which I
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kind of hit on briefly, but I'll reference it again,
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but you know, how is spousal maintenance determined in states?
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I know some states still referred to it as alimony,
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the lots of states have really moved away from that term.
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And again, it's going to vary based on the statute
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and the state in which any listener listening to this
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podcast lives in. So it's important to speak with a
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lawyer about the laws in their particular state because again,
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there could be quite a bit of variance. But some
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factors that generally come into play when you look at
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this in a generic sense in most states would be
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the income of the parties and their financial resources. What's
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an individual's ability to even pay support after their meeting
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their own expenses. The length of the marriage can be
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an important factor that courts look at. The age of
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the parties and their health can come into play. Courts
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oftentimes can look at the disposition of property in addition
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to spousal maintenance together kind of take these two things together.
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The standard of living during the marriage could be a
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factor courts look at. Obviously, it's hard to maintain it
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exactly the same, but courts can look at that, and
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then there could be a litany of other factors that
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courts look at. Some states allow the court to look
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at the conduct of the parties during the marriage, in
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other words, marital fault. Some states don't allow for that,
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So speak to a lawyer who's licensed and competent to
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practice law on your jurisdiction about that specific factor. But again,
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in a nutshell, some states have formulas or spousal maintenance,
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and they even have time limitations based on things like
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the length of the marriage. Lots of states don't have
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at at all, and it can be very much to
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the discretion of the judge in terms of how spousal
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maintenance is going to work. Missouri would be one of
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those cases, which is a state where I have predominantly
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practiced during my career. But definitely speak to a lawyer
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and your jurisdiction who understands how spousal maintenance works and
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they'll be able to give you more details in terms
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of what may or may not happen in your particular case.
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All right, well, look, that was the topic at hand today.
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Definitely an interesting topic, one that lots of individuals ask about.
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Is a follow up to the episode today again, go
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on over to Tulsa Divorce Lawyers blog dot com read
15:43
the article dated May eight, twenty twenty four, titled how
15:47
divorce affects your Finances. It'll give you more information. But
15:50
thanks for tuning in today, Stay tuned to our next
15:53
episode on Family Law Talk coming up. Thank you very much.
15:57
Speaker 1: Thank you for listening to Family Law Talk with Kirk Stangy.
16:01
Visit Stangye Lawfirm dot com for more about today's topic
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