Concerns over finances are often a main cause of divorce. When you combine financial worries with a divorce, it can be a recipe for big problems. Joint finances can be untangled, but here are three tips to take to protect your financial future during a contested South Dakota divorce.
Tip #1 - Take an honest look at your financial picture
Before making any decisions about your finances in the beginning stages of your divorce, you need to have a clear understanding of your financial circumstances. Itemize all of your accounts, including:
- Bank accounts - checking and savings
- Investment accounts - IRAs or a Roth account
- Real Property - homestead and any investment properties
- Lines of credit - mortgages and any home equity lines of credit
- Credit cards - including rarely used store cards
This will provide you with an accurate picture of your current finances. Also, make sure to find out if your accounts are single or joint accounts, which helps determine who will be responsible for paying what during the divorce.
Tip #2 - Cancel joint accounts
If you have a joint checking or savings account or joint credit card, it is generally best to cancel those accounts in order to protect yourself.
Tip #3 - Consider the tax implications of a divorce
When people are going through a divorce, they may liquidate assets in order to divide the funds. When this happens, one spouse or both may end up having unexpected tax liabilities. Cashing out a retirement account generally comes with large tax penalties, whereas profits from the sale of a residence receive more favorable tax treatment.
Tip #4 - Establish your own credit
If you have had joint credit cards during your marriage, not only are you responsible if your former spouse does not pay the bills, but your credit rating could be impacted. Although it may be difficult, especially if you did not have an independent credit history before you got married, the best thing you can do is begin to establish your own credit.