When a divorce is imminent, there are several concerns that must be addressed, even when a split is completely amicable. Regardless of the nature of a divorce or how long a couple was married, Pennsylvania couples need to be fully aware of how a divorce may impact both their retirement plans and taxes. Both areas, along with other financial areas, are better addressed early in the process and with full disclosure.
Retirement plans can be greatly impacted by divorce. One spouse may not have any retirement savings in his or her name because the other spouse was the main wage earner in the household . In situations in which one spouse was dependent upon the other, when a split occurs, retirement plans may also need to be split. This division of retirement savings can mean one party may have to extend the number of years he or she needs to work in order to retire comfortably.
Income tax changes must also be considered when divorcing. When a couple splits, they are often splitting tax liabilities too. Filing statuses change and the spouse with custody of the children will need to file as head of household. Tax breaks can also change because of the division of property and assets.
A Pennsylvania couple’s financial matters may have been the responsibility or area of expertise for one spouse rather than a shared aspect of marriage. Regardless of who may have made the financial decisions, a divorce means both parties should be in the know. Taxes and retirement accounts need special attention and understanding before, during and after the divorce process..
Source: The Washington Post, “5 ways to keep a divorce from being needlessly expensive“, Jonnelle Marte, Nov. 1, 2014