Fear of the financial unknown can cause you stress before, during, and after your divorce. divorce CPAs may recommend that you have a clear yet realistic focus on your financial situation. This can help you feel control over your financial life as you go through the divorce process. Divorce accountants recommend that those going through the divorce process focus on four aspects of the best practices for divorce bookkeeping. They include:
• Assessing your financial assets
• Dividing your real estate
• Reviewing your debt
The Role Of Bookkeeping In Helping You Assess Your Financial Assets
Your financial assets include:
• Checking accounts
• Savings accounts
• Certificates of deposit
• Investment vehicles, such as mutual funds, real estate investment trusts, and savings bonds
Accurate bookkeeping throughout the divorce process and in the months to come might make it easier for you to cover your living expenses while giving you a clear picture of your tax liability.
Bookkeeping includes monitoring and determining how defined-benefit plans, including pensions, get divided after your divorce. You and your ex-spouse may have more assets than those discussed in this blog. A divorce CPA might provide financial support and offer clarity throughout the divorce process.
Unraveling Complicated Real Estate Questions During The Divorce
In several marriages, the largest shared asset is real estate. This could include the marital home, vacation properties, or investment properties.
The question that you and your ex-spouse may need to determine is, what will happen to co-owned real estate during the divorce? If both parties agree to sell the home, the cash from the sale can be distributed to both parties.
A second option could be for you or your spouse to refinance the mortgage, allowing one spouse to keep the house. A divorce accountant may recommend this option to you for several reasons.
• First, it allows you or your spouse to be free from the financial obligation of the mortgage as the home ceases to be a jointly held asset.
• Second, it pays off all outstanding mortgage debts. The old loan you and your spouse may have been responsible for is replaced with a new mortgage.
• Third, it makes cash available that allows one spouse to buy out the other spouse’s share of the equity.
During a refinance, the divorced owner will probably need to qualify for a mortgage based on their sole income. A financial adviser for divorcing couples can help you look at your income and your debt to income ratio to determine whether it is financially realistic for you to think you will qualify for a mortgage on your income.
Understanding How The Divorce Process Affects Tax Liability
It’s common for one of the two spouses to be primarily responsible for filing taxes. After divorce, divorce financial advisers recommend that you and your ex-spouse keep copies of joint tax returns from the past five years. You may also want to keep records that will allow you to calculate cost bias for the assets you keep.
You should understand the tax implications of any settlement you negotiate during your divorce. Remember that after divorce you will probably file as single, which could increase your tax rate. If you are the custodial parent, you may enjoy head of household tax filing status.
Divorce Does Not Make Debt Disappear
A divorce decree will not end your financial obligations to a creditor. In most states, marital debt accumulated during the partnership is divided between both parties. Be meticulous in closing all credit cards and lines of credit held by you and your spouse that you may be responsible for.
Divorce can present several financial challenges. Here at Fusion CPA, we offer you divorce CFO advisory and can help you address many of the financial questions that come up during the divorce process. As financial advisers for divorcing couples, we can help you understand your tax liability and debt to income ratio. You can learn more about our services by clicking the button below to schedule a complimentary discovery call today!
This blog article is not intended to be the rendering of legal, accounting, tax advice or other professional services. Articles are based on current or proposed tax rules at the time they are written and older posts are not updated for tax rule changes. We expressly disclaim all liability in regard to actions taken or not taken based on the contents of this blog as well as the use or interpretation of this information. Information provided on this website is not all-inclusive and such information should not be relied upon as being all-inclusive.