Marriage focuses on romance and companionship, but divorce puts the spotlight on the finances of both people involved. Although couples in New Jersey seek divorces for a variety of reasons, the financial impacts of that choice require consideration. People ending their marriages need to analyze the numbers related to their real estate, investments and future monthly budgets very carefully. This process could prepare them for the income changes and potential tax consequences of divorces.
Divorce sometimes results in one person keeping the marital home, but this can be a significant financial mistake. The ex-spouse may not earn enough income to maintain the property or keep up with other bills without a second income. This financial strain reduces opportunities to save for emergencies or retirement. Selling a home and splitting the proceeds could provide a better financial outcome for both parties, but the sale could trigger tax consequences. Expensive homes that sell for amounts above the capital gains threshold may require payment of capital gains taxes.
Similarly, capital gains taxes might become payable upon the sale of securities. The sale of appreciated assets for the purpose of a divorce split might result in each person receiving less than the sale price due to taxes.
When divorce looms on the horizon, people also need to develop a new monthly budget. Household income generally declines for divorced individuals, which means they should prepare for lifestyle adjustments so that they can still pay for housing, utilities and child support.
Legal representation might improve someone’s ability to negotiate a fair divorce settlement that does not impose unexpected financial difficulties. When large assets are at stake, a family law attorney might propose legal strategies that protect a person’s long-term interests during divorce negotiations.