Arguments over money are often among the reasons that couples get divorced, but money woes can continue during divorce proceedings. There are at least four key areas that couples in California will want to consider when getting divorced.
Dividing assets
Since California is a community property state, the value of all assets acquired during the divorce is split in half. Still, judges can determine which particular asset belongs to which person. The process must start with financial discovery in which spouses list all their assets.
Be particularly careful if your soon-to-be ex-spouse has executive compensation coming during a divorce because those items must be listed as assets even though the name cannot be changed on them in some cases.
Dividing debts
Debts must also be divided. Any debt where both names are on it will be divided in half. When only one person’s name is on the debt, that person is usually responsible for it. For accounts in both parties’ names, it’s a good idea to at least the minimum due on all accounts until your divorce is final to protect your credit rating. Once the divorce settles, ensure you close all joint accounts or reassign them as necessary.
Health insurance
Generally, if an employer’s health insurance plan covers a spouse, the employee cannot remove them until the divorce is final. Sometimes, the insurance company will offer COBRA to the no-longer-covered ex-spouse.
Retirement
Most retirement funds are marital property, so your ex-spouse will get half of them. Therefore, it may be a good idea to reconsider the amount you put into these accounts. Before making changes, consider the tax implications because you may no longer be eligible for an individual retirement fund or be able to start one based on your income. Still, in most cases, you only have until the end of the calendar year to make these changes.
Divorce can have a significant impact on your finances, and it can help to take these issues into account so that there are no surprises.