Practically every divorce includes financial considerations.
All couples own property and most have debts. Property and debt needs to be divided.
When there are children, they need to be supported, normally with child support.
Spousal maintenance (alimony) may be a tool that can be used to provide for a former spouse.
There are also the costs of the professionals involved, which may include lawyers, financial analysts and advisors, accountants, coaches, etc.
Simultaneously all divorcing couples face the reality that it costs more to maintain two households than it costs to maintain one.
Financial decisions are among the most important decisions in a divorce. Yet, because divorce is unpleasant, many people want to make decisions quickly. When it comes to financial decisions, quick decisions may not be the best ones, particularly if made when under stress as in a divorce. Taking time to make the best decision is time well spent, and will pay off in the end.
A fundamental financial question in any divorce is whether both parties will be able to make ends meet. Careful budgeting, as unpleasant as that exercise may seem, proves to be a useful tool to ensure that needs can be met. It can also significantly reduce anxiety. The budget will show whether you earn sufficient income to cover expenses. Regardless of the answer, budgeting provides information with which to make decisions.
Financial decisions in divorce can have significant tax consequences, and some cases present the opportunity for tax planning. Some of the tax rules are very complex. For example, many people know that alimony payments are ordinarily tax-deductible to the payor and taxable to the recipient. However, that is so only if certain rules are followed. There are many tax considerations in a divorce. It is best to consult with a tax professional for your particular situation. If your collaborative divorce uses a qualified neutral financial specialist (many do), then s/he will alert you to tax issues to bring up with your CPA or tax attorney.
There is no formula for property division. While Washington is a community property state, the rules relating to community property are more applicable at death than at divorce. Unlike many other community property states, in a divorce, separate property need not be respected in Washington. And, property is often not divided 50-50 between spouses.
There is also no formula or convention related to the amount and duration of spousal maintenance (alimony). There are factors that make the amount and duration of spousal maintenance unique for the circumstances of each case.
While Washington uses child support worksheets to arrive at the baseline “presumed” child support transfer amount, not all expenses are included in that amount. Moreover, the majority of cases have “deviations” in child support based on the particular factors of the case. The worksheets are truly only the first step of a multi-step process.
It is best to get good professional financial advice as part of your divorce. If you choose a collaborative divorce, be sure that you have a neutral financial specialist on your team, who can provide cost-effective financial analysis.