It is no secret that divorce is expensive. The average New Jersey divorce costs $15,600, according to a recent news article. However, there are many factors that could drive that cost up, including the division of marital property.
New Jersey uses an equitable distribution system for dividing marital property. This means that almost all assets acquired by either or both spouses during the marriage will be divided based on several factors, including the duration of the marriage, the couple’s standard of living and the earning capacity of each spouse.
Typically, when you assess your financial situation, you consider your income versus your expenses, but during a divorce, it is important to also consider the household assets and liabilities. Early in your divorce, it may be a good idea to begin a list of all your household’s financial matters, and consider how you might want to divide them in divorce.
Financial assets include cash, savings accounts, checking accounts, certificates of deposits, stocks, bonds, real estate and retirement accounts, among others. When considering how to split your marital assets, be sure to factor in the tax implications of each. For example, you will generally have to pay income taxes on any distributions of retirement assets, so $100,000 in retirement assets are not truly equal to $100,000 cash.
Debts can include balances on credit cards, the mortgage on any properties or the loan for a car. It is important to list all the household debts and consider how those will be divided along with the assets.
Typically, the person who keeps the house will be expected to pay the mortgage payment, and the person who keeps the car will be expected to pay the car payment. However, it is important to note that both spouses remain responsible for any debt they took on together until the debt is paid back in full. This is because a divorce decree will not be able to eliminate your financial obligation to the creditor.
Child support and alimony
When evaluating your financial situation, it is important to be aware that the court may order child support or alimony payments. If you think you may be ordered to make child support or alimony payments, you should factor into your budget how those orders may affect your finances.
Child support payments are made by the non-custodial parent to the custodial parent to help with the expense of raising a child. The payment amounts will be determined by a formula that takes into consideration each parent’s income, daycare expenses, medical insurance expenses, parenting arrangements and other related considerations. Child support payments are never taxed.
Alimony payments are made from one former-spouse to another to balance the economic effect the divorce may have on the lower-wage earner. The amount and duration of an alimony award will be determined by several factors, including each spouse’s income, earning capacity and education level, as well as the standard of living during marriage and other related factors. Due to recent changes in tax law, alimony paid will no longer be tax-deductible and alimony received will no longer be considered taxable income.
Maintaining financial stability is important to everyone who faces divorce, and there are many factors to consider when evaluating your finances. However, when you have a more thorough understanding of where you stand financially, you can more accurately plan for the financial changes that may come with divorce.