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Divorce Settlement Tips

When you go through a divorce settlement, your personal and financial life is going to change dramatically. Divorce can affect your financial situation in a variety of ways. Here are a few things to consider about the financial implications of divorce.

Mortgage

In many cases, there is a mortgage to deal with during a divorce settlement. One of the spouses may end up living in the house while the other moves out. If this happens, the spouse that gets to keep the house will have to buy out the other spouse's ownership in the property. If this happens, it would be in the best interest of both parties to refinance the existing mortgage or use novation to remove one individual from the loan.

Sometimes, the best way to handle a home during a divorce is to sell it. The couple will sell the house and use the money to pay off the existing mortgage. Any money that is left over can be split equally between the two parties./

Alimony

Something else to consider about the financial implications of a divorce is alimony. Alimony is a payment that is made from one spouse to another in order to try and maintain their current standard of living. The spouse that was the main income earner will have to make a monthly payment to the other spouse in most cases. For example, in many cases one spouse will have a high paying career while the other spouse stays home with the children. In the event of a divorce, the spouse with the career will have to pay the other spouse a certain amount every month.

Many people fail to realize the possible implications of alimony before they get a divorce. An alimony payment could potentially be several thousand dollars every month. In many cases, the amount of alimony that has to be paid can negatively impact the spouse that has to make the payment.

The amount of alimony depends on the standard of living of the individuals involved. For example, a high profile individual that earns millions of dollars per year will have a much higher alimony payment than someone that works for minimum wage. You also need to realize that alimony payments are calculated differently from one state to the next.

Child Support

If there are children involved, the financial applications become even more complicated. During the divorce settlement, custody of the children will typically be awarded to one of the spouses. The other spouse that does not have custody of the children may have to contribute a certain amount every month to help raise the children. When you combine child-support with alimony, you could potentially be contributing a large percentage of your paycheck every month.

Retirement Accounts

Many people also have their retirement accounts affected during a divorce. The court will most likely try to split the assets between the two individuals. In some cases, one party will have to cash out their retirement account in order to pay the other spouse. This can result in a 10% early distribution penalty and additional income taxes.

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