Important things to know about divorce and finances

For those in Louisiana going through a divorce, it is important to understand some of the things that have an impact on a property settlement. Louisiana is one of only nine states that have a community property divorce settlement. As a result, just about all property that a couple gets while married is divided equally between the spouses in the event of the marriage. This is generally true whether the couple has been married only a short time or a long time and regardless of each spouses ability to earn income through work after the marriage ends.

Finances after a divorce may be especially important for older people who are 50 or older. The divorce rate for older couple, at least according to one study, has actually doubled in the last 23 years. Debts that a couple has will also be evenly divided when it comes to credit card accounts or other accounts that are held jointly. This may sometimes be true for some debts that were only in the name of one of the two spouses. An experienced Louisiana divorce attorney can best advise you on the specific application of these principles to your situation.

In some instances, if a home that a couple owns has gone up in value, it may be beneficial to sell it before a divorce and then split the proceeds. There could be as much as $500,000 in profits that is tax free when a home is owned by a married couple. If the home is sold following a divorce, and the owner is filing taxes as a single person, the tax free amount is only $250,000.

It is important to take retirement savings, including pension plans, into account when thinking about post-divorce finances. The money in such plans is subject to division during the property settlement. A special kind of court order, known as a Qualified Domestic Relations Order, is needed to get a share of a spouse’s funds in a defined contribution or pension plan. Individual Retirement Accounts (IRAs) of both the Roth type and the traditional variety can also be divvied up during the settlement process, but do not require the same kind of court order. It is also worth taking a look at possible spousal Social Security benefits that may be available after a divorce. Here, the ages of the spouses and the length of the marriage are important factors.

Source: The Rafu Shimpo, “Retirement tips: divorce and finances” Alan Kondo, Aug. 26, 2013