Mission Possible: Divorce & Managing Two Homes
There is no question, divorce is a difficult journey upon which to embark. Certainly, some are more amicable than others but if talking about money and financial planning is difficult when a couple is together, it goes without saying how challenging it can be when planning lives apart.
Sadly, there are no easy solutions. As I write this post, I wish I could share a magical insight that will save you some of the struggle of separating. Unfortunately, I don’t have that fairy dust to sprinkle. However, I hope that I can offer you some advice that will provide direction during this difficult time.
Here is what I know.
You Have Two Choices: Make More and/or Budget More
No matter what, you are going to have to re-work your lifestyle. Paying for two homes, two sets of utility bills, two social lives, etc. will take some re-configuring. But don’t fret. It is doable. If you’re a one-income household, this can be particularly sticky – even if that one income is substantial. That said, tough times call for scrappy measures. A stay-at-home spouse can elect to start working to increase income resources, or some major cuts are going to have to be made in order to make room for so many extra expenses. (Or, perhaps, both of the above apply.)
Enforced Togetherness Isn’t Always As Terrible As It Sounds
In the beginning, the two of you might need some time to un-tangle your financial lives and/or save some money for the initial expenses involved in separating households. That means continuing to live together even though the marriage is over.
I completely understand that to many, this sounds awful. But it doesn’t have to be. I’ve met many couples who, after setting up some strict ground rules, found that their brief stint together-but-still-apart became a bit of a practice round before game time.
If this is a possibility, here’s how you might approach such a set up.
a) If you have children, this is a great time to begin co-parenting and sharing time throughout the week. So, for instance, on days/evenings when you’re with the kids, you take on all parenting responsibilities alone – from feeding them to getting them to their activities, etc. The “off-duty” parent spends as much of that time as possible away from the house…beginning to shape their social life/routines away from the family unit. This can be a great way to explore your new roles, while also easing your children into a new routine.
b) It is important that clear expectations are set and adhered to. So, for instance, decide in advance which rooms each spouse will live in and use, which cars they will drive, and which chores they are responsible for.
Regarding finances during this time.
a) Consider separating any joint accounts and/or keeping individual accounts and paying into a joint account to meet home-related expenses that are still shared.
b) Consider shredding any joint credit cards and opening cards of your own. This will be especially important as you will benefit from starting to develop your own credit history.
c) Freeze any home equity so that neither of you can take out a second mortgage or another line of credit.
Select the Right Federal Tax Filing Status.
An unexpected tax bill is the last thing you need right now.
You will base your filing on whether you were married or single on the last day of 2016.
If you were married on that last day of last year, then you can file as Married Filing Jointly or Married Filing Separately. In many cases, it is wise to do the former, but check with your tax accountant to ensure you make the right choice for your specific case.
You should also know that child support paid out is not tax deductible. But, if you receive a child support payment, you will not be taxed on that income. Alimony is the opposite. A spouse who is paying alimony can deduct those expenses from his or her taxes but the recipient of alimony must treat it as income and pay taxes on it. With all of that said, I remind you dear reader, that I am not a tax professional. I recommend you sit down with yours and work through these details as you plan your filing strategy. If you have questions in the meantime, I recommend visiting the IRS’ Publication 504 which covers all the most up-to-date details in tax filing for divorced or separated individuals.
And with that, I bid you the very best of luck. This will be a difficult chapter in your life, to be sure, but so very many people come out of this period of their lives feeling more fulfilled and free to enjoy their lives on a whole new level. I wish nothing less than that for you, too.
This information is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor.