Without a doubt, divorce is going to have at least some effect on your finances, and that effect could be positive or negative. For example, if you divorce a spouse with a gambling addiction or out-of-control overspending habits (using money you earned), you may fare financially better after a divorce. But divorcing from a spouse who was the primary breadwinner and/or who owned significant holdings prior to the marriage may present more of a challenging financial transition. When spouses are closer to retirement age, divorce can present a host of financial challenges that may be more pressing than they would have been two or three decades earlier. Below are a few basic tips to keep in mind which can help to prevent a divorce from wrecking your retirement.
Have a Prenuptial or Postnuptial Agreement in Place
If you are not yet married, creating a prenuptial agreement between you and your spouse is one of the more reliable methods to avoid unexpected negative consequences to your retirement. With a prenuptial agreement, both spouses can work together with the guidance of their attorneys to create an agreement that provides security and stability for both of them following a divorce.
If you are already married but on good terms with your spouse, many states, including California, allow spouses to enter into a postnuptial agreement which provides them with all of the same benefits of a prenuptial agreement, namely how property should be distributed upon a divorce and how much, if any, spousal support should be paid.
Understand How Property Division and Spousal Support Might Interplay
Assuming minor children are not involved, the two major financial issues you will face within the divorce itself are likely to be division of property and spousal support. If a spouse is close to retirement or has already retired, there are a couple things to keep in mind. First off, state law often looks at a person’s income potential as opposed to their actual income in setting spousal support, so a threat to simply stop working in order to avoid paying spousal support may not always work before a family court judge.
Second, a spouse might consider the monthly retirement/pension benefits he or she receives after a divorce as being similar to work income, in that it is theirs alone subject to potential spousal support deductions, but a court may not see it that way. When spouses earn retirement benefits during marriage but are only paid those benefits later, those payments may well be considered marital property subject to equitable distribution between the spouses. A family law attorney can provide further analysis of your situation and how a court might view retirement benefits.
Work With Attorneys Who Can Negotiate a Mutually Beneficial Agreement
The last thing that you want to do in a divorce is for you and your soon-to-be ex-spouse spend your retirement money hashing out long legal battles over issues that experienced family law attorneys could negotiate to positive outcomes at a fraction of the cost. In all too many cases, spouses think they can avoid legal fees altogether by forgoing legal guidance but only end up in intractable, costly legal battles due to ignorance of the law and poor legal decisionmaking. Find an attorney who has your best interests at heart, namely reaching a satisfying and beneficial conclusion to your situation in the most efficient manner possible.
Help in Navigating a California Divorce
At The Law Office of Kelley C. Finan, our experienced family law attorneys can help you to navigate your California divorce to achieve favorable financial outcomes. To see how we can of service to you, contact our office today to schedule a consultation with a family law attorney.