Divorce is never an easy process, and it becomes even more complex when children are involved. Not only does it bring emotional upheaval to the family, but it can also have significant and long-term financial implications. In this blog, we explore the various financial aspects to consider when going through a divorce with children so you can make informed decisions that will impact your children’s financial futures.
The Relationship Between Your Children and Your Finances
In any divorce with children, you’ll need to resolve three primary issues: When will the children spend time with each parent, how will decisions be made regarding their care and well-being, and how will child-related costs be paid for?
Parents often disagree on what’s in the best interest of the child and how expenses will be paid, and these misunderstandings can lead to more legal fees and higher costs. The ability of both parents to remove the emotional component from their negotiations is crucial to keep costs down during the process and secure long term financial well-being for the children.
Even if you and your ex don’t see eye-to-eye on everything, prioritizing your child’s wellbeing can help you find common ground to make sound decisions regarding your child’s financial future and to avoid litigation.
Planning for Your Children’s Financial Future During Divorce
Thinking about your children’s financial future should always be a priority but it’s even more important to think about when you are divorcing.
For example, you may have put off buying life insurance during your marriage, but now it’s likely that you will need it to protect your children if one of the parents should die before the children are grown. When a parent dies, all of the funds they were providing to support the child will disappear and new costs will emerge (such as requiring additional child care to help the surviving parent care for the children full time). Life insurance helps to make sure the funds will be there when needed.
If you have young children, college may not be on your radar. However, if you are divorcing, it’s important to come to some agreement on how those costs will eventually be paid. Some issues you and your soon-to-be ex need to discuss include how the costs will be shared between you, whether you will each be expected to pay for private colleges or whether your obligations will be capped at the in-state tuition rate at a public college.
Tax Implications During and After Divorce
Understanding the tax implications of divorce is crucial. While child support payments are not taxable in New York, there are other tax-related issues to discuss when you have children.
It is essential to address and plan for who will claim the dependency exemption and the head of household status during your divorce. While tax rules state that the parent who has the children for more than 50% of the time controls the head of household designation, in a negotiated agreement you and your soon-to-be ex can choose other options with respect to dependency exemptions. For example, you may agree to trade off the dependency exemption on a year-to-year basis, or if you have two children, you may agree that each of you can claim one child as a dependency.
It’s also common to see parents agree that if they cannot benefit from the dependency exemption in a given year (because their income was too high for example), the other will be able to claim it. Communication between co-parents regarding tax benefits is key to avoiding potential conflicts and improving your child’s financial situation as well as that of both parents.
How Much Can Divorcing with Children Cost?
Divorce costs can vary greatly depending on several factors, such as child custody, child support, and each parent’s financial situation, and those costs can vary depending on the chosen divorce process. Determining child custody and child support terms, for example, will be more expensive if they are determined through lengthy legal battles. Litigation results in higher attorney fees, court fees, and expert witness fees if needed.
The financial situation of each parent is another determining factor of how much your divorce will cost. If there are substantial assets, property, or debts to be divided, it may require financial experts and more extensive legal proceedings, especially when litigation is pursued. Additionally, emotional conflicts between the parents can lead to longer and more contentious divorce proceedings, resulting in higher legal fees.
The divorce process you choose will have a great impact on the cost of your divorce. Traditional litigation is often the most expensive option. It involves going to court, hiring litigators, and potentially lengthy trials. Through divorce mediation, a trained mediator helps the spouses reach agreements on child-related issues and other matters. If the couple is willing and able to compromise, it can be more cost-effective.
An increasingly popular third option is collaborative divorce. In collaborative, both parties and their attorneys work together with a neutral team, which may include financial experts, parenting coordinators, and mental health professionals. This solution allows for various experts to help the couple navigate the complex issues involved in their divorce, including separating facts from feelings, assessing and dividing financial assets and obligations, and determining the best co-parenting arrangements and visitation schedules for the children. This allows for your attorneys to focus on the legal aspects of your divorce while the other professionals aid in advising the parents on the financial and emotional aspects.
Collaborative attorneys seek a win-win solution that takes all parties’ interests into consideration. Collaborative divorce is often the best divorce process to pursue if you are looking to keep your divorce out of court, keep your overall costs down, and protect your children and yourselves from the stress and emotional turmoil of a contested divorce.
It’s important to remember that none of these options are going to be inexpensive. However, there’s a significant difference between the cost of a custody trial and working with a trained mediator or collaborative team experienced in handling both legal and emotional parenting issues.
Common Mistakes Parents Make Regarding Finances During Divorce
One of the most significant mistakes parents make during divorce is getting caught up in the fight. It’s important to remember that, despite the separation, you will continue to be a family if you have children. This perspective shift can prevent resentment and desire for retribution, which will ultimately save time and money for both you and your ex.
At the same time, it can be a costly mistake to give in to the frustration and exhaustion that you may feel during the divorce process and end up settling for less child support than you need or agree to pay more than you can afford. It’s imperative to find ways to support your own emotional needs during the process so that you can continue negotiating until you arrive at an agreement that you can live with in the long term. There is nothing worse than seeing a parent throw in the towel too soon by taking too little or giving too much and know that in a year or two they will realize they cannot make ends meet.
Working with a therapist or divorce coach who can help you manage your emotions is key to helping you get the financial outcome that will be best for your children. These professionals will help you avoid getting into an intractable battle with the other parent as well as giving in to unreasonable demands too soon.
How Vacca Family Law Group Can Help
Navigating a divorce involving children requires careful consideration of their financial future and wellbeing. By approaching the process with a cooperative mindset, you can protect your child’s financial future during and after your divorce. At Vacca Family Law Group, we understand the importance of an amicable divorce process, especially when children are at the center of it. If you’re a parent going through a divorce, let us help you find common ground and achieve a resolution that benefits your family and avoids legal battles. Contact Vacca Family Law Group today to schedule your free introductory call.