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The do's & don'ts of protecting your finances during divorce

Divorce is a very difficult process to go through. It is both emotionally and physically draining and can certainly bring on high levels of stress. However, you can take the edge off and bring smoother sailing to the typically rough waters of divorce. With a little bit of planning and preparation, you can get through your divorce and be ready for a fresh start.

Finances play a big part in most divorce settlements. Who will keep the house in Clearwater? Will you get alimony? Will the settlement be enough to maintain your current lifestyle while you adjust to the new status quo? Here are a few do's and don'ts to help you protect your finances and get through the divorce process.

Do gather financial records

In order to ensure that you get a fair settlement, it is vital to know the full extent of your and your spouse's assets and debt. You can find a significant amount of this information on the most current and prior year tax returns. Gather and make copies of every financial document you can find. This might include credit card statements, loan applications, bank statements and even car registrations.

Do document what is in the house

Take a complete inventory of what you have in the house. If possible, list all valuables such as antiques, jewelry and even sentimental items along with their values. Also, take pictures of these things. It is not uncommon for an angry spouse to hide things from the other as a revenge tactic.

Don't fight too hard for the house

In many cases, one spouse wants to keep the house due to sentimental reasons. For example, if you have children, you may think that keeping the house will lessen the total disruption of the divorce. However, if you cannot afford to pay the mortgage or keep up with maintenance costs on your own, this may not make the most financial sense. In most cases, it is better to sell the house and split the proceeds.

Don't forget about tax consequences

While the money you receive in a divorce settlement is generally nontaxable, the same cannot be said for property. For example, if you get the beach house in the divorce and sell it later, you could end up with a capital gains tax liability on the profit. Before you agree to a settlement, be sure you have consulted with the right people about the financial impact and possible tax consequences.

If you are considering divorce, it is important to take the time to plan, prepare and examine various options in terms of the settlement. It is up to you to make sure your financial interests are protected.

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