Minimize the effects of financial infidelity after your divorce

| Apr 13, 2015 | Uncategorized

A divorce can have many ill effects, from the loss of a home to separation from daily involvement in the lives of daughters and sons. It can also have financial ramifications, as everything that once belonged to a couple winds up divided between exes, often to the disadvantage of one. A financial consideration rarely talked about involves taxes.

Taxes become key when one spouse during the marriage racked up debt, including back taxes. The other spouse may have had no idea that there were back taxes owing. Over the years it may have become a very significant amount.

This has come to be called financial infidelity. It can be an extraordinary shock when revealed in the process of a divorce. A divorcing wife, for example, might believe that there is a certain amount of money to be divided between her and her ex-husband. However, if there was financial infidelity on the part of her husband, most of that money might have to go to paying the back taxes and another debts.

In the divorce, a court might rule that debt is solely the responsibility of the higher earner. However, the court might instead decide that the liability for the debt is to be split between both the divorcing husband and the divorcing wife. In the latter case, the person who did not incur the debt and was not even aware of it until the divorce will find him- or herself responsible for paying part of it off.

Since this can significantly affect the amount available to each partner in a divorce settlement, it is important to learn about it as quickly as possible. Even better is for husbands and wives to know about each other’s taxes and debts within the marriage. This way, there are no surprises later.

Source: Main Street, “How to Minimize the Impact of a Divorce On Your Current Taxe,” Ellen Chang, April. 13, 2015

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