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Financial planning and divorce

Over the years, the majority of decisions that an individual and a couple makes can have a tremendous impact upon their long-term financial security. Thus, when a California couple decides to divorce, financial ramifications are almost a certainty. However, this impact does not necessarily have to be a negative one.

In some cases, one spouse will be receiving child support and/or alimony. While child support is not reported as taxable income and thus is not a tax deduction for the individual paying it, alimony is taxable. The individual receiving alimony must claim it as income and the individual paying it is entitled to claim it as a deduction. Since alimony is taxable income, a portion of it can be saved for retirement purposes.

Another financial aspect that can have long-term consequences has to do with Social Security benefits. If a couple was married for at least 10 years, one can claim spousal benefits under Social Security. However, if the individual remarries, he or she is no longer able to claim spousal benefits based upon a previous spouse's work record. Prior to making the decision to remarry, this is an area that may need to be taken into consideration.

Finally, once a California divorce is finalized, each individual will want to review his or her insurance, bank and investment documents. It may be necessary to change beneficiaries and even update paperwork. Additionally, one will want to review the manner in which assets are titled. Experienced legal counsel can provide the guidance necessary to ensure that all necessary financial aspects are covered.

Source: CNBC, "Financial planning for divorce -- it's not just for women", Beth Lynch, Oct. 2, 2017

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