Beyond the emotional challenges of divorce, the legal intricacies of ending a marriage can be overwhelming. While most people are aware of basic facts about divorce, such as the need to file paperwork or the division of assets, many aspects of divorce often go unnoticed until they become relevant. Whether you’re considering divorce or already in the process, these five little-known facts can help you better understand what to expect and how to navigate this challenging time.

1. Divorce Can Impact Your Taxes—In Ways You Might Not Expect

Many people are aware that divorce can affect their finances, but fewer realize the profound impact it can have on their taxes. Filing status is the most immediate concern—whether you’re single, married filing jointly, or head of household can significantly change your tax liability. However, other hidden tax considerations come with divorces:

Alimony and Taxes: As of 2019, alimony payments are no longer tax-deductible for the payer, nor are they taxable income for the recipient under federal law. This means that both parties may need to reconsider their financial planning to account for changes in post-divorce finances.
Division of Assets and Capital Gains: If your split includes the sale of a shared home, it’s important to understand how capital gains taxes will affect you. You may be able to exclude up to $250,000 in profit from the sale if you’ve lived in the house for at least two years. However, if only one spouse stays in the home, the tax burden may shift depending on how long the home was owned and lived in before the sale.
Child-Related Tax Benefits: When children are involved, deciding who gets to claim tax credits like the Child Tax Credit or the Earned Income Tax Credit can become a point of negotiation. The parent with primary custody typically claims the children, but this can be modified by agreement.

Understanding the tax implications of your divorce is crucial, as it can affect your financial stability long after the split is finalized.

2. You Don’t Need to Go to Court

Many people think that divorcing inevitably leads to a long, drawn-out court battle, but this isn’t always the case. In fact, you can often avoid the courtroom altogether. Alternative dispute resolution (ADR) methods, such as mediation and collaborative divorce, allow couples to resolve their issues outside of court. This can save time, money, and emotional energy.

Mediation: In mediation, a neutral third party helps both spouses negotiate a settlement agreement. It’s a cooperative process that fosters open communication and often leads to more satisfying outcomes for both parties.
Collaborative Divorce: This process involves both spouses, their attorneys, and sometimes other professionals like financial or child custody experts. Everyone agrees to work together to settle the case without litigation. If the collaborative process fails, the attorneys must withdraw, and new ones must be hired, encouraging all parties to stick with negotiations.

Choosing a path that avoids court can lead to a smoother, faster divorce and reduce stress for everyone involved—especially when children are a factor.

3. Your Spouse’s Debts Can Affect You After Divorcing

When dividing assets, many people focus on who gets the house, cars, or savings accounts. However, debts are also divided in a divorce, and this can have lasting consequences. In California, a community property state, any debt incurred during the marriage is considered joint debt, meaning both spouses are responsible, regardless of who took it out or benefited from it.

For example, if one spouse was responsible for most of the credit card spending or took out personal loans, the other spouse could still be liable for half of that debt. Even if a divorce decree assigns responsibility for certain debts to one spouse, creditors aren’t bound by this agreement. If your ex-spouse doesn’t pay, you could still be held responsible.

Being proactive in understanding and negotiating debt division during divorces is essential to protecting your financial future.

4. Divorce Can Affect Your Retirement Plans

Getting divorced doesn’t just impact your current finances—it can also affect your future financial security, particularly your retirement. Retirement accounts, such as 401(k)s, pensions, and IRAs, are typically considered marital property in California and must be divided as part of the settlement. However, dividing these assets isn’t as straightforward as splitting a bank account.

Qualified Domestic Relations Order (QDRO): To divide a retirement account without incurring tax penalties, you will likely need a QDRO, which allows one spouse to receive a portion of the other spouse’s retirement benefits. It’s important to ensure that the QDRO is properly drafted and accepted by the plan administrator, as mistakes can lead to costly delays or losses.
Social Security Benefits: Even after divorcing, you may be eligible to receive Social Security benefits based on your ex-spouse’s work record if your marriage lasted 10 years or longer and you’re at least 62 years old. This can be an important source of income during retirement.

Properly navigating the division of retirement assets is crucial to ensuring that both spouses have financial stability in their later years.

5. You Can Modify Parts of the Divorce After It’s Finalized

Divorce decrees aren’t always set in stone. In certain circumstances, you can request modifications to parts of the settlement after it’s been finalized. This is particularly common when it comes to issues like child custody, spousal support, and child support.

For example, if there’s a significant change in either party’s financial situation—such as a job loss, a new job with higher pay, or changes in living arrangements—you can request a modification to spousal or child support.

Understanding that divorce agreements can be adjusted provides peace of mind if life changes occur after your divorce.

Kaspar & Lugay LLP: Making Divorce More Understandable

Divorce is a complex legal process with many layers that people often overlook until they’re in the thick of it. By being aware of these less-discussed aspects of divorce, you can better prepare for the road ahead, avoid common pitfalls, and make informed decisions that protect your future. If you’re facing divorce, the experienced attorneys at Kaspar & Lugay LLP can help guide you through the process with insight and compassion, ensuring that your rights and interests are fully protected at every step.