Can Timing Affect Your Divorce Filing?
When people decide to divorce, they may be tempted to file right away to begin the proceedings. After all, the faster the papers are filed, the more likely it is that the divorce will be finalized quickly. However, it is important to remember that divorce is not only a personal and emotional milestone but also a practical and financial matter. A New Jersey family law attorney may provide valuable advice about how to time a divorce filing to minimize complications related to financial changes.
Planning a Divorce Filing in Challenging Times
The COVID-19 pandemic has affected divorce proceedings. The financial fallout of widespread shutdowns, as well as various programs to keep businesses going, have led to an odd financial year that may not fully reflect a couple’s overall financial situation. Those changes that have already taken place and those that are anticipated in the future will need to be incorporated into the divorce negotiation process.
It is important to note that once a couple has decided to divorce, they and their respective family law attorneys can start the settlement negotiation process right away. However, it is also important to note that money earned during the marriage counts as marital property, even if the couple is discussing divorce. This kind of joint property is subject to distribution in the divorce settlement, and the official cutoff date is the date the divorce papers are filed, unless agreed otherwise in writing through counsel.
Financial Considerations for Divorce Filing
New Jersey is an equitable distribution state, which means that marital property should be divided fairly between both spouses. This may not be the same thing as a 50/50 split. However, in general, both partners are considered to contribute to the overall marital finances and have a right to share in them, even if one partner received a greater income through their employment or investments.
During the equitable distribution process, the court identifies assets and debts subject to distribution. The overall marital estate includes bonuses, income, the home, bank and investment accounts and other property acquired from the beginning of the marriage until the date of filing for divorce. Some property remains separate, such as gifts from outside parties or inheritances, so long as it was not commingled with marital property. The court then values the marital property for purposes of determining a fair division of assets. In many cases, divorcing couples and their divorce lawyers negotiate a settlement rather than turning to litigation.
Unless a prenuptial agreement or a postnuptial agreement exists to the contrary, money earned after a divorce is filed maybe excluded from the divorce settlement. The clock generally stops on the assessment of marital assets when the divorce is filed, and your New Jersey divorce attorney may advise you about the most strategic time to commence the action officially. There certainly are exceptions to this rule.
This means that if you are expecting a financial windfall of some kind or a major raise or promotion, it may be advantageous to file for divorce before your payment is expected to come in. In this case, some of the payment may be considered separate property, absent some reason why it should be considered part of the marital estate. Setting the timing may be less sensitive if there is no immediate financial change expected on the horizon.
Filing Early in the Year
Regardless of a couple’s specific financial situation or the vagaries of national economic events and changes, many people tend to file for divorce earlier in the year. By filing for divorce at the beginning of the year, accounting and taxes tend to be simpler. Most documentation from the prior year, such as tax records, pay stubs, investment reports and statements, can be easily compiled and placed on record during the negotiations process.
It also presents a clear point in time, where new income for the coming year will be classified as separate, outside the distribution process. Many family lawyers may advise you to make an early filing when the year begins, even if you have been preparing for a divorce for some period in advance.
Many couples may want to file earlier in the year to resolve their tax status. Marital status is determined on December 31 of the tax year; that is, if a couple was divorced at any time before the end of the year, they may not file a joint tax return for that year. When the benefits related to joint tax filing are important to the couple, they may want to time their filing date so that the judgment of divorce is issued at a more opportune time for tax planning.
Why Wait Until Later in the Year?
For some couples, it may be a reasonable choice to wait until later in the year to file for divorce. Many courts will examine the last tax filing, and most people do not file their taxes until close to the due date. One year may make a difference in how a spouse’s finances are perceived, whether their income has grown or declined. Of course, each spouse can always present evidence relating to the changes they have experienced financially.
In other cases, people may wait to file until after a contract both spouses were part of comes to an end. The proceeds would already largely be subject to distribution, and it may be less complicated to finalize the divorce after some types of transactions. For example, if the spouses are selling a family business, it may be easier to divide the proceeds of sale than to divide the business before moving forward with the sale. In still other cases, people may have roughly even income annually and do not expect the time of year to make a major difference in the outcome of divorce negotiations. Here, personal considerations rather than financial planning may be more important in determining the filing of divorce papers. A family lawyer may provide advice about handling the financial aspects of decision-making during the end of a marriage.
Considerations for Business Owners
Business owners may have particular considerations when determining when to file for divorce. While the records from the entirety of the business and not only the current year will be considered, filing may offer the opportunity to create a date of record for business valuation. Both parties might bring in experts to provide a suggested value for the business, and these figures may vary. Ensuring that both parties are working from the same date can provide a stronger basis for divorce negotiations.
Whether business owners are expecting a slow period or a period of high activity, they may want to ensure the filing date reflects an accurate picture of how well the business is doing throughout the year, rather than at only one moment in time. It will also be important for business owners and their divorce attorneys to present extensive documentation and information about the financial health, assets and liabilities of the business. Owners may want to spend time preparing themselves to present the information that they will need to proceed with the divorce negotiations process.
Contact a New Jersey Divorce Lawyer
Planning the timing of your divorce is a complex choice. While the financial considerations are significant, especially for New Jersey high-asset divorces, there may be significant personal and emotional considerations as well. Delaying a divorce filing for a potential financial benefit may not be worth the emotional costs of dealing with a delay. On the other hand, moving a divorce filing forward quickly may also be a complex decision, especially after a long marriage or when children are involved. Again, the emotional considerations may outweigh a potential financial benefit of an earlier filing. One can also explore entering into a cut off agreement which could have the same impact as filing a divorce complaint.
A New Jersey divorce attorney can help a client to determine the most advantageous filing date and take action to protect their interests. Contact the experienced family lawyers at Lawrence Law at 908-645-1000 or use our convenient online form to request a consultation at our Watchung, New Jersey, office.