Legal Separation vs. Divorce: Which Do You Choose?
Divorce is a complicated, costly process for all parties to endure. As a result, many couples are now finding that there may be a more cost-effective, beneficial resolution to their marital woes. In some cases, couples find that the benefits of being legally separated trump an official end to their marriage.
What do you really need to know in order to choose legal separation over divorce? Here are a few tips that both parties need to consider before they decide to remain legally separated:
You need a legal separation agreement.
If the trickiest part of divorce was coming up with an agreeable settlement during negotiations, legal separation will not be of much assistance to you. Couples who are considering this method will need a legal separation agreement. It becomes even more critical when the two of you decide to maintain separate households, or when there are children involved.
A legal separation agreement is much like a divorce settlement. It is a legally binding agreement that helps the two of you communicate the core issues and details of the end of your relationship. It will work much the same way as a divorce settlement. It accounts for custody arrangements, financial arrangements, and the payment of debt obligations. To mark your separation, any pertinent details that would make it into a divorce settlement should also make it into your legally binding document.
In many states, you will need a period of legal separation to meet the divorce requirements. If you happen to be in a situation such as this one, you should know that a legal separation agreement can be beneficial while you wait for your required period to end.
Know the possible benefits of remaining legally married.
Oftentimes, the true cost of obtaining a divorce can be more subtle (such as the loss of health insurance or social security). One of the main reasons why couples sometimes opt to remain legally separated over pursuing a divorce is that they want to maintain access to the financial benefits of still being married to one another.
If you remain legally separated, some states continue to grant access to social security and other government benefits. Depending on which benefits are important to allowing for a greater degree of financial freedom, you may want to check on the details of your specific policies. There is a possibility that they exclude spouses from whom you are legally separated.
One additional benefit to being married is that you can still opt to file your taxes as married, filing jointly. This option can be very beneficial at tax time, with the IRS giving the largest standard deduction to filers in this category. You may find that more tax breaks and deductions are available when using this status on your annual returns. While each situation will be completely unique, being able to file in this manner could be a consideration for choosing to remain legally separated, instead of finalizing your divorce.
How long can you be legally separated?
Separation can be a long-term solution if you think the marriage could be saved. For some couples, divorce is not an option. Whether you are opposed to the dissolution of your marriage for religious or personal reasons, remaining legally separated allows you to maintain your married status while still gaining space from the relationship.
For others, there may still be some doubt regarding the need to dissolve the marriage. A separation agreement gives you freedom to work out the details, while giving both of you some space from the emotional turmoil of a tumultuous relationship. This space can undoubtedly be an effective tool for determining whether the marriage has any remaining value to either of you.
Alternatively, it can also be a great stepping stone toward an eventual divorce. If the two of you are already making arrangements to maintain two separate households during this time, it allows you to gradually ease into your newly single life before your divorce is finalized. In other words, make sure to use this time to work on becoming financially secure as a single individual.
Opting for legal separation over divorce
For many couples, choosing legal separation over divorce makes more sense, both relationally and financially. It can be an effective tool for keeping your finances afloat by making the most of federal tax breaks and continuing to receive additional benefits such as health insurance. With the proper legal documentation in place, both of you could gain some sense of permanency during your legal separation.
Legal separation is often a reasonable first step to take, whether you ultimately choose to pursue a finalized divorce, reconcile your relationship, or remain separated. In many states, it allows you to qualify for the required period of separation before divorce, so you are one step closer (if that is your goal). Every marriage is unique, so it is paramount to take the time you need to make an educated decision. Therefore, legal separation may be the answer.
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Shawn Leamon, MBA, CDFA is author of Divorce and Your Money: The No-Nonsense Guide and host of the Divorce and Your Money Show on iTunes. Learn more at www.divorceandyourmoney.com.