Financial Benefits of Divorce

Most people have to stretch their minds to believe that financial advantages can be gained by divorcing. After all, the divorce process has a well-earned reputation for costing assets and income and derailing retirement plans. But benefits do exist on a few levels, particularly as spouses age.

It's possible that you could pay less in taxes after you divorce if you earn less than your ex does. If his income is $100,000 a year and you earn $30,000, and if you file a joint married return, the $130,000 total income puts you in a 28 percent tax bracket as of 2014. At $30,000 a year, you're in a 15 percent bracket if you file a single return. Of course, if he's paying you alimony, you have to claim it as income, so this could bump you up into a higher bracket.

Perhaps the greatest advantage in being single at tax time comes about if you want to itemize your deductions. With some categories, such as medical and work-related miscellaneous expenses, you can only deduct the amount that exceeds a certain percentage of your adjusted gross income. With medical expenses, it's 10 percent as of 2014. That's $13,000 of a combined $130,000 AGI, but only $3,000 based on a $30,000 AGI. Of course, you always have the option of filing separate returns when you're married, but if you do, both spouses must itemize or claim the standard deduction -- your returns must match in the method used. Filing a separate married return also bars you from claiming certain tax credits, but they're available to you if you file a single return.

If you live in a common law state, you're somewhat protected from liability for your spouse's debts if they're in his sole name. This isn't to say that if they were incurred during the marriage, you won't be assigned responsibility for a portion of them in a divorce, but the creditors can't come after you personally if your name isn't on the contract. If you live in one of the nine community property states, however, the "community" of your marriage -- you and your spouse -- is responsible for all debts incurred regardless of who signed for them. Divorce, and often even just a legal separation, nips this problem in the bud. You're once again responsible for only those debts for which you personally sign.

As long as you're legally married, your spouse is entitled to a share of your retirement benefits, so he'll take a bigger bite the longer you stay together. Divorce courts divide the marital portion of retirement plans -- that which was earned and contributed from the date of your marriage until the date your marriage ends. He's often entitled to 50 percent of this portion. If your marriage isn't working, the sooner you divorce, the more you'll have in the way of retirement income in your golden years -- the plans revert back to your separate property again.

Stories abound of senior citizens who are forced to divorce when one of them becomes incapacitated to the point of needing long-term care. Medicaid eligibility is complicated, but if you need to move into a nursing home, the government won't kick in and help you pay for it until your assets are exhausted. If you're married, this doesn't just mean what you own in your name, but everything you and your spouse own together. He's entitled to a "spousal resource" allowance, but this doesn't always amount to much. Some couples think they'd rather divorce, reaching a settlement agreement that gives all or most of their property to the healthy partner, rather than lose the property to nursing home costs and leave the other spouse to exist on a frugal allowance.