Divorce costs money. It’s difficult to predict the financial impact of divorce because expenses go well beyond paying an attorney and can impact everything from your credit card settlement process to your insurance. So if you are not careful, your ex-spouse can come out of the divorce in perfect financial health while you are in ruins.
With that in mind, here are a few steps that can help to protect your money in the divorce.
Hire a good divorce attorney
A good divorce attorney can negotiate resolutions to financial and non-financial problems without getting into nasty court battles. An experienced divorce attorney will know the state laws and help you divide marital properties amicably.
Find out how much you have
You might have more assets than you think, even if you don’t consider yourself wealthy, and you can’t preserve what you don’t know is there.
In New York, you will complete a statement of net worth, which will list all of your debts and assets.
This necessitates awareness of everyone’s 401(k), savings, credit card, 529, and other account balances. You can get an idea about what you possess and what might potentially be your financial future following a divorce once you know the overall value of everything you own.
Obtain copies of all of your financial documents. Get everything down on paper. Everything. The court will be concerned with evidence of your assets, not your spouse’s affair, so start gathering as much evidence as you can.
Use caution when relying solely on electronic copies. Print everything out so you won’t run the danger of being locked out of your information if a vengeful spouse tries to set new passwords for all of your joint accounts.
This includes any recent financial documents you’ve signed, such as bank account statements, tax returns, brokerage company statements, and tax returns.
Think about tax and child support
Now that you have decided to split, you must also consider your tax filing status. Make sure you are not taking the tax-exempt assets while your partner receives the tax-exempt assets. Suppose a spouse receives $875,000 from his 401(k) retirement account, while the wife receives the same amount from funds in her bank and brokerage accounts. On the surface, it could appear fair, but it’s not. If the husband takes the money out, he will have to pay taxes, but the wife won’t.
If you have a child, it’s time to determine how much you need to get or pay for child support, which is a pretty big calculation. If you’re going to get child support, include the extracurricular activities like camp and baseball equipment. Little and large purchases add up, and you don’t want to return to court after a divorce to try to recover the expenditures. Your protection from the potential additional costs will come from these simple considerations.
You may want to separate your bank accounts or open new ones in your name
You may want to build your credit history immediately if you’re a non-working spouse (like a stay-at-home mom) in case you need a loan in the future.
Tackle your credit card debt and mortgage payments
Regardless of your circumstances, mortgage companies and landlords want their payments. Even before a divorce, you might wish to get a place of your own, which could weaken your claim to the house.
The same thing goes for credit card debt. If you have joint credit cards with an outstanding balance, try to pay them off before the divorce. Or think about a solution beforehand.
Modify your will
You should change your will when you get ready for a divorce or as soon as it is finalized. Former spouses are typically automatically disqualified from acting as trustees, estate administrators, or beneficiaries under your will. Consult an attorney to know the state laws about amending the will.
Make sure the documentation is correctly filled out. A divorce coach or attorney are examples of qualified specialists you should consult with to ensure the paperwork is completed correctly.
For instance, if you share a retirement or pension plan, your attorney will probably need to submit a QDRO to the court.
Be cautious if you are conducting the divorce paperwork by yourself. Even though you are entitled to your share under the rules of your divorce, you run the danger of not being able to get it if the correct paperwork is not filed.
Author: Lyle Solomon has extensive legal experience, in-depth knowledge, and experience in consumer finance and writing. He has been a member of the California State Bar since 2003. He graduated from the University of the Pacific’s McGeorge School of Law in Sacramento, California, in 1998 and currently works for the Oak View Law Group in California as a principal attorney.