Ute Scott-Smith, ChFC, CDFA
Guiding You through Divorce
to Financial Security
How do I get Divorced?
10 Tips to prepare your finances when you are contemplating Separation or Divorce.
A divorce or separation can cause an emotional and financial toll on both spouses. If you are considering divorce and are seeking advice on how to divorce or have been served with divorce papers recently, you need to know which steps to take in order to reduce much of the stress and conflict that many people face when they rush the divorce process. After all, when confronted with a divorce, people are at a vulnerable point in their lives, both emotionally and financially. It is critical that you have expert divorce advice and the right information so you can make sound financial decisions for yourself and your family and save time and money in the process.It's not uncommon for a divorce or separation to result in financial difficulties. Debts are divided and with only one income, it may become difficult for one spouse to pay debts. All too often, a divorce leads to bankruptcy because a couple is often unprepared for the financial responsibilities that arise. This can be prevented by getting your finances in order.
The focus on information gathering at the beginning stage of the divorce process will help you:
- Save time and money when you start working with an attorney and/or certified divorce financial planner
- Distinguish your separate property from the marital assets
- Negotiate a divorce settlement from a position of strength, and
- Begin building a foundation for a secure financial future.
Below are some things to consider as you begin preparing for a separation or during the initial phase of divorce.
Start gathering Records and Copies of all Accounts. The amount of information required for a divorce is enormous, so it makes sense to begin gathering all of it together as soon as possible. It is important that you prepare a detailed list of all accounts that you own individually and as marital property with your spouse. The list needs to include both debt and asset accounts. For all accounts you will need to have a record of account names, account numbers, who is listed on the account as being financially responsible, balances, addresses, and phone numbers for contacting the creditors or financial institutions. Don't forget bank accounts, credit cards, loans, stocks and bonds, mortgages, and title information. It is important to obtain a detailed accounting of recent activity on the accounts. If you suspect that your spouse has been spending money in a questionable manner, you should obtain a copy of as many statements as possible before they disappear
Gather Copies of other Crucial Documents. It also helps to have copies of tax statements for the last three years, as well as pay stubs and employment information. If there is a business involved, get a copy of the tax records, assets, and debts. Other paperwork to make copies of are deeds, prenuptial agreements, marriage certificates, birth certificates, trusts, wills, and powers of attorney. It is also helpful to write down all applicable social security numbers and drivers license numbers.
Open a Separate Bank Account. One of the steps that you can take to protect your financial assets when beginning the divorce proceeding is to open a separate bank account. By opening a separate bank account from your spouse prior to the divorce process being initiated, you can ensure that you are able to remain financially viable and that you have access to money in order to live and care for your children. Therefore, you should open a checking account solely in your name without your spouse having access to the account. You are then able to pay your bills and your attorney's fees without substantial interference. If you are a woman who has taken her husband's surname, use this name to open new accounts. After the divorce is ordered, you can change your name back to your maiden or former name, at which time you can change the name on your new accounts.
Transfer some Money into your new Account. Transfer your share of mutual financial assets out of shared bank accounts into your new, individual bank account. Keep a detailed record of any money that you transfer out of your account, as it may be a contested issue in a divorce proceeding.
Cancel all Joint Credit Cards. When you divorce or separate, the court will divide the debt between you and your spouse. To prevent getting into further debt, cancel credit cards that list you and your spouse as owners. You don't want to be responsible for debt created by your spouse. Prior to cancelling joint accounts, it is important to obtain a credit card in your own name.
Be aware of outstanding bills and obligations, including your mortgage! Even though you are in the process of getting a divorce, regardless of Court Orders temporarily dividing debt, the creditors to which both you and your spouse are obligated still have a right of recourse against you and your spouse. Additionally, if you and your spouse are jointly obligated on an account, slow payment or non-payment can have a devastating effect on your credit, which can cost you thousands of dollars. Not only can your credit rating be significantly lowered, but you also can be sued by creditors in certain circumstances. Therefore, it is important to keep careful track of your outstanding bills and obligations.
Understand your Financial Situation. Another consideration when contemplating or preparing for a divorce is to keep a budget of your income and expenses. This will help provide documentation for determining the amount of support awarded, as well as give you an idea of the amount of money it will take for you to live comfortably after your divorce. For some people, it may make sense to hire a certified divorce financial planner to help sort out all the financial information, and assist in making sound decisions during the actual divorce.
Make sure your Taxes are Up To Date. Make sure that all federal, state, and local taxes are paid to date. This can be a major hassle once the divorce is finalized, and a tax lien is the last thing that you need as you start your new life. If you suspect that your spouse has not reported taxes properly and stands to be audited, consider filing amended tax returns as married-filing separately.
Consider Insurance Coverage If you are covered on your spouse's insurance, get complete medical and dental check-ups done for you and the children. It's important to have any necessary procedures done now while you are covered. Start the process of obtaining your own coverage for health, automobile, and home, and take these expenses into account for your post-divorce budget.
Obtain Emotional Support Family crisis and the break-up of a marriage can be one of the most stressful and traumatic experiences a human-being suffers in life. It is normal to experience anger, hurt, sadness, fear, low self-esteem and/or guilt. With all the emotions that are occurring, you will probably also have to make major financial and practical decisions that will affect you for a long time. It is important to be aware of and express your feelings. It is important to have a loving and caring emotional network. Find a good therapist and have a family member or friend you can talk to throughout the divorce process. Your lawyer should be sensitive and sympathetic, but do not use your lawyer as your therapist. She or he is not trained for that role and it is expensive. Sometimes one's emotions can affect the legal divorce process in a way that is harmful to that person's and the children's best interest. One may refuse to accept a reasonable amount of maintenance (alimony) and child support because she is feeling undeserving at that time. One may urge his or her lawyer to do frivolous and expensive motions because that person is experiencing intense anger towards one's spouse. Be aware of such behavior.
Obtain professional divorce advice! If you want to get a clear understanding of your financial situation before initiating a divorce or separation, consult with a Certified Divorce Financial Planner to ensure that you make smart financial decisions regarding your separate and marital assets in your divorce settlement.
Contact me today for your complimentary divorce advice!
Ute Scott-Smith
ChFC, CDFA