For most people, going through a divorce can feel like your whole world is falling apart. As you deal with emotionally untangling from your spouse, the last thing you likely want to think about is money and financial assets. However, protecting your financial interests should be a priority so you can best provide for yourself and your family post-divorce.
According to a study, women who went through divorce experienced a reduction of 45% in their standard of living, whereas the standard of living for men decreased by 21%. Thus, while splitting up finances with your soon-to-be ex may be the absolute last conversation you want to have, you’ll need to approach this sensitive subject practically rather than emotionally for a fairer outcome.
So, don’t let the pain of divorce cost you your financial stability, too. Read on and learn how you can protect yourself and your future by being prepared when dividing marital property.
Consult with a divorce attorney
Bringing a divorce lawyer on board may be one of the wisest financial decisions to make during the divorce process. A good lawyer has your back and becomes your guide through the confusing legal maze of divorce.
From the earliest stages, a lawyer can explain state laws regarding alimony, child support, asset division, and more. If you and your ex-spouse have shared stock holdings, stocks splitting during divorce will even be more complex, making hiring a divorce attorney even more necessary. They know the intricate rules and formulas used to determine settlements.
Beyond just advising you on the law, an attorney also works with you to develop the shrewdest negotiation strategies. This prevents you from sabotaging your own case due to a lack of know-how.
Collect and organize financial documents
Having organized records plays an invaluable role in getting a fair divorce settlement. However, you don’t usually need to dig out decades’ worth of dusty old bank statements. Most of the time, you’re only required to present documents from the last few years – tax returns, mortgage statements, recent pay stubs, investment portfolio summaries, and the like.
Make copies of all tax returns filed during the marriage. Don’t leave anything out, even if you’re embarrassed by issues in previous years. Past income and deductions establish baseline support levels today. Also, compile regular paycheck stubs to demonstrate salary history over time.
Obtain expert valuations
Sure, you could guess numbers or do some quick online searches to estimate the worth of your house, vehicle fleet, jewelry, and other possessions. However, banks, courts, and the IRS expect rock-solid figures and documentation. That said, having professionally done appraisals and expert valuations can serve as your insurance if financial disputes crop up down the road.
Work with qualified professionals to value any real estate holdings, businesses, livestock, collectibles, equipment, and other substantial assets. For example, jewelry stores can provide appraisals for expensive jewelry to substantiate claims if family heirlooms are involved.
Even something as simple as a used car merits a formal valuation rather than you just throwing out a number that feels fair. Don’t give your ex-spouse any reason to nitpick or doubt your estimates. Removing that uncertainty creates peace of mind as you both agree to divide property equitably based on credible figures.
Close or divide financial accounts
Canceling joint credit cards and separating bank accounts probably ranks pretty low on your list of divorce details to handle. However, addressing financial entanglements quickly helps avoid future problems – like a future ex-spouse running up debts. Furthermore, statistics show that 38% of couples divorce due to financial issues. If this is one of the primary reasons for your divorce, you wouldn’t want to complicate the situation by delaying these financial entanglements.
Contact each financial institution to find out the process for removing one spouse. Closing joint credit card accounts entirely prevents them from being accessed. For saving accounts, request changing ownership to individual names.
If significant assets are involved, consider opening new accounts rather than trying to divide or transfer an existing account. This gives each spouse complete control over their own money without messy logging of withdrawals.
As soon as legally permitted, remove your ex-spouse as beneficiary on insurance policies, retirement accounts, and pension plans as well. Don’t delay making these bureaucratic changes to protect your future interests.
Budget for temporary increased living expenses
The cost of maintaining a household on a now reduced income will likely strain your finances, especially with added divorce costs. Ideally, you must develop and follow a strict monthly budget to help you manage this difficult transition period. Having an emergency fund can also help cover unanticipated divorce-related expenses.
Going through a divorce places your finances in a vulnerable position. Being proactive by collecting documentation, budgeting carefully, and working with legal and financial experts can help you make the best of this difficult situation. And remember, an informed and strategic approach will safeguard your financial wellness and pave the way for a more stable and secure future.