How to Be Financially Prepared for Divorce
From the very beginning, you knew that almost half of all marriages in the US end in divorce, but you didn’t think yours would be one of them. It’s a tough time for you and for your spouse, and it may be even tougher for your children. There are many, many issues to consider at this difficult time, not the least of which are financial. Not to downplay the emotional impact of a divorce, we have compiled a VERY short divorce checklist of financial steps that should be taken as soon as you’ve determined that a divorce is inevitable. At worst, we hope it will give you an idea of a few things to take care of before moving forward with the divorce. This list is intended to provide general considerations. It does not replace in-person and unique advice you should receive from counsel. In fact, in some situations, it may make strategic sense to take steps directly in contradiction to this list of suggestions.
- Gather documents — The first thing to do is start rounding up financial records and making copies. There are many types of financial documents that you’ll need, including (but nowhere near limited to) property titles and loan documents, bank documents, insurance information, tax information, wills, and trusts. You’ll need these documents when financial questions come up during the divorce proceedings, and they have an unfortunate tendency to go missing if you don’t round them up right away.
- Consider closing joint bank accounts — It makes things easier in the end if you try to keep money separate. At this point, it may be a good idea to split the money in any joint accounts you have and close them. Keep close tabs on what you take from the accounts and what you spend — in fact you should be keeping track of pretty much everything until the divorce proceedings are over. However, closing joint bank accounts should be done only after you and your attorney have decided that is an appropriate move. In some cases, closing a joint bank account will not be a smart choice.
- Open a private bank account— To avoid any further spending overlap and further financial stress in an already volatile situation, you’ll need to keep all the money that you earn in a separate account.
- Monitor spending and save money — As your divorce proceeds, the bills will begin to add up. It’s time to start saving and preparing for the worst. Even if it looks like you’re in good shape money-wise, spending sprees are not a good idea right now. Keep a close eye on what you’re spending, save cash where you can and, again, keep track of everything.
- Talk to an attorney — Chances are you’ve never been through this before. An attorney can give you divorce advice, prepare you for what’s to come, and build a strategy so that you lose as little as possible during the divorce. At the same time, your attorney will try to get you through this difficult time as quickly as possible.
- Talk to a financial planner — This does not necessarily make sense for everyone in a divorce. But if you have a significant retirement account or other more relatively liquid funds, you may want to speak with a financial planner. Not only will the divorce be expensive, but there will be plenty of money and valuable property shifting around before the dust clears. A qualified financial planner can help walk you through the process and provide sound financial advice for your divorce. Even if you expect a relatively peaceful divorce settlement, it can be very expensive. However, it’s important to hire a financial professional who is familiar with the aspects of the divorce process. The credentials to look for are CDFA, CDP, and/or CDS.
Any time a marriage reaches a point where divorce is inevitable, it’s painful for all the parties involved. There are crushing emotional issues to deal with but, unfortunately, there are other important matters to deal with, as well. It’s extremely important to be financially prepared for each step of the divorce, because it can be very expensive and add to an already stressful situation. While there’s no way to remove all the stress from a divorce, there are steps that you can take to mitigate the damage. This is no time to go it alone — talking to a qualified divorce attorney is one of the smartest things you can do.