Divorce can wreak havoc on your finances. Hiring an attorney, setting up a new household, dividing assets and paying increased expenses can hurt your short and long-term financial condition. This is particularly true if you let your negative emotions affect your negotiations with your spouse. The longer the divorce goes on, the higher the legal fees and court costs. As you go through the divorce process, it’s best to try to separate the emotional issues from the financial ones and take these steps to help you achieve a fair settlement.
Take Inventory of Your Assets
Gather information on your assets. Don’t list every item you own but include significant personal and real property. You need to do this as part of the divorce because your assets will be split under the rules of equitable distribution. It’s also important to understand what you have since your half of the assets will help support you post-divorce.
Know How Much You Owe
Debts are also subject to equitable distribution. Your portion of the debt will be part of your financial future unless the debt was acquired for one party’s sole benefit and was not a normal marital expense. For example, if the parties frequently bought expensive items for themselves, that debt would be marital. However, it might be treated as one spouse’s debt if the purchase was unusual for the marriage.
Don’t Hide Assets in Divorce
Both parties are required by law to fully disclose their assets, income and debt. Concealing assets not only breaks the law, it also creates distrust. If your spouse discovers you hid assets, he or she is likely to hire a forensic accountant and/or private investigator to search for additional assets. That drives up the cost of your divorce and makes it more difficult to negotiate a settlement.
Hire a Financial Advisor
A financial advisor can help you analyze your finances and settlement offers as well as assist you in developing a plan to recover your financial stability after divorce. Some people hire a Certified Divorce Financial Analyst (CDFA). This is a financial planner with a separate certification to handle the special financial issues of divorce. A CDFA must pass an exam and meet certain other requirements.
A CDFA may not be needed depending on your circumstances. Often, your lawyer can provide you with the necessary explanations about how your assets will be divided. You can then take that information to a financial advisor without the additional certification to create a financial plan. Most importantly, you want to hire someone you trust who makes you feel comfortable.
Consider Long-Term Planning
In the short term, you must develop a budget. There will be new expenses as you set up your household and existing costs that will go up since they are no longer shared with your spouse. However, your budget needs to also factor in your long-term needs. Your savings may have been substantially impacted by the divorce. You must develop and maintain good financial habits to ensure you have money for emergencies, retirement and other goals. A financial advisor can help you with this.
Also, remember to consult an estate planning attorney to update your will and other documents and change your beneficiary designations as needed which you can do once the financial issues of the divorce are resolved in a signed separation agreement.
Taking these steps can help resolve your financial disputes more effectively during divorce and put you on the path to financial stability post-divorce. If you are considering divorce, contact us to discuss how we can assist you in achieving the positive results you want.
