Let’s say that one day your spouse comes to you and says that he or she wants a divorce. Regardless of how you feel about your marriage, your first reaction will probably be emotional. You may experience anger, fear, sadness, disbelief and other feelings. While it is normal for anyone facing these circumstances to experience these emotions, he or she also needs to think rationally about becoming wholly familiar with the finances of the marriage. Separation and divorce have a significant impact on your finances. It is important to know what is there in terms of both assets and debt, so that you can plan for the future.
- Make copies of all financial documents. Scan, copy or take screenshots of all financial documents, including bank, retirement and investment accounts, loans, credit card balances, insurance policies, wills, trusts, deeds/title certificates, tax returns, business records, etc. This is so you know exactly what documents exist and the amount of your assets and debts at that moment. You should have at least the last three years’ worth of all financial statements of the marriage in your personal file.
- Computer and account passwords. If your spouse may deplete your accounts, you will want to protect them from access. There may be more sound, alternative remedies that cure for a spouse’s actions without changing passwords and/or other login information given how cutting off access to joint accounts may lead to more animosity and conflict.
- Discuss finances with your spouse. Before the divorce is even filed, you should both consider how your financial situation will change as you separate your households. Each of you will have to determine your new living expenses and start budgeting and managing your own money.
- Be transparent about your finances. This goes along with discussing your finances. It is good practice for the spouse with more money to be actively communicating with the less monied spouse about financial matters. When parties are secretive, whether deliberately or not, it often results in accusations of misconduct and leads to more disputes. It is important to start working on separating assets in an open manner where possible. In some cases, this can only be done with the guidance of lawyers and financial experts since the less monied spouse will be suspicious of any actions taken by the other spouse.
- Modify your will and beneficiary designations. Until you are divorced, your spouse is entitled to a share of your assets. However, beyond that, you can designate other beneficiaries of your property in your will, trusts, financial accounts and insurance policies. In addition, if your spouse is named as a trustee, executor, power of attorney, or other fiduciary, you may want to change those provisions.
- Consult with several attorneys. It is important to find the right attorney to help you with your divorce. Ask friends or your other advisors (financial planner, accountant, etc.) for recommendations. Then speak to a few lawyers to find the right one for you in terms of their approach and experience.
These steps can help you protect your finances and your legal rights as well as minimize disputes over money. If you or your spouse are considering divorce, contact us to discuss how we can assist you in achieving the positive results you want.