For a lot of people divorce will be a life event that will shake up not only their emotions, but also their finances. Though the process can be a difficult one, preparation and planning can help protect you and your future.
Planning Before the Divorce Process
Before you start the divorce process get your finances in order. This means knowing your assets and their values. You’ll also need to identify what is owned separately and what is owned jointly with your spouse. Sort through your financial inventory and be ready to do the following:
- Develop a budget for before and after the divorce – you’ll need to figure out what your new financial goals will be
- Compile your bank statements and records – you’ll want to hand this off to your attorney
- Make sure you have copies of all joint tax returns
- Check that your taxes are up to date
- Jointly owned assets should not be given away or transferred at this time
- Do you have bank safety deposit boxes? You’ll want to check them
- Don’t make any large purchases – they could get you in trouble down the line
- Have your attorney review all documents before signing them
- Consult your attorney before agreeing to any distribution of assets
What Will Divorce Mean for Your Finances?
You might have more wealth after your divorce – and you will need to have a financial plan for it, as well as financial goals. Chart your income and expenses so you have a thorough understanding of what’s coming and going. If there are kids involved you’ll need to figure out if you’ll be able to support yourself and them after a divorce. Will you be receiving child support or will you need to pay it? What is the tax situation for these payments? When do the payments start? Will you be required to seek employment if you do not already have a job?
Debt and Employee Benefits
You will be responsible for debts on any of the assets you keep. Know what this debt is. You should also be aware of the debt your ex-spouse has. Make sure that any accounts that need to be separated truly are, and that your name has been removed. You’ll also need to make sure you understand how life, health, and disability benefits will be impacted. Who will be covering the children’s health care. You might also need to split up retirement accounts and stock options.
There are numerous questions that you will need to answer. Your financial advisor, tax professional, and attorney can walk you through any complex questions you have. Having the right advisors in place will help you get through this emotional life event.
Source: Huffington Post, Sudden Wealth From a Divorce?, August 21, 2014
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