No one has ever said that divorce is a cheap process. For the most part, if you and your spouse are unable to come to a decision on things, divorce can be an expensive process with an expensive aftermath.
To Consider Before You Divorce
If you are unhappy and unable to continue your marriage, then divorce might be the best option for you. There are some financial considerations you will need to make. Here’s a little of what you can expect:
- Living as a single person costs more. This can be increasingly true for couples that share children.
- Your standard of living might drop because of increased living costs that are no longer being shared.
But there are ways to minimize the financial damage. You’ll want to review these steps if divorce is in your future.
Minimize Financial Pain During Divorce
Work with a Lawyer
Even if you have decided that you don’t want to work with an attorney, at least consult one so that you are aware of your rights and options. You need to protect yourself. Even the most amicable of divorces can get sticky when it comes to ironing out the legal ramifications and you’ll want to do the best you can when it comes to protecting yourself. Remember that bitterness can cause people to do things they wouldn’t normally. Most lawyers offer a free first consultation.
Look at Your Credit Reports
You are able to pull free credit reports three times a year. These reports show all of the credit accounts that exist in your name, in addition to those you share with others. You’ll want to look for new accounts opened in your name and any changes that are unexpected. Your credit score can be damaged by a spouse that fails to pay joint bills.
Close and Monitor Your Joint Accounts
A lot of times divorcing spouses will move money from joint accounts to individual accounts so that the other spouse is unable to recover the cash. A lot of times this leads to large amounts of debt on joint credit cards, for which the innocent spouse is also responsible for.
The Consumer Financial Protection Bureau says:
When you have a joint account, each account holder is responsible for the full amount of the balance. The card issuer can seek to collect the amount due from either account holder.
Because of this, it’s advised that you close or freeze your shared financial accounts, including credit cards, joint bank accounts, and lines of credit. You will then need to open lines of credit under your own name. You might consider moving to new institutions to avoid confusion. If your spouse is resistant to this, try to do it on your own by consulting the account rules in the contract you signed when opening the account. You can also ask your bank to help.
Remember to also remove your spouse’s name as an authorized user from your personal accounts.
If you must retain a shared account because of costs related to children, try to limit it to one. Make sure to monitor the activity on the car by requesting balances and records of the most recent transactions. You can do this from an ATM, bank branch, or online.
Document Your Money — All of It
Try to locate every single marital financial resource, including:
- All accounts and assets held jointly and individually. Record the balance, date, account number, authorized users, and contact information for each bank or creditor.
- Incomes, property, retirement plans and all other assets owned jointly and individually. This should include vehicles, homes, jewelry, furniture, brokerage accounts, and insurance policies.
Make sure you keep everything in one place. Regardless of if you work with a lawyer or not, the court will need statements and documents pertaining to all accounts, assets, bills and debts. Organize everything in a file cabinet. Include:
- 401(k) statements
- Insurance policies
- Real estate purchases
- Mortgages and refinances
- House appraisals
- Brokerage accounts
- Money market accounts
- Tax returns
Work with a Divorce Financial Analyst
You might consider working with a divorce financial analyst that can help with your settlement by:
- Locating assets. This also includes hidden assets.
- Ensuring information about family finances is accurate and complete.
- Developing a long-term forecast of how your divorce will affect your finances when it comes to retirement needs, tax liabilities, and benefits.
- Developing a realistic household budget so that you know where you stand in terms of life insurance, health insurance, and cost-of-living increases.
- Appraising and/or valuing assets.
- Preparing financial affidavits that describe your financial and tax implications when it comes to various divorce settlement options.
- Mediating a financial agreement between you and your soon-to-be ex-spouse.
Get Your Name on the Deed
Regardless of if you are getting divorced or not, make sure your name is on titles and deeds of property you own together. This is important for all spouses, and can become an issue in cases of a spouse passing away.
This property is considered marital property in the state of California, and will need to be divided should you divorce your spouse.
When it comes to dividing assets during a divorce there are various concerns you will need to deal with when it comes to dividing the marital property.
What State do you Live in?
State laws govern how the marital property will be divided. You will need to do your research and check with an attorney to see if you live in an equitable distribution state or a community property state.
There are four other steps that need to be considered when diving marital property:
- Identify the assets owned by you and your spouse
- Categorize all assets as marital or non-marital property
- A value will need to be assigned to the assets
- Devise a plan for the division of assets that is in accordance with state laws
No Fault Divorce Laws
Though most states separate the division of marital property from grounds for divorce due to no fault divorce laws, most states do consider any financial misconduct when it comes to dividing marital property. What this means is if you or your spouse has foolishly spent money then you or your spouse will most likely be penalized when it comes to dividing marital property.
Separate Join Financial Obligations
If you feel the division of marital assets might be a contentious point between you are your spouse, you might want to consider separating financial obligations prior to starting the divorce process. Marital property does not only mean furniture and household items, but also joint credit accounts. Each spouse should have access to a complete set of all financial documents. You’ll also want to close all joint credit card accounts. If you’re not able to fully separate the accounts, draft a formal written agreement outlining the activity on the remaining joint accounts. Freeze any investment assets – this will ensure neither spouse misuses funds until everything has been agreed upon. You might also want to consider changing the title on your home to read “tenants in common” until the final agreement regarding marital property has been decided upon.
Change Beneficiaries & Rewrite Your Will
After your divorce you will need to change the beneficiary on your assets, including insurance or stocks, bank accounts or retirement accounts. You’ll also want to update your will too if it lists your spouse’s name.
Have a Financial Plan
You’ll need to know how to budget according to your new income amount. Putting this together before entering the divorce process will help you understand your needs following the divorce so you can come to a settlement that works.
Make sure you plan for college tuition, child care, children’s lessons, sports and activities, and your own retirement, taxes, transportation and housing.
Considering your financial situation after your divorce can feel daunting and overwhelming, but if you take the right steps, you can be sure to set yourself up for financial freedom. It might take some tweaks, but consider the fact that you are now completely in charge and able to make your own decisions regarding how your money will be spent. Embrace it, and embrace the freedom you now have.
A Family Law Attorney
When it comes to the actual legal process of a divorce, you’ll want to work with a skilled family law attorney There are a number of things that need to be considered during a divorce: child support, spousal support, marital property division, and other things. Working with a skilled attorney can help ensure you get a fair case. For advice on divorce, child custody determinations, setting up a co-parenting agreement, dividing marital property, and spousal support you need the expert law firm of Divorce Law LA. Schedule a consultation today.
33 S. Catalina Ave. Ste. 202
Pasadena, Ca. 91106