As Washington works to figure out exactly what step will be coming in terms of the nation’s healthcare, couples are working to figure out what step comes in their marriages. According to financial planners and divorce attorneys throughout the nation, the health care uncertainty in Washington, D.C. is causing some separating couples to re-evaluate if now is the time for a divorce.
Stalling Divorce Because of Washington’s Health Care Indecision
Couples with pre-existing conditions are in limbo. When it comes to health care, according to Lili A. Vasileff, founder, and president of Divorce and Money Matters, “We don’t know what will be in place, what it will cost, and if you can even get it.” Until there’s an answer, some couples are choosing to stay married and instead draft a postnuptial agreement that leaves them legally together but clarifies the separation of assets and terms of possible future divorce proceedings. For other couples, the stall in Washington means finalizing divorce papers but holding off on actually sending them into courts to be processed. It used to be a common practice that though legal separation, couples were able to keep coverage for their spouses, even if they were not actually together. Most insurance companies stopped honoring this type of agreement, according to Andrew Vaughn, a Chicago divorce attorney and founder of NuVorce.
Congressional Republican leaders have been working to repeal and replace the Affordable Care Act (ACA). Under the ACA coverage was guaranteed for everyone on the individual market, regardless of how healthy or unhealthy they were. It also prohibited insurers from charging more to people with pre-existing conditions. Now that practice and the future of it is unclear.
Additionally, the cost of health insurance often factors into the calculation of alimony (also known as spousal support). In this uncertainty, attorneys are left to make their best estimate.
Divorce and Money
Divorce is scary to face. What can make the process even more overwhelming is determining what your financial situation will look like. In addition to child support and alimony, you will also need to determine how your property will be divided.
What State do you Live in?
State laws govern how the marital property will be divided. You will need to check with an attorney to see if you live in an equitable distribution state or a community property state.
What Counts as Property?
Property is anything that can be bought or sold, or anything that has a financial value. This includes: houses, cars, furniture, clothing, bank accounts, businesses, etc. Within that, there are two forms of property when it comes to a marriage: community property and separate property. Community property is anything earned or acquired during the course of the marriage. Separate property belongs to one spouse. States make their own determinations on what counts as separate property. A family law attorney would be able to help you determine what is “separate property” based on your state’s laws.
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.
In addition to figuring out marital property division, you’ll want to consult with professionals familiar with re-structuring finances after divorces.
The Rest of Your Financial Picture
As you move forward in your new life there will be a number of things you need to change: weekend schedules if you have children, perhaps addresses, maybe even your employer if you have to go back to work or get a higher paying job. There are going to be a number of unanswered questions. You don’t have to answer them all immediately, but chances are, you’ll need to answer them sooner rather than later. Here are some things to consider when it comes to your finances after divorce.
Figure Out a Budget
You might not have been the spouse in charge of the finances before. Now that you’re on your own, you’re going to have to be. This can be difficult if you’ve never taken care of a checking account. According to certified divorce financial analyst Eva Sachs, the first step toward financial independence is balancing your income with your expenses. So how do you do that? she advises that you sit down and figure out how much money is coming in (this will vary depending on what side of alimony and child support payments you’re on). After you figure this out you’ll need to assess how much of what is coming in is being spent on living expenses.
“Think of it as a spending plan rather than a budget,” says Sachs. “Knowing where your money goes is key, especially after divorce. There will be many new expenses you might not have thought about prior to your divorce; this is a critical time to refrain from spending money you don’t have.”
It might be helpful to write everything down until you have a clear picture. This will give you an up-close look at your financial habits. If you’ve never done this before, this might be a shock. It’s good to know where you can tighten up, or loosen up so that you can budget accordingly.
Rainy Day Fund
Now that you don’t have a spouse to lean on in times of trouble – loss of job, medical emergency, unplanned home expense – you’ll want to create your own rainy day fund. Any unexpected hits to your bank account will need to be covered by you and solely you. Protect yourself, says Sachs. She recommends creating an emergency fund you can continue adding to when you have the chance.
“An emergency fund should equal three to six months of your living expenses,” she says. “If you can swing it, I recommend six months because you’re now single and need an even bigger cushion if you are not able to work or an emergency occurs.”
Make Sure Assets Have Been Transferred
The papers are signed, your divorce is final, you can consider it over. Think again. According to Cheswick, the divorce may be finalized but your work isn’t really complete until you’ve ensured the assets awarded in the settlement have been distributed. Make sure all your t’s are crossed and i’s dotted before you skip along to singledom. Just because things have been agreed to in a settlement, that doesn’t necessarily mean they will automatically happen.
“I can’t tell you the number of people who will contact me months (and unfortunately even years) after their divorce is finalized and there are still outstanding items which have not been resolved,” Cheswick says. “Remember that the agreement is a legally binding contract that you both signed and agreed to uphold. If one party is failing to comply with the terms of the contract then the other party has every right to take steps to ensure their compliance including going back to court to have the agreement enforced.”
Enlist a Professional
It might seem like another financial burden to use a certified divorce financial planner during your divorce. In addition to legal fees it can feel like yet another financial expense. But a financial planner can save you a lot of headaches while also setting you up for a bright financial future, according to McBurney.
“Most financial mistakes that people make during and after divorce could easily have been avoided if they had sought professional assistance,” she says. “Financial planners can help you figure out how to live within your new financial realities post-divorce and develop strategies for building back your financial security. And tax advisors and CPAs can help you avoid making expensive (and very common!) tax mistakes (related to things like asset transfers, retirement, spousal and child support).”
Retirement can be a difficult thing to face during divorce. Chances are you imagined yourself and your spouse sitting on an amazing porch, sipping lemonade, and reminiscing about your children. Just because your spouse is no longer in the equation, that doesn’t mean that you need to abandon your dream retirement life. As Sachs advises, now that the divorce process is almost finalized, look to your future and start to maximize your retirement savings.
“Don’t let divorce stop you from planning for your future,” she says, “Investing in your 401K plan will allow you to save for retirement. You can begin by saving a small amount each week and then let it build slowly or make payroll contributions that match your employer contributions. Don’t stop thinking of the future!”
Just because your future plans have changed, that doesn’t mean it can’t be a bright one. Be smart about your finances and you’ll find the financial freedom you need to help you move on and start a new life.
Working with a Family Law Attorney
As with anything regarding your divorce: child support, spousal support, marital property division, child visitation, etc… you should consult a family law attorney. A lawyer from the expert law firm of Divorce Law LA will be able to guide you through the divorce process. The Divorce & Family Law Offices of Divorce Law LA will provide you with the highest level of expertise and professionalism from our skilled attorneys. Our Divorce and Family Law Practice spans a wide spectrum of areas that include: divorce, high net-worth divorce, marital property division, child custody and visitation, and child support.
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