February 6, 2014
Divorce and Your Finances: The Basics
No one likes to plan for divorce, especially married people. However, divorces, like marriages, are about transition, and all life transitions require smart, proactive financial planning. If your marriage is troubled, do your best to restore it. But if divorce is even a remote possibility, take these steps to protect your financial health.
Hire a lawyer and a financial adviser to work with you on your settlement, including addressing how the courts where you live will handle retirement accounts and other assets in a divorce. The right professionals will help you to set goals and objectives for your divorce that make sense, despite the emotional turmoil of the process for you and your family. Your current family attorney and financial adviser will likely not be able to fulfill this need if they are jointly obligated to both you and your spouse as clients, as it would present obvious conflicts of interest. Be prepared to identify and hire other professionals to represent your interests.
Budget for new living arrangements, as well as a plan for transition tailored to your next situation. Factors such as children, transportation to employment, moving costs, etc., must be considered and planned for. Face up to and budget for changes in your lifestyle, and prepare family members who will be impacted accordingly. For example, you may need to rent a smaller place than the home you now live in with your spouse, or your children might have to change schools. Anticipate these and other changes, and budget accordingly.
Do a thorough review of bank, credit card and investment accounts, especially joint accounts that can be depleted by your spouse. Remove your name from joint credit cards so you won’t be liable for unpaid charges. Do your best to eliminate outstanding debt and avoid creating new debt until you have completed the transition out of your marriage.
If a new love interest is in the picture, resist the temptation to make joint financial commitments with that person, such as co-signing for major purchases or becoming an authorized user on their credit card account, until you have completed the legal process of separating your assets and liabilities from those of your former spouse.
Prioritize terms over things, and people, and particularly children, over all. That means not wasting money and emotion fighting over stuff. Your goal should be to quickly reach terms both you and your former spouse can live with, even if you don’t love them, and to keep negativity and resentment to a minimum, so you can recover both emotionally and financially.
Of course, these basics can be inadequate when divorces are marked by animosity, bitterness, jealousy and hostility, including domestic abuse.
Check out Seven Steps to Protect Your Assets When Leaving An Abusive Marriage by Huffington Post contributor and Bedrock Divorce Advisors President Jeff Landers.