In a divorce, untangling accounts and assets and setting child and spousal support may be complicated and messy. You should make financial preparations before you begin negotiating or litigating property identification and division.
Identify current and future expenses
Begin identifying and following household expenses when you start considering divorce. This may be essential for negotiating and determining the division of assets and debts and whether child support or alimony should be awarded.
Start collecting and reviewing bills for household expenses, food, clothing entertainment, home repairs, transportation, and other routine monthly expenses. Bank and credit card statements can help with estimating previous spending and predicting future expenses. In addition to these routine expenses, you should identify and project other one-time costs such as trips and replacing appliances.
Also, you should anticipate that spending may have to change with new circumstances. For example, child-care expenses will transform into payments for extra-curricular activities and ultimately college tuition.
As soon as possible, start collecting financial records because these documents are needed for planning. Financial advisors and financial institutions cannot keep your requests confidential if you and your spouse share the accounts.
Important financial records include check and savings account statements for the last year, current retirement account statements, investment account statements for the last year, credit card statements for the previous year, rent pay stubs, income tax returns for the last three years and ledgers for mortgage and vehicle, and personal and other loans for the past year. You should also prepare a list of assets and debts brought into your marriage and those that accrued in your marriage.
Hopefully, your spouse is transparent and shares this information. But these documents may be withheld or somehow become lost. Getting your hands on these documents early helps assure that you have this information. There are also court-ordered remedies if your spouse is uncooperative.
Big financial decisions
Important financial decisions, such as changing life insurance or retirement account beneficiaries, should be put off until the divorce is final. These may be addressed in the divorce proceedings. The judge may award your spouse or even find you in contempt because of certain changes made before divorce.
Depleting joint or even sole assets before the divorce is final may be risky and complicate later property division. Continue to use joint or individual accounts as usual.
Try to seek agreement with your soon-to-be former spouse about comparable and reasonable spending if you do not have money set aside for divorce expenses. You may need to seek a legal separation governing how money may be spent pending final divorce if your spouse is not cooperative.
Professional financial advisors can also assist you about the financial feasibility of divorce. An attorney can also help you consider practical options, represent your interests in negotiations and proceedings and assure that your rights are protected.