Finances and Divorce, Part 1

Your Finances…Planning for the Future

In an ideal world, everyone would have time to plan for a divorce. Why? When it comes to finances, it takes time to gather information, and it’s helpful to avoid emotional decision-making. During times of stress, it’s easy to confuse feelings with facts, but you need to get away from emotional reactions so you can plan for your new life.

Try to separate the personal and emotional experience of divorce from the “business” side of divorce. Take some time to put together a plan. Ask yourself, “How do I get from where I am now to where I need to be in the future?”

Decisions about money will not only affect your life during your divorce, it will also affect your future. If possible, take the time to plan ahead and seek advice from an attorney and financial professional.

Getting Started

Make a list of everything you own (assets) and everything you owe (liabilities). While you don’t need a complete inventory, try to write down everything that has value. You will use this list when you meet with an attorney to discuss your divorce settlement. Also remember that the kids should get what is theirs. This should never be a question.

What you own (assets):

Home

Cars, boats

Jewelry

Furniture

Household items

Checking account (balance in the account)

Savings account (balance in the account)

Retirement accounts (balance in the account)

Investment accounts (balance in the account)

Business (value of business)

What you owe (liabilities):

Mortgage

Car, boat loans

Credit card debt

Other debt and loans

What if I Don’t Have Access to the Finances?

If your spouse always handled the finances, it may be harder for you to know exactly where you stand financially. You may be able to access this information by looking through files at home, on the computer, mail, etc. If not, you can ask your attorney for help. There is a process called “discovery” that allows your attorney to gain legal access to your spouse’s financial information, so that you know where you stand.

What Do I Want to Keep?

List the items you’d like to have after the divorce. This includes both assets and the related liabilities (mortgage or loan). Be sure to bring this list when you meet with your attorney. In the heat of the moment, many women make rash decisions and declare “I don’t want anything; I just want to be free!” Try to remember that this is a “business decision” not a personal decision. Keep your best interests in mind, when planning for the future.

Future Value of Earnings

One thing that many women forget to consider is the future value of their husband’s earnings. You want to think about your spouse’s current income, but also his increasing future income, particularly when it comes to alimony and child support.

This needs to be a part of the settlement discussion, especially if you supported your husband financially while he attended college or graduate school, or while he started a new business. In such cases, you may be entitled to a portion of his future earnings because you helped create his success. The amount and duration of this type of settlement can be negotiated. Don’t overlook this.

How to Pay for an Attorney

There are several ways you can pay for a divorce attorney.

Your legal fees can be paid out of your own pocket, or from a joint account. Any joint account you share with your spouse at the time of divorce is considered part of the “marital estate.” Some of this money is yours. Don’t be afraid to use it to pay for good legal representation.

In addition, some corporations provide legal benefits for their employees. (This often works like a medical benefit, where you sign up in advance, and a small amount of money is automatically deducted from each paycheck to pay for your legal services.)

You can also obtain legal aid through various community resources.

Gather Documentation

You may contact your local mortgage broker for mortgage advice to help you better manage decisions concerning your current circumstances with your home. Gather and organize all your financial information in one place. It’s a good idea to make copies of everything and put them in a three-ring-binder. Your binder should include:

Tax returns

Bank statements (checking and savings)

Investment statements

401K and pension/retirement statements

Credit card statements

Mortgage and other loan documents

Insurance information (health, life, auto, home, property)

Business and personal financial statements

Develop a Current Budget

Although the actual costs may be different, estimate what your current expenses are, and what they will be after the divorce. You’ll also use this list to help your attorney determine your divorce settlement, alimony, and/or child support.

Make a list of your income and expenses and develop a budget. This will help identify how much you’re making, how much you’re spending. It’s also a useful tool to help identify areas of possible savings.

Stay Tuned for Part 2 where we’ll discuss more money issues related to FUTURE income, savings and investments.