Ironically, the most important time to be clear-headed and smart is usually the same time you are trying to dodge the rubble of your crumbling marriage. Hopefully, you have a good lawyer to steer you down the right path, but it can be overwhelming to deal with all of the issues an uncontested divorce brings without being sent over the edge.
If the divorce is not a surprise, and you have time to prepare, use it to your advantage and be smart about your finances and documents. Taking the time to reason clearly and craft a plan will help you in the long run.
Gather the Paperwork
Firstly, it is imperative to think clearly and calmly. A time when you are reeling from a hit is not the time to make important life decisions. While you lick your wounds, gather your paperwork for your attorney/CPA. And by paperwork, we mean every single document you have on paper and any statements that you can print that are online based. This means documents that address money markets, 401(k), pension statements, certificates of deposit, checking accounts, etc. These papers will verify the value of each asset you hold as a couple and you hold individually. If you can, get your spouse’s documents. This will help in making the best decision on how to divide assets and debts.
Make a Budget
Second, take the time now to budget for the new you. Make sure your finances will allow you to ease into the new you. While expenses will go down, the overall household income will likely decrease, as you will be the only person earning income. The possibility of receiving or paying alimony should also be factored into your calculations. This will be the beginning or figuring out how much to save, spend and how you will approach your new financial situation. You should start trying to live by your new budget as soon as it is practical.
Plan for the Worst
Then, try to minimize the risk that something will happen that hurt your financial standing. Many people are blind-sided when they find out their spouse is filing for bankruptcy. However, bankruptcy and divorce go hand in hand more often than you would expect. Also, not having health insurance can cause financial turmoil in the event you or your dependents have any medical issues. In the middle of a divorce, you need to make sure that all your insurance coverage is adequate, that the premiums are current, and that your spouse has not cancelled them.
Also, if your spouse is having financial problems, you will need to avoid backlash on your own financial stability. Start by making sure that you and your soon-to-be ex-spouse divide your bank accounts. If you have joint bank accounts, make plans to separate them and follow through. If you are an authorized user of your spouse’s card, remove your name from the cards. Also, if your spouse is an authorized user on your credit cards, have them removed as soon as possible to prevent them from making unexpected purchases and charges.
Make Changes to Your Accounts and Estate
If your spouse is the beneficiary to your life insurance policy, retirement accounts, or other bank and asset accounts, start the process of remoing their name. You can replace them with your children, parents, your estate, or another person. You will also need to revise your estate planning documents, trusts, power of attorney, will to reflect the change in your life. Also, you will likely need to update your
Change your beneficiaries and designate a new representative for your of power of attorney in order to make sure you would be legally protected even in the case of incapacitation or death.
Separate your Financial Life
Here is a useful checklist for separating finances:
- gather copies of all tax returns, with the more recent tax returns being a priority
- request copies of your credit report(s) and review them carefully
- close joint credit card accounts and other lines of credit
- set up separate checking and savings accounts, and do not add your spouse as an “authorized user”
- transfer any significant funds that you are entitled to into your own separate account, but discuss with an experienced divorce attorney beforehand
- close any unnecessary joint checking or savings accounts if possible
- do not continue to deposit funds that are not necessary for day-to-day living into joint checking or savings accounts
- pay off household expenses from joint bank accounts
- consider selling the house and other real property to get it out of both your names. In the alternative, refinance the real property and put it in one persons’ name
- Check to see if you overlooked any assets such as frequent flier miles, club memberships, vacation pay
- Update your will and other documents
- Revise your budget and consider hiring a financial planner to handle long-term plans if you have not already done so
At Coleman Legal Group, LLC – our divorce and family law attorneys have extensive experience helping clients deal with complex and routine financial issues when facing divorce. Call us at 770-609-1247 to speak with a divorce and family law attorney about how we can help you.
Updated: 2022-08-14
