Dealing With Money Before and After Divorce: 5 Essential Questions

No matter who you are or what your current life situation happens to be, going through a divorce is guaranteed to change your financial situation. Legal fees, moving costs, redistributed assets, childcare costs, and other financial considerations can all have a big impact on your sense of financial security. What’s more, if your partner was responsible for handling finances during your marriage, you may feel overwhelmed when faced with the prospect of suddenly managing finances on your own.

The good news is that with careful planning, it’s more than possible to take control of your finances. To get you started, here are five essential questions to ask yourself when dealing with money before and after your divorce.

1. Do I Have Funds Set Aside in My Own Name?

If you’ve recently begun the divorce process, then the first question you’ll want to ask yourself is whether or not you have any bank accounts or credit cards in your own name. Many couples own joint accounts, which are convenient during a marriage but can lead to disaster in the event of a hostile divorce. Close any joint accounts as soon as possible, and transfer funds to an account in your own name. This way, a potentially hostile ex-partner will have less opportunity to cut you off from your finances.

2. Do I Know What My Assets are Worth?

Another step to take at the beginning of the divorce process is to determine how much your assets are worth. This typically includes your house, cars, bank accounts, investments, and any other valuable possessions. You’ll also want to inventory any debts that you currently owe.

Once you’ve familiarized yourself with your assets, you’ll want to determine which assets are considered marital property and which are considered non-marital property. Generally speaking, the distinction is that marital property will have been acquired during your marriage. Ultimately, taking the time to understand your assets will give you a financial advantage by ensuring you don’t overlook any important assets during the divorce proceedings.

3. Do I Know What Funds I’m Legally Entitled to Post-Divorce?

Depending on your situation, you may be entitled to funds such as alimony or child support following your divorce. In these situations, it’s wise to consult with a family law attorney, in order to make sure you’re fully aware of all relevant legal details. Although, ideally, your ex-partner will be scrupulous about sending alimony, child support, or other funds, the reality is that funds aren’t always sent in full or on time.

4. Am I Making Financial Decisions Based on Logic or Emotion?

It’s probably not surprising to learn that emotions play a big role in many people’s post-divorce financial decisions. For example, it’s often difficult to make the decision to sell a home or car that may be too expensive to keep after your divorce. Some parents find themselves trying to make it up to their children by purchasing expensive toys, clothes, or other items. Although it’s challenging, being extra careful about avoiding emotional expenses following a divorce will pay off in added financial security.

5. Have I Updated My Budget And Left Room for Unexpected Expenses?

Even if you kept a budget before your divorce, you’ll want to set aside the time to update your budget with new monthly expenses. In particular, you may want to leave room for unexpected expenses, until you’ve become familiar with your new post-divorce lifestyle. If it feels overwhelming to create a budget, remember to start with the basics: food, shelter, childcare, and any other broad categories that come to mind. Once you’ve budgeted for your basic needs, it becomes easier to factor smaller expenses into your budget.

Our online resource has step-by-step instructions for organizing your finances and creating your post-divorce budget. We have personalized support available as well. Getting a clear picture of your post-divorce financial situation can definitely be challenging, but is very do-able with right resources around you. I can guarantee you’ll feel much less anxiety and confusion when you’ve tackled this piece! We’re here to help – you don’t have to go it alone!

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First Financial Steps When Preparing for Divorce

If you are contemplating divorce or preparing for divorce, getting your financial house in order is so important. It’s very common for one spouse to handle the finances and for the other to not have much knowledge of the financial situation. While this is fairly normal, it isn’t ideal, especially when heading into divorce. It is critically important that both spouses have a solid understanding and this begins with having access to all accounts, statements and documents. Plus assets can be hidden, debts can emerge and cash can disappear when the “D word” is uttered. Having at least three months of statements is helpful to ensure everything stays on the up and up! Hope for the best, but prepare for the worst.

Gathering the documents listed below will not only ensure you have full knowledge of what you own and what you owe, but you’ll also be prepared to start doing the divorce financial planning.

  1. Tax returns – Most recent year for business and personal
  2. Paycheck stubs for both of you
  3. Checking and savings account statements
  4. Credit card statements
  5. Mortgage statements
  6. Insurance policies
  7. Investment and retirement account statements
  8. Home equity or other loan documents
  9. Your credit report
  10. Child or spousal support documents from a previous marriage

What if I can’t find it?
If you are the spouse who doesn’t manage the finances, unearthing all of this paperwork is no easy task.

Here are a few tips to help your detective work:

  • Call your accountant. He or she will have old tax returns as well as the supporting documentation. Be sure to advise them that you are requesting this confidentially if you don’t want your spouse to know you are contemplating divorce.
  • Contact the IRS. Visit www.irs.gov/Individuals/Get-Transcript to order up to three years of previous returns.
  • Contact your financial planner.
  • Go through your home office files.
  • Watch the mail to grab other documents you may not yet have.
  • Access online statements. As long as your name is on the account, you should be able to call to get a username and password if you don’t have one already.

What’s next?
You now have everything you need to not only start divorce financial planning, but also to ensure you have full visibility of your financial situation. This will prevent your spouse from getting away with any shenanigans. Hopefully this wouldn’t happen to you regardless, but it does happen. It’s better to be safe than sorry.

Untangle The Knot will guide you through the next steps on understanding your current and projected financial situation, including considerations for decisions you will need to make and the financial gotchas to avoid. If you thought this was helpful information, sign up now for your Untangle The Knot service for immediate access to much more! You’ll also find helpful resources, including a financial checklist and toolkit, to make it just a bit easier to get your financial house in order! Check back soon for the blog on tips to safely store these confidential documents, and other important online security precautions to take before and during divorce.

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