Financial Changes to Make During Your Divorce
Think divorce financial planning is only for the rich and famous? Think again. No matter your current financial status, there are a few financial planning tasks you need to check off that divorce financial checklist.
There are a lot of financial changes during divorce, for example:
Separation of assets
Establishment of separate accounts
Preparing your financial statements for the divorce proceedings
So, while we’re on the topic of financials and divorce – we recently covered Ways to Make Extra Money After Divorce and I Was the Breadwinner and Now My Ex Wants My Money – we thought we’d gather some of our top tips for getting your finances ready for the whirlwind of divorce proceedings. Or it might be more accurate to call it the tornado of divorce proceedings.
Don’t worry. Today, we’re going to address some of the impending stress that’s keeping you up at night. While you don’t have a lot of control over what happens in the courtroom – you can be as thoroughly prepared as possible, which makes everything go far smoother. With a little preparation, you can stroll confidently into that courtroom ready, prepared, and hopeful for your financial future.
Let’s take a look at some of those tips.
Yes, You’ll Want a Financial Checklist
Financial institutions, advisors, banking professionals, lawyer’s offices – they all have divorce financial checklists for you to use to improve your financial health, including divorce checklists to help make sure you aren’t forgetting anything.
We’ve reviewed lots of them for you and compiled this helpful list.
Divorce Financial Checklist
Take stock of every single expense and income source. It helps to prepare a master document for income and expenses, including payment information, the names on the accounts, and documentation for who is paying what. DivorceNet has a great list of expenses that may be helpful to you.
Take stock of your credit report – If there are outstanding accounts that involve your ex in any way, gather the documentation for who owes the debt and payments that are being made.
Prepare a list of all shared assets, their proven values, and any remaining balances owed on those assets. Remember, if you can’t prove something on paper (like the remaining balance on a car, the value of your shared art collection, or the accumulated debts), in court it likely won’t be considered. AARP has a great list of tips on financial asset division.
Fully document your income. Get it all together. The judge will want to see what your financial situation looks like, where the money is coming from, and how those funds are being allocated. (Especially when it comes to financial care for the children.)
Gather your tax documents and speak to your tax advisor. You may have to prepare for a much different tax season outcome. It’s good to be mentally and financially prepared for that.
Get your banking in order – your banking, not shared! You will need to operate moving forward, from your own banking accounts to which your partner does not have access. Your personal income should be diverted there, henceforth.
Talk with professionals that can advise you more specifically – lawyer, financial advisor, banking professional or lending specialist (should you have to sell your home, divide the assets, and move), realtor, tax advisor, etc.
This, of course, is just a start.
Divorce Financial Planning 3-Step Simple Strategy
We tend to think of divorce financial planning as a 3-part strategy. Keeping it as simple as this can be a game changer, especially for when procrastination and avoidance seem far more appealing. Simplicity of any kind during your divorce can be grounding, calming, and give you that safe mental space that seems so elusive during times of stress like this.
Our very very simple 3-part financial divorce strategy is this:
Analyze
Separate
Document
Let’s take a look at each of these.
Yes, It’s Time to Take Stock – of Everything (Analyze)
You’ll notice a lot of the check boxes we talked about above have to do with taking a sort of financial inventory of your life. You may have done this before you got married, or after you finished college, before you had your first child, or at other milestones in your life.
You may have never looked at your finances in your life. Unfortunately, you’ll have to do it now.
Get some paper files and a pen, create a folder on your computer, and get ready to do your best to gather the information and documents on every financial thing in your life.
If it sounds daunting – don’t worry. Once you have a process, it will come easily. You’ll handle this analysis one account, one bill, one asset at a time until the process is just a simple task to be done.
Remember: Do not stress; simply assess.
Here are a few things you’ll need to get a current assessment of and the information you’ll be gathering:
Bills
For each bill:
Account number | contact information
Due date and amount
Where’s the money coming from currently (what account)?
Update your contact info with the company if you will be taking over that bill (even temporarily)
Financial Assets
For each asset (Savings accounts, stocks, retirement accounts, IRAs, Real estate holdings, rentals, etc.) :
Account number | contact information
Balance
Who has access to the funds and can they be frozen until the divorce proceedings determine allocation of the funds?
Physical Assets
At the risk of overstating this: list everything. Assess what you and your spouse had before the marriage, acquired together, and what’s remained in your custody since the separation.
Create a Google Sheets or simply write it on a notepad, but you will need a list of all the physical assets you own, shared or separately. Try this template as a starting point, or for inspiration.
A simple list of assets and their values is helpful, along with important bills of sale, receipts for purchase, or receipts documenting how the item was paid for, etc.
You do not need to do this for everything you own – but if it matters to you and you want to keep it, then it needs to go on your list of assets.
Think of this as an “insurance policy” preparation. Like when you prepare for an insurance policy to cover your assets, you focus on and document what’s important to you and what’s of value. The same goes during divorce. Document what’s owned that’s of personal or financial value to you so that if those particular items are discussed in court, your lawyer can argue that those items should go to you.
Yes, You’ll Need Your Own Everything (Separate)
Aside from taking an assessment, you’ll need to begin the work of separating yourself from your ex in all matters financial.
This means you need your own bank checking and savings accounts.
Begin changing contact information for accounts that you’ll be managing or for which your lawyer predicts may now fall under your responsibility.
Follow your lawyer’s advice on shared income streams (rental income for shared rental properties, as an example) and do not tap into funds to which your lawyer says you do not have rights. Your lawyer can advise you on how to protect income assets during your divorce.
Yes, Prudence Pays Off (Document)
The judge has never been to your home. They do not know what you have or don’t have. Imagine your ex stands there in court and tells the judge you share a boat, it’s been left in your yard, and that you owe him half the value of the boat.
Who wins this argument (even if that boat was sold for cash two years earlier?)
Simple: The person who proves via documentational evidence that what they are saying is true.
You come prepared and show the judge the cash bill of sale for the boat, proof that your ex shared in the profits from that sale, and a picture of the place where the boat used to be, which is now a gardening area complete with flower bed, and teal-painted cork boards for your favorite gardening tools.
You show the judge all your documentation. The judge gives your ex a skeptical eye, noting their dishonesty, and this affects the judges decision-making regarding other financial claims your ex may make.
Honesty, proven by documentation, builds your credibility with the very person who will be determining other financial matters for the dissolution of your marriage. Reward is in your favor for that mysterious boat and for other assets you are prepared to document.
So, document everything financial. It doesn’t matter that you say it in court – but that you prove it.
Takeaway
Diligence will pay off. We realize this is a terribly stressful time and handling financial matters during divorce can feel overwhelming. Take it slow. Cover a few items each day by researching the financial status, documenting it carefully, and thinking about whether or not that particular asset is worth fighting over in court.
With each step, you can begin the process of building your financial freedom one account at a time.
To recap –
Take a financial inventory of your life
Begin separating your finances from your ex
Be prepared with documentation to argue your rights to assets
In the meantime, while you work on your finances during divorce, we at Alimonialife are here for you with articles and personal stories of others who are going through exactly what you’re facing now. We hope it makes you feel a little less alone.
Christina M Ward