These Four Tips Can Help You with How to Financially Prepare for Divorce
by Carolyn Lee Mar 6, 2023
Planning to divorce your partner can result in challenging situations that could weaken your finances, especially if there are mistakes. Financial responsibilities associated with divorce include lawyers’ fees, court costs, filing fees, mediation, asset division, and alimony.
Some people may have child support and need expert witnesses or a private investigator to support their case. We have some tips that might help you financially prepare for a divorce.
A simple divorce versus a contested divorce.
A simple divorce is typically less costly than a contested divorce since the parties involved have already agreed to the divorce terms making it unnecessary to go through a trial. The costs associated with a simple divorce might include attorney, mediation, and filing fees, with payment for obtaining crucial legal documents adding to the overall cost.
When a couple cannot agree on the issues related to the dissolution of their marriage, it can lead to a contested divorce. Some reasons for a contested divorce include child support and custody, prenuptial agreement, marital asset division, and spousal support. As a result, they go to a trial where a judge decides the divorce issues. This divorce process is potentially time-consuming, contentious, and expensive.
Four financial steps to consider when preparing for divorce.
Gather and organise crucial financial documents: Ensure you have copies of current and past financial statements of all the accounts you and your partner hold together and include individual bank accounts. Create a file that includes debts (credit cards, mortgages, etc.), property (land, home, or vehicles), household expenses (insurance, internet, phone), assets (investment, savings, checking accounts), and retirement accounts.
Find a divorce lawyer: Get advice from an experienced, reputable, and knowledgeable attorney. Your lawyer can give you an idea of your expenses, review your separation agreement, and ensure your interests and rights are protected. Another crucial area your attorney can assist with is ensuring you have not overlooked critical issues that may later harm your finances.
Track your expenses: Tracking your income and expenses can help build a post-divorce budget. Include food, entertainment, clothing, childcare, home maintenance, transportation, household bills and other costs. You can use bank and credit card statements to estimate spending from previous years. Then, work on projecting future expenses. Your attorney and later the judge can use this crucial information in deciding how to share debts, assets, spousal, or child support.
Be intentional about your finances: If you haven’t done so already, open a new account in your name and use it for the money that might come from your divorce. In contentious divorces, there may be a risk that one partner could divert funds or lock accounts. So, ensure you know how much money you need and have enough available for immediate bills.
You should also create a new budget that reflects expenses you might have post-divorce. A robust new budget can help you estimate your long-term financial situation and how much you’ll need to re-establish yourself.
Finally, be conservative with spending and saving. Avoid making expensive purchases that could significantly impact the decision-making process for the separation or allotment of money from joint accounts. Wait until the proceedings are finalised before making changes to wills, retirement accounts, or insurance beneficiaries, typically sorted out in the legal proceedings.
When it comes to legal issues, finding the right lawyer is crucial. Find Yello has an extensive list of law firms, attorneys-at-law, lawyers, and related services that you may find helpful.
Sources: Wells Fargo, The Balance Money, Nerd Wallet, Forbes, and Money.