For many, marriage is a happy time of wedded bliss and dreams of a mutually shared future. Divorce is nowhere on the horizon. So what happens when love goes wrong? How do you plan after the fact? Is there a way to prepare once it seems inevitable that you will soon be going your separate ways?
Maybe you tried couples therapy, individual counseling, pastoral guidance or temporary separation. Maybe you just know your marriage is over. However you came to the decision to divorce, your critical next step is to focus on logistics. Lower emotional distress and denial with an action plan.
It has been said that marriage is about love and divorce is about money. Below are the five most important things to focus on right now to protect your financial stability and future plans.
- Put together a team of trusted advisors.
Even if you believe you can work together through mediation in finalizing your divorce, it is still imperative to seek out separate counsel. You do not have to engage an attorney but you should have one available should you need them.
How to best find an attorney? Pool your inner circle. Your divorced friends, colleagues, CPA, and Financial Advisor are all likely to have highly qualified attorneys in their Rolodex. Rely on your network rather than a Google search and hoping for the best.
Your Financial Advisor is just as important as your attorney. This is the person who will help you understand your financial picture as a married person and more importantly, can assist with mapping out your financial future as an individual. If your current advisor is more directly tied to your spouse, then it may be time to seek advice and guidance from a new source. A good starting point is to seek out a Financial Advisor that specializes in divorce. You can find Certified Divorce Financial Analysts in your local area at www.institutedfa.com/find-a-cdfa/.
- Determine your Household Net-Worth.
Your household net-worth statement may be the single most important task in this moment. Take your time, be thorough and be diligent. I promise, you will thank yourself later.
Start by listing your assets (things you own) and the current values for each item, then work on your liabilities (what you owe). Your net-worth is the value of your assets minus liabilities.
If you’ve been involved in the financial aspects of your marriage this may be a simple task. If not, put your detective hat on and get to work.
Items you’ll need to include:
- Bank account statements
- Investment account statements
- Retirement account statements
- Stock options statements
- Defined Benefit and Defined Contribution Pension Plan statements
Tax Returns (three years), Partnership/Corporate Financial Statements, Payroll Stubs, Social Security Statements, Life Insurance policies, Real Estate Documents, list of all Individual, Joint and Business Non-Investment Assets, Wills, Trust Documents, Business/Partnership Agreements, Loan/Credit Card Statements, lists of all Household/Business expenses.
As you can see this list can seem exhaustive. All the more reason you will be better served to compile this data while both parties are still under one roof and the information is likely more readily accessible.
- Obtain your free credit report.
Request a free credit report at annualcreditreport.com. This can provide a lot of clarity. Has your soon-to-be-ex opened accounts without your knowledge? A credit report will give you an up-to-date list of all your current recorded liabilities.
- Address jointly held accounts.
Depending on your situation, you may want to open separate bank accounts and credit cards. Keep in mind that most banks will take instruction from one individual on a joint account to withdraw/deplete funds. If your situation is dire it may be time to have a conversation about closing the joint accounts and depositing funds into individual accounts in an effort to protect yourself from your spouse draining the joint account without notice.
- Educate yourself.
You’ll pay a lot of money if you have the attorney teach you everything you need to know about divorce and the specific laws associated with your state of residence. Do your due diligence.
As you spend time educating yourself, you’ll learn each state has its own rules/guidelines in Divorce Law. An absolute must is to find out if your state has minimum separation requirements before granting divorce requests. Additionally, find out how property is distributed in your state. Are you in an Equitable Distribution or Community property state? Alaska, Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin are community property states and the rules are very different for what is classified as marital property and division of those assets.
If you have children, then you’ll want to understand what the baseline rules are for child support in your state. At the same time, if you have children and you are a stay-at-home parent you will want to research the state guidelines around Spousal Support/Alimony. Knowledge is power.
Have more questions? We can help.
Henry+Horne Wealth Management has the expertise to help individuals better navigate the financial issues faced during the divorce process. Our Certified Divorce Financial Analyst coaches clients through the unknown. Together, we work to clarify your pre/post-divorce financial picture and help you to understand how settlement decisions made today set your path forward. Contact your Henry+Horne Wealth Management advisor today.
Shaunna M. Anderson, CDFA®, Senior Vice President and Principal