Thinking About Divorce? Be Smart and Plan Ahead

Are you thinking about divorce? I get that you are frightened, stressed, and wondering how it’s all going to play out. People plan for their weddings; divorces are no different – they need planning. I’m not advocating for divorce, and as someone who was divorced after 26 years, take it from me that divorce is more difficult than you can imagine.

Do what you can to save your marriage but if your divorce is inevitable, I’ll tell you things you can do to level the playing field, so you are in a better position to get what is financially fair and equitable.

I recommend watching a video available on my website, “Planning for Divorce.” There I have detailed advice on planning for your divorce. Here are some quick tips from that video:

ONE: Meet with Divorce Professionals

Have a consultation with a Certified Divorce Financial Analyst (CDFA). A professional can explore what you have done or need to do financially to prepare for divorce and the likelihood of you divorcing amicably and/or settling. It is definitely a good idea to meet with a lawyer sometime early in the process.

I do not advocate immediately signing up and putting down a retainer, but a consultation will help you understand the legal rights you have in your state with regard to spousal support and division of assets. Mediating your divorce is considerably less expensive and does not create adversarial situations like hiring an attorney may.

TWO: Take a Financial Inventory

You must have an accurate idea of your financial situation. If you left the finances to your husband, you are going to have to pull up your britches and become knowledgeable about your assets and debts. Most debts are also divisible in divorce.

The obvious place to startis to find bank statements, credit card statements, and your mortgage statement. Next, find out if you have retirement and investment accounts. Do you or your spouse have IRAs or 401(k)s or pensions with a current or former employer?

Do you have a safe deposit box or a storage unit? If so, try to get into it as soon as possible and take an inventory and photograph it. Photographing all valuables is a good idea, so you have a record if they disappear. Make sure you have a set of keys to everything, including safe deposit boxes, storage units, and cars.

Next, you need to find out your familyincome. Try to get a copy of your spouse’s pay stub. It will tell you if he is contributing to a 401(k) plan or deferring compensation. If you have no idea what your husband makes, you can get this information from past tax returns or from your CPA if you trust them. If you can’t get copies, then you can request copies from the IRS. Ask for complete copies, not just summaries.

You also need to know what you spend, both now and what you will probably be spending when you are separated. If you have never done this, you need to sit down with your bank statements and credit card statements, and create categories by using different colors of highlighters and then list every expenditure, month by month.

It’s tedious, but you HAVE to do it. For the very affluent, a “lifestyle analysis” can be performed by a CDFA to categorize and summarize your past spending so that you can prove your pre-separation lifestyle for purposes of support.

What about insurance? Do you have life or disability insurance policies? Your insurance agent may also be a good source of information about your husband’s income, if they can be trusted.

THREE: Documentation

While you are working through step two, make a copy or secure the documents you find. You don’t want your husband to find out that you want a divorce and then he moves out, taking the financial documents with him.

This is also a time to get your credit reports. Reports from all three credit bureaus are available for free once per year at AnnualCreditReport.com. You may find credit cards and bank statements or debt you didn’t know about.

While you are reviewing your bank and investment statements, pay attention to account transfers. Are they being made to accounts you know about? Can you tell if your husband’s entire paycheck is being deposited to the family bank accounts? You may need the help of a Certified Divorce Financial Analyst for this.

You should get a copy of the deeds to your house and any rental properties. These can often be found online through county property records. Are the properties in your name?

FOUR: Get Cash Before You Separate

A divorce is going to cost money, and lots of it. The basic process is affordable, but you shouldn’t count on your husband being amicable, and if you hire attorneys, even if there isn’t a lot of fighting involved, it can get expensive quick. You need to get some cash, and you need to open a bank account or store this cash outside the home in a secure place.

In summary, be smart, be willing to put in the work to gather your financial documents and learn about your financial situation and your legal rights. Your outcome will be better, and you will put yourself on more equal ground. The best defense is a good offence.

Let’s Have a Conversation:

How did your lack of planning, or conversely, your proactive planning, affect your divorce outcome? Did you find out things you didn’t know when you were preparing a financial inventory? How much money did you save for the divorce process and was it enough?