Experiencing a divorce is a life-altering event that can happen to anyone - no matter your net worth. Billionaires Bill and Melinda Gates are presently going through this publicly, but experts say many couples may soon be considering divorce following the year-long lockdown. If this is something that you may be working through, there are a few important things you can do to protect yourself financially during the process.
Divorce can be an emotional process, and financial protection may not always be top of mind. But being cautious and prepared early on can help prevent financial stress later down the line. If you’re amidst a divorce or considering the process, keep these seven tips in mind.
Tip #1: Familiarize Yourself With Your Finances
Every couple handles their joint finances differently. Some choose to split responsibilities evenly, some may involve each other in all financial aspects and, in some cases, only one person may be dedicated to handling all financial responsibilities.
But when it comes to divorce, you’ll want to familiarize yourself with your family’s finances, especially if you weren’t as involved with them before. Because nearly every financial aspect of your life is scrutinized and addressed during a divorce, having a good understanding of where things stand now can make a huge difference later on.
Educate yourself on all aspects of your finances including:
All assets and how they’re titled (houses, cars, and boats for example)
Debt (mortgages, car loans, personal loans, credit card debt, student loan debt)
Income (your family’s total combined income)
Tip #2: Close Joint Accounts (Carefully)
If you and your spouse share a joint credit card, you’ll want to close the account as soon as possible. Neglecting to close the account could make you liable for paying any charges your spouse accrues on the card. With a divorce underway, you want to avoid accruing any additional joint debt including credit card debt.
If you have a joint bank account, this may be trickier to handle. You’ll likely want to close the joint account down as well, but you’ll want to speak to your attorney before doing anything on the account. They can help you avoid potential legal issues caused by the removal of funds from a joint account.
Tip #3: Update Beneficiary Designations
It’s likely your spouse is listed as the beneficiary for various accounts, policies, and assets. If you’d like to change your beneficiary designations, you’ll need to do so for every instance in which they are listed. Simply updating one item or rewriting your will does not guarantee all assets are updated.
Possible beneficiary designations to update include:
Retirement accounts (IRAs and 401(k)s)
Life insurance policies
Bank accounts (checking, savings, CDs)
Tip #4: Build Your Team of Professionals
Working with professionals can be a crucial step in protecting your assets and financial wellbeing during a divorce. Most people start by hiring an attorney, but there are others who may be of importance as well.
Possible professionals to speak to include:
Financial Advisor: A financial professional can help bring to light all financial assets between you and your spouse while working to help preserve your financial wellness during and after the divorce.
CPA: An account is another financial professional who can help gather and sort through the financial assets accumulated throughout your marriage.
Appraiser: You may need to work with an appraiser to assess an accurate and fair value for all your important property, including antique furniture, art, collectibles, etc.
Child Custody Mediator: Negotiating child custody is no easy feat, and having an unbiased third party to lead the discussion is sometimes necessary.
Tip #5: Gather & Protect Important Paperwork
When going through the process of divorce, you’ll be faced with what feels like a million small details to consider. Do yourself a favor and set aside time to gather up all important paperwork. Not only will you likely need some of it throughout the divorce proceedings, but you’ll want to keep your documents protected as well.
Possible paperwork includes:
Birth certificate & Social Security card
Diplomas & certificates
Previous tax returns
Current tax paperwork (W-2s, bank statements, etc.)
If some of the paperwork is applicable to both you and your spouse, make sure to make a copy for you and a copy for them.
Tip #6: Inventory Your Home
Doing an inventory of your home with your spouse (if possible) early in the process can be an effective way to prevent headaches and stress later on. Through photos or video, document all items of value in your home and the condition they’re in. Document the date of the video or photos and any pertinent details about furniture or other important items. This can be helpful in putting both parties on the same page in regards to what assets you both own and what condition they’re in.
Should an item of value go missing during the process, you have proof of what it was, when it was last on your property, and the condition it was in.
Tip #7: Reevaluate Your Budget
The reality is, divorce isn’t cheap. The average cost of divorce in the United States is $15,000.1 Once the divorce is finalized, you may need to readjust your expectations for saving and spending - especially if you’re transitioning from living on two incomes to one. A financial advisor can help you through the process of determining what your current financial needs are as well as how divorce may affect your plans for retirement.
Divorce is painful, often messy, and almost always emotionally exhausting. While there’s no getting around it, there are things you can do to help make it easier on yourself. If this is something you are working through, reach out to a financial professional who can help keep your best interest at the forefront of the process moving forward.
Schedule time with our team to discuss your situation.
This content is developed from sources believed to be providing accurate information, and provided by Twenty Over Ten. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.