Untangling your financial life from that of your spouse is one of the most daunting tasks you’ll face as you prepare for the divorce process, and it’s a task that can quickly become messy. Any mistakes or errors during this process could potentially jeopardize your finances. Fortunately, pre-divorce financial planning can help you anticipate these issues before they arise.
Consult a Divorce Lawyer
Perhaps the best way to protect your financial interests is by consulting a divorce lawyer as soon as possible. Ideally, you should talk to an attorney when you begin considering divorce. However, if your spouse surprises you with a legal separation, you should speak with a lawyer immediately. An attorney can explain the connection between divorce and finances and protect you from any steps your soon-to-be-ex might take against your financial interests so you can meet your financial goals.
Track Your Regular Expenses
Once you separate and divorce, you and your spouse will each support a separate household rather than combine your income to support a single household. To prepare for this change, you should create a monthly budget by tracking your expenses, such as mortgage/rent, real estate taxes, utilities, car payments, healthcare expenses, groceries, and your children’s tuition or extracurricular activity expenses. Understanding your regular expenses can help you cut costs where necessary to avoid overstepping your financial means in the future.
Identify Your Assets
Divorce will require you and your spouse to divide your marital estate. Your marital estate includes all joint or marital property you and your spouse acquired during your marriage. It excludes separate property, which is anything you owned before your marriage, and specific property you acquired during your marriage, such as inheritances or separate gifts.
However, you or your spouse may have commingled or mixed separate property with marital assets, such as by making payments on a car you purchased before your marriage with money from a jointly held bank account or by putting money into a retirement account your spouse started before you were married. As you gather key financial documents, you will need to trace any portion of marital property back to separate property, if possible. Otherwise, that separate property may become part of the marital property subject to equitable division in divorce, complicating the goal of asset protection in divorce.
Change Beneficiary Designations
You should also review your financial accounts, retirement accounts, trust assets, life insurance policies, and estate planning documents to change beneficiary designations, transfer/pay-on-death designations, or executor/trustee designations away from your soon-to-be-ex. You may also want to change any powers of attorney or healthcare proxies that give your spouse decision-making authority over your medical, financial, or legal needs if you become incapacitated.
Protect Your Credit
Finally, request a copy of your credit report. Each of the three credit bureaus must provide you with one free copy of your credit report every 12 months. You should review your credit report to see if your spouse has placed any loans or credit card accounts in your name so you can avoid any liabilities during the equitable division process. Your soon-to-be-ex can significantly damage your credit by running up debt balances or defaulting on loans that have your name on them.
Contact Our Experienced Divorce Lawyers Today
Are you looking for legal advice for divorce finances? Then contact Alward Fisher today for a confidential consultation with a divorce attorney to discuss your legal options and get the advocacy you need during divorce settlement negotiations.
This post was originally published in February 2021 and has been updated for accuracy and comprehensiveness in May 2024.
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