You and your spouse may have the goal of an amicable divorce, but splitting your financial picture can bring out the worst in some. To have a peaceful divorce, it’s important to know what you have together, what your financial needs are for the future, and plan to divide things in a fair way where both partners can start their new life on good footing.
If you want to have an amicable divorce, being open about your full financial picture is the first step. Some spouses may try to hide assets during the divorce process to avoid having them split in the settlement, and this is never a good idea. Be on the lookout for any red flags that could signal that your spouse isn’t being honest, such as changes in your accounts or inconsistencies in income. If you are worried, speak to your attorney. No matter what, make sure you have the full scope of all your accounts – not only your income and expenses, but any debts, retirement accounts, investment accounts, credit reports, property, and tax information.
You may have budgeted well, but your expenses will change after a divorce. Instead of using your joint income to maintain one household, you will now be using the same income to support two households, and both spouses will be impacted. When you are planning for your post-divorce budget, look at not only your single income and household expenses, but consider how that number will be impacted by spousal or child support. You may want to fight to keep the family home, only to find that you can’t afford to buy your spouse out or keep the home up on your own.
Divorce will impact your finances in a bigger way than just the immediate separation of your assets. Think ahead. If you have children, think about how you will handle and split college expenses. If one spouse dies while responsible for spousal support, will there be a provision in place? Are there any tax concerns, such as capital gains from the sale of joint property, decisions about who will claim the children as dependents, or other tax implications of the financial split? Inflation can make a big difference in the value of support payments, so you may need to include a provision to address the impact. Your attorney can help you look ahead and anticipate what provisions to include in your settlement.
When your life feels unsettled during the process, it’s tempting to take control wherever you can, but it’s best to hold off on making any big financial decisions. Changing beneficiaries to insurance policies or retirement accounts will be dealt with during the proceedings in court. If you try to make a change before the divorce is finalized, you could actually be in legal trouble. Whenever you have a question about what you should be doing, talk to your divorce lawyer first. Your attorney can always advise you about the right steps to take. In addition, be conservative with spending. Splurging on purchases, or even simply using more of your budget than usual, can be seen as trying to take assets from your spouse. Until your finances are officially separated, try to spend as usual.
Mediation can be a great solution for couples who are attempting to have an amicable divorce. When both partners are committed to a civil split, the divorce process is much easier and can often be far less expensive, since a contentious divorce can end up with very high costs. However, this does not mean that you should attempt to go through the divorce process without an attorney. Having an attorney can help you sort through your finances so you are prepared for mediation. In addition, an attorney can help you prepare for resistance, just in case things don’t work out as friendly as you hope.
If you want an amicable divorce, the best strategy is to be completely open with your spouse and your attorney about your financial picture. When you are prepared and committed to resolving things, you can protect your financial future and move on. If you’re going through a divorce or are planning to file and don’t know what your next step should be, contact my office today.