So you see the writing on the wall and feel it is likely you will be getting a divorce.
It is important to make sure you have your financial “ducks in a row” before your divorce process gets too far along. While your spouse may be trustworthy, taking these protective measures will help ensure you are in a position to begin financial discussions knowledgeably.
Get Organized
Gather your financial records. On the back of this newsletter is a checklist of the documents you need to find.
Start with your cash accounts such as bank and savings account statements. If you have a brokerage relationship you may also have cash there to be accounted for. This is the money you use to pay the bills,
Next are your investment and retirement accounts. IRA’s, and certain insurance products like variable annuities are in this category, as are company retirement plans such as 401(k)’s. Other corporate plans such as stock purchase, stock option and deferred compensation programs should also be accounted for. Lastly don’t forget about pension plans. You may have more difficulty getting this information as you probably don’t receive a monthly statement but they are required to report at least once a year on the accrued benefits.
Get copies of any life or disability insurance contracts. These are the core protection you family relies on should an income provider die unexpectedly and may need to be replaced or modified. Some insurance contracts have cash value as well.
You also will want to account for your outstanding debt. Get a copy of your mortgage statement, car loans, and credit cards.
Put it all in a safe place, ideally out of the house for safekeeping. You may want to have a financial specialist such as a Certified Divorce Financial Advisor CDFA to review all the paperwork and prepare a “where you are today” analysis. You will have your data organized and will know the strengths and weaknesses of your household finances. Your attorney will thank you as well.
Open a credit card in your name only
Having a credit card in your name will help you establish your own credit. Also, credit cards may help with day-to-day living expenses during the divorce when some of your other funds may be frozen or unavailable. Do this before any divorce proceedings start, especially if you are not working or if your income is substantially less than your spouse’s (you may not be able to get sufficient credit based on your own income).
Get a copy of your credit report
You should immediately get copies of your credit report. You want to be able to resolve any disputes as soon as possible. If you are concerned that your soon-to-be ex-spouse might borrow money in your name, you might want to sign up for a credit monitoring service. These services will notify you anytime there's a change to your credit history. Keep in mind it is illegal to aggressively spend down accounts or “dissipate” assets in an attempt to gain financial advantage.
Make a list of your personal property
You should take an inventory of all of your personal property. In most states, property that was yours before the marriage is considered to be separate property and should remain yours. With luck you did not put Aunt Mary’s inheritance in you joint account as you lose would have lost the ability to call it separate property.
Separate property includes items that you owned prior to the marriage such as an inheritance received solely by you or a gift you received solely from a third party. The pain and suffering portion of a personal injury judgment and your engagement ring are also separate property. An engagement ring because it was given before the marriage is separate, but your wedding band is marital property since it was a gift from your husband during your marriage. Lastly, gifts that you and your husband gave each other during the marriage (birthdays, anniversaries, etc.) are considered Marital Property.
Consider putting assets in your name alone
Most families have joint accounts in both the husbands and wife’s name. Spouses are not allowed to hide or spend down assets during a divorce proceeding. Nevertheless if there is a reason to believe your spouse may not be trustworthy it may be prudent to move some of the assets from your joint account into one in your name only. Some advisors will suggest you move half of the joint assets in your name, but this may be looked at unfavorably by your spouse. Your attorney can give you guidance on the wisdom of this action.
Review wills, trusts, and insurance policies to make sure you are still the beneficiary.
Most people take it for granted that their spouse won’t make a change to the beneficiaries designated on these types of accounts. But it happens. Get fresh copies of these documents and make note of the current beneficiaries.
Written by J.A. Licciardello, CDFA
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