There are many factors to consider during a divorce, including your financial rights. Here, the attorneys at Protokowicz & Rodier discuss ways to protect your financial future during a divorce or separation.
Understand your Financial Position
As a good life rule, it is always important to have at least a basic understanding of you combined assets, income and financial history. In relationships where one partner holds the financial reins, the other partner can be at a serious disadvantage during divorce.
If you are thinking of filing for divorce, or suspect your partner will be, collect copies and login credentials of vital financial records. Make sure that you have documentation of savings and checking accounts, retirement accounts, brokerage, credit card statements, tax returns and lease or mortgage information.
If you and your spouse believe you can amicably reach a settlement on issues such as alimony, asset division or child custody, choosing mediation over a trial could save you both thousands of dollars in fees.
Mediation is facilitated by a neutral third party, typically a family attorney with mediation training. This individual aids the divorcing couple in reaching an agreement that is fair for both sides. The format of mediation provides the couple with flexibility to come up with an agreement that will work best for their family. The mediator will not rule in either direction, as a judge would, instead they simply facilitate conversations. Mediation is not always the best options for all couples, especially those whose divorce will be emotionally intense or combative. If one spouse is being secretive, uncooperative, or trying to deceive the other spouse, a traditional divorce hearing might be the best option.
Protect Your Assets
If you believe your spouse is hiding assets or would go as far as to liquidate or retitle without your knowledge, it is vital that you take immediate action. To protect your assets, first notify the company holding the asset in writing. Then, your lawyer can help you get a restraining order to protect those assets.
In situations like this, the best action to take is preemptive action. If your spouse moves, liquidates or uses assets with your consent, you may have to hire forensic accountants to work alongside your legal representative to locate the assets.
Fully Evaluate Your Living Expenses
Your lawyer may ask you to draft an initial budget to cover living expenses. In many cases, this preliminary budget amount is unknowingly understated, which can leave you unable to pay your bills or standard expenses. To ensure that you are quoting a fair amount, speak with a financial planner to ensure that your budget accurately reflects all costs.
Plan for Taxes in Your Divorce
A key detail that many divorcing couples forget is that once your divorce is finalized, you will owe taxes on anything you receive through the settlement. To ensure that you are getting a fair deal, and not having to pay more in taxes than you receive, work to determine the after-tax value of the assets and then make determinations on a fair split with those numbers. Discussing any divisions with a tax or financial professional before accepting is always a smart choice.
Emotional Attachment to Assets
While it is easier said than done, emotional attachment to objects is a good indicator of a difficult negotiation. Without first evaluating the financial impact of the asset, you could end up fighting for something you can’t afford. During divorce negotiations, it is imperative that you focus on the financial impact of your decisions. The emotional value of an object often does not compare to the peace that comes from knowing that you and your family are set up to be financially stable in the future.
Evaluate Your Future Finances
Your divorce settlement can have a significant impact on the future of your finances. Ensure you are considering these factors’ future effects during the divorce process:
- Adjust for Inflation
Inflation is a commonly overlooked factor, especially when it comes to the cost of retirement or a child’s education. When negotiating a settlement, be sure to work inflation into future cost estimates to ensure that your support payments or settlement allotment will be able to cover the true cost.
- Consider Future Social Security Benefits
If you and your spouse have been married for more than 10 years, a lower-earning or non-working spouse has claim to the working spouse’s social security benefits without impacting the working spouse’s payments. Remember to factor this contribution into your future retirement amount.
- Remember Your Estate Documents
Updating beneficiaries on IRAs, wills and life insurance policies is a frequently forgotten task after a divorce. During your divorce, talk to your family lawyer to make changes to your estate plan during or after your divorce.
- Plan for Future Accidents
In the case that your ex-spouse passes away prematurely or becomes disabled, payments to your alimony, child support (and tuition) or property settlement could be at risk. You may find it beneficial to insure the divorce settlement through life and/or disability insurance policies to ensure continuance in the event of an accident.
While divorces can be confusing, ensuring that you are taking control of your financial future can make the process a little less daunting. For help preparing for, or navigating through your divorce, contact the experienced attorneys at Protokowicz & Rodier online or by phone at 410.803.1839