3 Fool-Proof Ways To Protect Your Finances During Divorce
3 Fool-Proof Ways To Protect Your Finances During Divorce
Money and marriage—rarely are the two a match made in heaven. According to Business Insider, money is the leading source of conflict in marriage and one of the top reasons cited for divorce.
Surprised? Neither are we.
Money and financial well-being are often thought of as a major source of anxiety. Whether you’re worried about how much money is coming in versus what’s going out, or wondering if you’re investing properly for your future, you’re bound to think about money on a daily basis.
What’s surprising though, is that the more money you have, the greater chance there is for conflict between you and your spouse. A 2018 study conducted by SunTrust Bank debunked the common belief that the more money you have, the happier you’ll be—at least when it comes to marriage.
Regardless if you and your spouse fought about money during your marriage or not, chances are high that you'll fight about some aspect of your finances during divorce. When it comes to your financial well-being, the old adage is true: an ounce of prevention is worth a pound of cure.
There are many ways to protect your assets before and during your marriage. If you haven’t taken these precautions before saying “I do” though, all hope is not lost. In this article we’ll discuss the three most important steps you can take now, in the midst of your divorce, to help you avoid financial ruin.
Tip #1: Get Your Financial Game Face On
It’s no secret that divorce is expensive. On the most fundamental level, partners have the ability to earn more together than they do apart. Even if you or your spouse decided to stay home with your young children, it’s likely that doing so helped you avoid the costly expense of daycare or a nanny. This cost savings comes to an end when you divorce.
Not the spouse who handles the finances? Get ready to make a sharp turn from financial newbie to financial know-it-all. The sooner you start figuring what’s going on with the finances, the greater the odds that you’ll walk away from your marriage with your wallet relatively in-tact.
To get your financial game face on, add these items to your to-do list:
- Check your credit.
- If you only have a joint account, it’s time to set-up a personal checking and savings account.
- Make copies of all of your financial documents including, bank statements, tax information, assets, outstanding loan balances and more.
- Understand the value of your marital estate, that is, all of the assets and debts you’ve amassed together.
- Figure out what's rightfully yours. Gifts, such as a family inheritance, should be disclosed but aren't considered marital property.
- Evaluate your budget and be realistic about your financial situation post-divorce.
- Find an experienced lawyer (we’ll dive deep into this in tip #2) and a trusted financial advisor.
The steps above are a starting point to help you prepare for your upcoming divorce. The sooner you start understanding your finances and taking the reign, the better off you’ll be. Don’t wait until the last minute to prepare for your divorce, get started now to increase your odds of financial success.
Tip #2: Have High Standards When You Lawyer Up
There are two costs to your divorce: the financial burden associated with dividing your marital estate and the fees you’ll incur for legal representation.
If you only remember one tip from this article about retaining your financial health post-divorce, let it be this:
Regardless of who you choose for your divorce lawyer, resist the urge to select an attorney solely on cost. Selecting an attorney based on price alone, often comes at a very high price.
The best lawyers aren’t cheap, they’re experienced. You want a lawyer familiar with family law, with a proven track record of results. Those results might include:
- Awarded double the amount of child support over the offer from the opposing attorney.
- Obtained five years of alimony for a stay-at-home father.
- Obtained award of lifetime alimony for 50-year-old wife and successfully defended former husband’s attempt to modify the alimony in the family court.
- And more.
Often, people going through a divorce for the first time will inquire about the cost of a divorce. Unfortunately, there isn’t a one-size-fits-all answer to this question. The cost of your divorce is based on a variety of factors including: whether or not it’s contested, the complexities of your marital estate, a division of a family business, alimony and support issues, and more.
Regardless of your situation, we strongly encourage you to meet with several experienced Rhode Island family law attorneys before selecting one. Choose an experienced law firm that specializes in family law and has a proven track record of success.
Tip #3: Future Planning Leads To Financial Success
Divorce is a stressful time. Not only do you have to balance your normal roles and responsibilities, you’re also burdened with the emotional turmoil associated with a major life change. A common idea during times of stress is to focus on the immediate next step and avoid looking too far into the future.
While focusing on the short-term might be a good strategy in certain situations, it’s rarely a good idea in divorce. In order to achieve financial success in the future, you must plan and prepare now, even in the midst of your divorce.
Two main areas to focus on are your marital estate and your retirement, specifically:
- Estate planning:
The majority of married couples list each other as beneficiaries on life insurance policies. The reality is that beneficiaries attached to life insurance policies or financial accounts will override wishes outlined in a will. If you’ve left everything in your will to your children, but your life insurance policy beneficiary still lists your ex-wife, then your ex-wife is the one who gets the life insurance payout.
Divorce is the time to name new beneficiaries, for instance, your children, so your soon-to-be-ex doesn’t profit from your death. Keeping your life insurance in order allows you to protect your income, any support or alimony you receive, your children’s financial future and other important factors.
- Retirement Planning:
Once you have made the difficult decision to divorce, one of the most important decisions you face is how to divide the marital property, including pension and retirement benefits. In long-term marriages, these accounts can be quite large. Rhode Island is an equitable distribution state, which means that all property of the parties is distributed equitably, but not necessarily equally.
Your divorce lawyer will typically draft a QDRO (Qualified Domestic Relations Order) necessary tax purposes. A QDRO is an order for the equitable division of retirement accounts, including a pension, 401(k) plan, 403(b) plan, individual retirement account (IRA), defined benefit plan, defined contribution plan or stock options.
Depending on what your spouse took during the divorce, you may have to also work on investment strategies that will provide diversification and balance to your portfolio.
When it comes down to it, divorce is an incredibly stressful time. There are many issues you’ll be faced with, in addition to managing your financial well-being and protecting your future savings. By using the tips outlined in this article, you can get a head start on creating a bright financial future.
As one of Rhode Island’s most experienced and distinguished law firms, we’ve helped thousands of people survive divorce with their financial future intact.
For immediate assistance contact Kirshenbaum Law Associates at 401-467-5300.