Divorce Planning – Divorce Advice on How to Handle Your Financial Records
Divorce is a rather unfortunate end result of many marriages today, and you may be walking through this process yourself. Financial stress can compound the anxiety and concern that you feel about your future. Divorce Planning can be an emotionally daunting time in your life. In many divorces, assets, as well as debts, will be split equally. However, you will need to come to a fair arrangement for this with your soon-to-be ex. Regardless of the percentage split, you need to protect your financial well-being during a divorce. Financial records include your assets, debts and even credit rating. Divorce advice and tips can help you to navigate through this process more easily.
Divorce Planning – How to Prepare Financial Records and Divorce Advice
Create a New Budget
As soon as you begin to consider divorce seriously, you need to take a close look at your financial situation. Essentially, create a budget that lists your income as well as all expenses. If you plan to rent an apartment, research apartment rental rates.
Remember that you may still be responsible for a car loan payment, credit card bills and more after the divorce. If you obtained health insurance through your spouse, you would need to purchase a new health policy. It can be stressful to think about living on a single income and fully supporting yourself alone. However, in divorce planning, the creation of a budget may help to alleviate some of your concerns. During a divorce, your budget may change by the month. Therefore, always keep a close eye trained on your budget. Project your budget outward, and make changes to it as needed. Use your budget as a financial guide to help you make informed, wise decisions.
Divorce Advice – Open Your Own Accounts
To fully separate your assets from your ex, you must open your own bank accounts. Consider this divorce advice by using a different bank than you are currently using for joint accounts. These new bank accounts should include a checking and savings account. It can also be helpful to apply for a new credit card in your name only. Instruct your employer to start depositing your paychecks into the new checking account. However, in the divorce planning process, avoid taking funds out of joint accounts and depositing them into your accounts.
The division of joint savings accounts assets and other assets will be determined in the final divorce decree. Joint assets will need to be split at that time. Moving or trying to hide away money from your ex before the judge’s ruling can lead to a nasty divorce. When in doubt, seek the legal advice of your attorney.
Divorce Planning – Live Conservatively
Some people have an emotional crisis after a divorce that results in splurging and impulse buying. Refrain from this damaging behavior. It can lead to significant financial problems and eat into the capital that you may need to rely on in the future. Only purchase the necessities, and avoid taking expensive trips until after the divorce. Now is the time to hunker down financially and to be very conservative. After the divorce shakes out, you may be able to afford a well-deserved vacation or luxury item.
Gather Supporting Financial Records
As soon as you are aware that a divorce is pending, you should gather all of your financial records. These financial records may include bank accounts, retirement accounts, real estate, debts, life insurance and more. As part of the divorce proceedings, you will need to itemize all assets and liabilities for the judge to see. The value of these items should be determined on the date that the divorce paperwork is originally filed. This means that you should obtain bank statements and other documents reflecting value on this date. You will need to keep financial records to deal with tax effects of divorce or separation.
Assets and Liabilities: List All Assets and Debts in Divorce Planning
Divorce Advice: When you have all supporting documents in hand, make a detailed list of everything you own. These financial records of assets and debt include cash accounts and investment accounts. It also includes your house, vehicles, furnishings, appliances, electronics, boats and more. Assign a reasonable value to each of these items.
Then, list out your debts or liabilities. Keep this document handy, and you may wish to provide it to your ex. In an uncontested divorce, both parties will agree on the values as well as how the assets and liabilities will be split. If the divorce is contested, the judge can review your financial records. Even if your ex has relocated funds into a private account, the financial records will show the value at the time the divorce was filed.
Think About Liquidating Your Assets
Because all of your assets and liabilities need to be split fairly, liquidating assets may be necessary. For example, it may be necessary to sell a boat or even the house to pay off credit card debt. This process can dramatically simplify the division of marital property. In some cases, the finalization of a divorce must wait until a house or other property can be sold. While this can delay the process, it may yield the best outcome overall.
Divorce Advice: Keep an Eye on Your Credit Report
A divorce can be damaging to your credit, but this is not always the case. You should ensure that all bills are being paid on time throughout the divorce. Until joint debts are divided, both parties remain responsible for them. Late payments are unfortunately common during divorces, and these can be avoided. Ensure that joint accounts in your name are closed so that new balances cannot be added to them. Remember that accounts can be closed before the divorce is finalized. The last thing you want is for your credit card accounts to go to debt collections.
Divorce Planning Tip – If you are concerned about your ex charging up balances on credit cards, closing accounts will protect you.
Closing your credit cards and opening new accounts in your own name can alter your FICO score. Be prepared to wait several months or more before applying for new credit after a divorce. Some joint debt may need to be transferred to your new credit card. Therefore, avoid making charges to your new credit card for the time being.
Change Your Beneficiaries
When you take these steps, your finances will be almost entirely divided up equitably. Now, you need to take control over the assets that are in your name after the divorce. Divorce Advice: Changing beneficiaries is a common step to take in divorce planning. This may include beneficiaries on life insurance policies as well as retirement accounts. Grown children may be your new beneficiaries. Otherwise, you may establish a trust for your children. If you do not have children, a sibling or other close relative may be your beneficiary.
Alter Your Will and Directives
Serious medical issues and even death can occur when you least expect it. Now is the time to alter your will and medical directive. For example, you may want to leave your property in a trust for your children by creating a will. You may also want to name a sibling or adult child as the decision-maker if you are in a vegetative state. Making these decisions now can make things easier for your family later. It is important that your wishes are carried out in a worst case situation. These factors may not be immediately pressing during the initial stages of a divorce. However, in the months that follow a divorce, these final divorce planning steps will ensure that your financial house is in order.
Think About the Children
A divorce involving children can be even more challenging on many levels. While the emotional impact of a divorce on children can be challenging, parents often find it difficult to manage child-related expenses. After the divorce, a child support payment may affect both parties’ budgets. Plan for child expenses properly. For example, one person may need to pay child support. The other may receive regular support payments. In the months when the divorce is in process, parents should ideally work together to pay for child expenses. Childcare costs may include daycare, medical expenses, clothing, extracurricular fees and more. Even in a contested divorce, the welfare of the children should be a top priority.
Divorce Planning When Done Correctly Makes The Divorce Process Less Stressful
Final Divorce Planning Advice:
When you are in doubt about making any serious decisions regarding your financial records consult a divorce attorney. Each state is different. You want to be sure all the decisions you make are legal and ethical.
A divorce can feel like a financial setback in many ways. After all, you may see your asset balances and net worth plummet. You may go from being a homeowner to a renter once again. However, it can also be a liberating experience. After all, you are now in complete control over your budget and investments. You do not have to worry about a spouse overspending. You may have to alter your lifestyle to accommodate a single income. However, if you were in an unhappy marriage, you may find that living more frugally is a small price to pay for your happiness.