Divorce is difficult. During this stressful time, emotions are high. Although you want to get through the process quickly, there is a lot to consider, such as your finances. Read more to learn helpful tips for protecting your assets during a divorce.
Before Filing for Divorce
You should consider the following three factors before filing for divorce.
Emotions
When you’re emotional or stressed, it’s hard to make sound financial decisions. That’s why getting a divorce can be so hard. Not only will the process affect you emotionally, but if you make decisions based on your emotions, it could impact you legally and financially.
Avoid making financial decisions by yourself. Consider hiring a legal team you can rely on to help navigate the divorce process.
Negotiations
Know that many of your most significant emotional challenges may happen during the negotiation process. Just remember the decisions made during this process will last for a long time – and possibly forever.
Trust your legal team and resist the urge to wrap everything up too quickly. Let your attorney guide you through this process as your emotions may creep up on you and get in the way of the proceedings being fair and equitable.
Keep and Maintain Records
Knowing what you have is key. Account statements can disappear throughout the divorce proceedings, so if you’re considering filing for divorce, make sure you follow the process below:
- Collect all your statements and financial documents.
- List your assets. This information will be beneficial for beginning the divorce process.
- Create a spreadsheet of how much each asset is worth and who owns what.
It’s also a good idea to keep both electronic and digital copies of everything. Examples of assets to think about are:
- Retirement funds
- Liquid assets
- Real estate
- Personal property
- Cash value life insurance
- Business interests
Make sure you document communication between you and your soon-to-be ex-spouse. To avoid a situation where one party contends the other’s claim, it’s recommended that you communicate through email. This way you have evidence of what exactly was said.
During and After the Divorce
You should expect the following after you’ve filed for divorce.
Lifestyle Changes
After your divorce is finalized, you will most likely experience a decrease in your income level. If you were both working, you will no longer be able to rely on your partner’s added income. To avoid financial problems, make sure you budget and stay within your post-divorce means.
Who Keeps the House?
Most often, the wife will want to keep the jointly-owned house. The traditional way homes are dealt with during a divorce is:
- One spouse stays in the house either alone or with the children and buys the partner’s share of the house through cash, giving up another asset, or with a property settlement note.
- Both spouses agree to sell the house and split the profit.
Depending on your lifestyle and finances after the divorce, keeping the house may not always be the best option. Rely on your legal team to help you determine what you should do with the house.
After-Tax Values
Keep in mind taxes when appraising all your assets. Know that if your divorce is finalized within the year you are filing for, you will file separate taxes.
Filing joint taxes is generally better as married couples get higher deductibles. However, both you and your ex-spouse must be comfortable splitting that deductible.
If you have kids with your ex-spouse, it’s typically the parent with custody who gets to claim the kids on their tax returns. However, if the non-custodial parent claims the kids on their tax returns, they may have to pay more in child support.
Pensions
Many people aren’t aware that any portion of a pension earned while married is included in the marital asset pool. Different ways this can happen during a divorce are:
- The spouse who is not an employee gets their share of the future pension
- The pension is valued and offset
- A combination of both of these options
A divorce is a complicated and often messy situation. The best way to move forward with a divorce is to think about what is the best option for you. Someone who has an established career with children will need a different option than a person in their 20s who is childless. Try to think ahead and make sure you have options for the future.
