Divorce Financial Planning 101: How to Conquer Self-Doubt and Maximize Your Assets
Written by: Megan Dell
When you decide to file for divorce your relationship with your spouse will inevitably change. So will your current relationship with your finances and household income. A divorce will cause a financial upheaval. We strongly suggest you seek divorce financial advice and start your divorce financial planning ASAP.
When planning for divorce, you need to know what financial information you need access to and which is the best divorce and financial planning advice for your situation.
Answering these three questions can help you start your financial planning for divorce.
- What information do I need to set the stage for divorce financial planning to be as organized and effective as possible while setting myself on a path toward financial independence?
- What issues might I be overlooking when asking for divorce financial advice?
- How can I prepare for financial planning after divorce?
There are many moving parts to consider regarding divorce and financial planning in divorce proceedings in order to be able to fully answer these questions.
With a forward-thinking mindset, divorce financial planning can become a time for reflection and growth. With these goals in mind, here are a few ways to jumpstart your divorce financial planning.
Collect relevant information for divorce financial planning
Start by collecting relevant information. This includes documentation of joint loans or debts and joined expenses, insurance policies, individual and joint assets, current tax status, jointly owned assets, total family income, retirement assets, retirement plans, other estate planning documents, living expenses, your tax return from at least 7 years, outstanding college debt, marital property, spousal benefits, property taxes bills, current child care cost, college funds, credit card accounts, the value of your family home and more.
Items that appear to be financially independent of your ex-spouse, such as separate assets delineated in a prenuptial agreement, or assets acquired before marriage should be accounted for and kept up to date in the event they become the subject of scrutiny.
Keep your financial information organized and up-to-date.
The information you accumulate now will be evaluated for the purpose of equitable distribution and for spousal and child support payments and child support calculations. Keep your financial situation and information organized until you are ready to use it.
Financial statements, legal documents, health insurance policies, various retirement accounts and plans, credit card debt, marital assets, and other pertinent financial information can be challenging to find on a whim. You might need these to prove who is financially responsible in order to retain ownership of certain assets.
Our road to financial freedom starts here!
Understand the financial impact of divorce
Next, learn more about your financial picture. Check your credit score by requesting a credit report from at least three credit bureaus. Keep up with your credit rating as it changes periodically.
Should you need to buy/lease a car or find a new place to live as a consequence of your divorce you need to understand tax implications for your financial picture.
Staying abreast of income tax and financial matters will also keep you informed of any changes to your own credit score, including changes caused by your ex-spouse, that you might not have known about and help you plan for upcoming expenses.
Put this information in an accessible but safe place, whether digitally or physically. Understanding your financial standing is always wise, but when financial planning for divorce, knowledge truly is power should you seek financial support or child support, or have to pay child support!
Manage and take control of your accounts.
Once you have taken stock of your financial information, there are steps you can take to assert your financial independence. This might involve various tasks depending on your and your ex-spouse’s financial relationship
Be sure to speak to your attorney before removing yourself or your spouse from any accounts as an authorized user, or setting up new ones. Doing so prematurely or without the advice of counsel could have negative legal repercussions.
Cancel joint accounts
One of the most common steps to take during divorce financial planning is to cancel any shared accounts. Remove yourself from your ex-spouse’s bank accounts or them from yours. Shared accounts are liabilities — even if you have a seemingly amicable relationship with your soon-to-be-ex-spouse, as they can easily affect your financial health and future without you having any say in the matter.
Check with your family law attorney before making any permanent financial decisions.
Open new accounts if applicable
Next, open new accounts, such as credit cards or checking and savings accounts, during the divorce process. Before your divorce settles, it is critical you consult with a South Carolina divorce lawyer first.
Start your own emergency fund to secure your financial future
Create an emergency fund for yourself and add money when possible. Establishing an emergency fund is an important step in divorce financial planning, one that often falls by the wayside because it can feel like less of a pressing issue.
Though you should prioritize payments for mortgage/rent, car payment, utilities, and basics such as food and clothing, an emergency fund can prevent you from going into unnecessary debt if a problem arises unexpectedly, keeping your finances on track for success.
Revisit your existing estate plan or create a new one.
As part of your divorce settlement and financial planning, you should consider updating your existing estate plan or creating a new one. Here’s why.
You might have previously named your ex-spouse to play various roles in your estate plan. However, these wishes typically change in the face of divorce.
If you do not revise your estate plan to reflect these new wishes, your ex-spouse could receive assets you do not intend to or be the individual in charge of making end-of-life decisions on your behalf.
Protect access to digitized financial information.
When embarking on divorce financial planning, many people neglect to protect their access to digitized financial information. Though they might be seeking advice to gain financial independence from their ex-spouse, they might not have taken the necessary steps to protect their financial assets and themselves adequately online.
Change your passwords to keep your digital assets safe
Changing passwords is one of the most important pieces of divorce financial advice you will get. If your ex-spouse had access to your previous passwords through a password document or book, create new passwords that are difficult to crack. This keeps your information and money secure and can prevent your ex-spouse from harming your divorce and finances or taking your money.
Stop sharing devices with your soon-to-be former spouse
If you previously shared devices with your ex-spouse, such as a desktop computer, you should delete any sensitive information and move it to a secure location where only you have access. If you shared devices like a smart TV or an Alexa, you should likewise remove your accounts.
If your ex-spouse still has access to your Amazon account through your Alexa, you need to reset your password and stop sharing these types of accounts.
Find a South Carolina family law attorney
Though you might not be eager to deal with the financial impacts of your divorce finances or the headache of a divorce and financial planning, doing this early on will afford you autonomy over your future financial well-being and bring you peace of mind, both of which are priceless during and after a divorce.
Your financial picture will likely change no matter how much divorce financial planning you do, but that should not stop you from taking the reigns of your finances today.
At Dell Family Law, our experienced team of South Carolina family law attorneys understands that putting yourself and your financial interests in the foreground can help keep yourself, your family, and your future financially sound, even in the wake of change.
Our skilled legal team recognizes how financial planning after divorce can feel overwhelming, but if you keep these pieces of divorce financial plan advice in mind, you can set yourself up for success now and for years to come.
Last but not least we suggest you seek the advice of a financial advisor if you are overwhelmed by the prospect of doing this financial planning solo, or if you need financial advice after divorce.
Contact our Charleston office today or click the button below.
