Divorce Preparations: Minimizing Losses During Your Divorce
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One of the popular topics on this blog is on the subject of divorce.
This is quite understandable as I have chronicled my own divorce quite extensively and tried to advise others how to navigate through it if they ever find themselves in a similar predicament.
Of course one of the most contentious subjects, apart from custody arrangements, is exactly how things get divided up between the two divorcing individuals.
One of my readers, Peter Rossi, offered to give his take on the subject which I gladly accepted.
Divorce is never easy.
Even in the most amicable of endings, moving forward can be difficult and painful to deal with.
Understanding a few helpful tips can make the process just a little bit easier and allow you to move forward in life.
While children, if there are any, are the most important thing in a divorce, protecting assets is a close second.
Getting through divorce with as much of your money intact is the goal that just about any divorcee can get behind.
Here are a few helpful tips to guide you through the process.
Identify and Clarify.
Before you can even worry about what assets may be lost in the divorce, the first step is to identify them.
Before you can start to move forward, you have to know how much money you have in cash and assets and where to find them.
Another important thing is to clarify what is already in your name, what is in your spouse’s name, and what may have both.
This can include things like bank accounts, mortgages, investments, and any other assets.
Even if you aren’t divorcing, knowing the assets can be beneficial.
After all, it can feel like an instant between looking at the best pool heaters and filing for separation.
Get Copies of Financial Statements.
One thing about divorce is that it is essential to get absolutely everything in writing.
The more you can prove, the better your chances are of retaining assets.
The court won’t care about proof of an affair – infidelity is infidelity, after all – but they will definitely care about proof of assets.
Don’t rely on electronic copies entirely, however.
There is always the chance that you could get locked out of your information if your soon-to-be-ex spouse knows the passwords.
Printing out financial statements is the safest way to go and provides a fail-safe if they want to get vindictive.
Your financial statements should include tax forms, bank account statements, brokerage firm statements, and any potential financial documents that you may have signed on your own or together over the last couple of years.
Again, the proof is in the pudding – or in the paperwork, as it were.
The more that you can prove on paper, the better your footing will be when things get their toughest.
Leave Yourself Some Liquidity.
While it is great to have paperwork pointing to financial assets, that doesn’t automatically mean that you will come away with those assets.
Not only that, but you don’t want a particularly petty ex-spouse to leave you with nothing in cash.
The sad thing is that this happens all the time.
There are even joint accounts where you can change the account to one person and have a certain amount of assets moved over.
It is smart to wipe your assets from the account but still make sure that you have enough left over to cover your bills until the attorneys can do their thing.
The only other way to gain access to those access would be to hold an emergency court hearing in order to pursue temporary alimony or child support.
That can be a time-consuming and expensive process.
If you have liquid assets available, having that at your disposal can buy a little bit of time until things settle down.
Know the Laws in Your State.
It is important to keep in mind that divorce laws can vary depending on the state you live in.
Don’t just go with the flow and assume you know the process.
Having a lawyer can help but it is important to know what you may be walking into as well.
For instance, if you happen to live in a state that has community property laws, there is a chance that you could lose exactly half of all that is jointly owned when going through a divorce.
And that doesn’t even cover things like no fault versus fault states.
In the aforementioned instance of community property laws, all of the marital assets – as well as the debts incurred by either party during the course of the marriage – are then split equally.
Any separate property, things that were owned prior to marriage, is only in one spouse’s name, was inherited, or given as a gift won’t be taken into account.
Bring in More Than a Lawyer.
While divorce lawyers are generally the backbone of a strong divorce proceeding, it is important to have a team on your side.
Look into bringing in a financial adviser as well, particularly if your spouse handled all the money.
Finding someone that you trust is essential, but it is just as important to find someone that will explain the financial situation in an understandable way.
Far too often, one spouse handles all of the finances.
Whether intentionally or not, the other spouse gets left in the dark and winds up losing most of if not all of their assets.
Even if you happen to be financially savvy, having an experienced financial advisor and family law attorney on your side can be invaluable.
Particularly because divorce is so heavily mired in emotion, having non-biased parties to speak for you can mean the difference between being protected and being unprotected.
Understand Not Only What You Want, but What You Need.
When divorces get particularly bitter, one or both spouses can get petty and decide that they are coming after everything.
But in most cases, there will need to be some compromises in order to move things forward.
So, it is important to know what you need and what you can live with as opposed to what you want.
What sounds like a large financial number can actually be way less than what you need to live fairly.
Talk to your team and take a wide-angle look at all of the finances.
What do you need to sustain a certain standard of living?
Divorce can be messy but having a better understanding of financials and what to look for can make the entire process just a little clearer.
Peter Rossi, a professional hot tub designer and founder of ByRossi.
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Even a steadfast DIY’er can sometimes gain benefit from the occasional professional input.
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