9 Ways to Protect Your Ass(ets) Before You Get a Divorce
By Tracy E. Hill, Ph.D.
I work with a lot of individuals, couples and families at every stage of the divorce process. And as a lawyer’s daughter, I spent countless hours deliberating clients and cases with my father for his legal opinion on things. Let’s face it, divorce is tough enough on everyone’s emotional and mental wellbeing. Protecting yourself financially is simply a smart offensive move that will pay great dividends down the road. Here are some tips to help you out. But I hope you never have to use them!
- Establish the date of separation. Establishing the official date of separation is easy enough to do through your attorney if you have one. But it can also be a simple email written to your soon to be ex-spouse that states, “I want to establish that we are officially separating on (enter date). The official date of separation needs to be in writing. Print the email and make sure you keep a copy of it and any response from your ex-partner. This date officially puts a stamp on the separation of financial bills, income, assets (401k, pension plans, stocks, bonds, etc.).
- Document who owns what. Before you do anything else, take inventory of your and your spouse’s assets and liabilities. Whose name is on the mortgage? What about the car? Go beyond the obvious here. You also need to think about retirement accounts, insurance policies, and even jewelry and furniture.
Start by making a list of everything you two own. Then, gather documentation that shows who legally owns and has access to these assets, any relevant account numbers, and the value of each asset. This can be a daunting process during an already stressful time, so go easy on yourself. Break this down into smaller chunks, and start early to prevent burnout and overwhelm.
- Three months of savings. If you are the spouse with more limited funds, make sure before you officially separate, that you have at least three months of funds saved up to pay bills, shop for groceries, pay for temporary housing, etc. Although you may be entitled to pendente lite (spousal support during litigation), it may take several months before this gets established.
- Pre and post-divorce budget. Regardless of sex, job, title or position, it’s always important to make a budget so you know what you’re up against financially if you decide to part ways with your spouse. Make a budget that includes housing, food, clothing (all of Maslow’s first hierarchy of needs) for you and your children as well as other items your children might need (i.e., sports equipment, activities, etc.) so their daily activities are not completely disrupted. You may want to meet with your CPA or financial advisor to discuss your situation before forging ahead.
- Talk to a lawyer or other professional. The average cost of a divorce is approximately $12,000 for each party unless you are doing it yourself, using a mediator or other professional to help write up a custodial agreement, separation agreement etc. Mediators and other professionals will cost a fraction of an attorney, but buyer beware. Some professionals are not savvy to the process and may cost you more in the end. A contested divorce can cost upwards of $30k so you need to think long and hard whether divorce is right for you.
- Open/Close bank accounts. Once you’ve established the date of separation, it’s imperative that you sever your name on any joint accounts – including bank accounts, credit cards and other such joint financial arrangements. Talk to your financial institution on how to do this because joint accounts are different than individual accounts with authorized users. Although you are still responsible for any debts jointly incurred after the divorce, establishing your own financial accounts makes it easier for the accountants and lawyers to parse out who owes what. If you are both listed on mortgage statements, car loans and other big ticket items your soon-to-be-ex will have to release you from the liens through refinance loans or buyouts.
Now that you’ve closed your accounts, it’s time to open a new one! A checking account will allow you to pay bills such as a deposit for a new domicile. Oftentimes, individuals will open a PO Box so the new account information will not be sent to the current joint domicile, which would tip off your soon-to-be that a divorce is imminent. When you open your new account, this is the perfect time to open a new credit card to establish your own credit and finances.
- Update your policies. If you have a life insurance policy, retirement accounts, or a will make sure to speak with your CPA about changing the beneficiary name on these important policies and documents. Typically you can change beneficiaries by simply logging to your online account. If you’re unsure how to do this, call the institution or your financial advisor and ask for help.
- Talk to a mental health professional. Divorce is quite stressful. Before, during and after it’s a smart way to invest in your own emotional health by talking to a mental health professional who will be unbiased and nonjudgmental. During the divorce, it’s also a good idea to get your children any emotional support they may need as well. You may not realize it, but kids hear and see more than you think.
Lastly, the grass isn’t always greener on the other side. It’s just different fescue. Whether you have Kentucky Blue Grass or Perennial Ryegrass, relationships still need to be tended to. Before you take the leap of divorce make sure this is the right decision for you.
Photo credit by: Giorgio Trovato (Walnut Creek CA) @nice_rcrd