The period before officially filing for divorce is a critical window of opportunity for financial preparation. The actions you take during this time can profoundly impact your stability and negotiating power throughout the process and for years to come. Being proactive, organized, and strategic allows you to move from a position of fear to one of knowledge and control. This comprehensive checklist is designed to help you gather the necessary information, protect your interests, and lay the groundwork for a secure financial future.
Below, our friends from Merel Family Law discuss steps to take to be financially prepared for an impending divorce.
Conduct A Financial Inventory And Gather Documents
Knowledge is your greatest asset. Before any separation is announced, discreetly begin gathering and making copies of key financial documents. This includes:
- Income Documentation: Pay stubs, W-2s, and tax returns for at least the last three years for both you and your spouse.
- Asset Records: Statements for all bank accounts (checking, savings), investment and brokerage accounts, retirement accounts (401(k), IRA, pension), and savings bonds.
- Property Documents: Deeds for real estate, titles for vehicles, and appraisals for valuable personal property like jewelry or art.
- Debt Information: Mortgage statements, credit card statements, car loan documents, and student loan records.
- Insurance Policies: Life, health, auto, and homeowner’s insurance policies.
- Estate Documents: Copies of wills, trusts, and powers of attorney.
Store these documents in a secure location, such as with a trusted friend, family member, or in a password-protected digital cloud storage account your spouse cannot access.
Establish Your Own Financial Identity
If your financial life has been deeply intertwined, it’s time to build your independent footing.
- Open Individual Accounts: Open a checking and savings account in your name only at a different bank. If possible, start directing some of your income here to build a safety net for initial legal fees and living expenses. Be reasonable; draining joint accounts can be viewed poorly by the court.
- Build Your Credit: If you don’t have credit in your own name, apply for a credit card. Use it for small, regular purchases and pay it off in full each month to build a positive credit history. This is essential for securing loans or renting an apartment post-divorce.
Understand Your Cash Flow And Marital Lifestyle
A court will often consider the standard of living established during the marriage when making decisions about support. Document your current monthly expenses in detail. Track everything from housing and utilities to groceries, entertainment, and children’s activities. This serves two purposes: it helps you create a realistic post-divorce budget and provides crucial evidence if you need to argue for appropriate spousal or child support.
Inventory Household Assets And Liabilities
Create a visual record of your marital property. Discreetly take photos or videos of the contents of your home, including furniture, electronics, artwork, and jewelry. This prevents items from disappearing or being undervalued later. Similarly, ensure you have a complete list of all debts.
Consult With The Right Professionals
Before you file, invest in expert advice.
- Consult a Divorce Lawyer: Understand your rights, obligations, and the legal process specific to your situation.
- Meet with a Financial Advisor or CPA: These professionals are invaluable for helping you understand the long-term tax implications of dividing different types of assets (e.g., a house vs. a retirement account) and for projecting your financial future under various settlement scenarios.
Avoid Major Financial Changes
Now is not the time to make large, unusual purchases, liquidate significant assets, or dramatically change investment strategies. Courts frown upon any activity that could be interpreted as dissipating or hiding marital assets. Act prudently and maintain transparency to avoid accusations of bad faith.
Taking these steps will not eliminate the emotional stress of divorce, but it will provide a tremendous sense of empowerment and clarity. By preparing financially, you ensure that you can make informed, rational decisions that protect your interests and pave the way for a stable and independent new beginning.