Even if you are not quite ready to get divorced, or know someone who might
be, you need to be informed and Financially Smart.
Divorce is a complex process. Deciding how easy or difficult the process will
be depends on you and how your spouse responds. How well or ill prepared
you are emotionally and financially will dictate how smooth or turbulent
the divorce obstacle course will be.
Depending on the make-up of your marriage, here are 10 legal, emotional
and financial suggestions with which to equip yourself so that you have
(or get) “Divorce Smarts”.
Consult with an attorney and a mediator, or an attorney who is also a mediator.
It’s a good idea, especially if you have children or assets. Choose
the right person for you. Someone who represents who you are and your
divorce style. If you don’t have easy access to the family funds,
start putting some money aside so you can afford to pay an upfront retainer,
which is often required. It is best not to navigate a divorce on your
own. You wouldn’t perform your own open heart surgery. Would you?
Ask lots of questions. Choose the attorney or mediator who will listen
and pay attention to your wants and needs. See someone before you are
ready to do anything so you don’t make some common mistakes.
Make Copies. Make Copies. Make Copies.
Photocopy every important, relevant financial document you can get your
hands on. I would say go back and make copies of documents for the last
three years of your marriage. This should include: tax returns, bank statements,
pension, stock, portfolio statements, credit card statements and pay stubs
to supply your lawyer or mediator.
Avoid Damaging Credit Problems.
If you are using a joint credit card, you are still responsible for any
charges made by your spouse. If charges are not paid, those charges can
end up on your credit report. Establish credit cards and accounts in your
own name to build and protect your credit.
Make Sure You Have Medical Coverage.
Medical insurance coverage usually ends at divorce. If you are on your
husband’s insurance plan, you should be able to continue coverage
for up to 36 months under COBRA. Under this plan someone has to pay the
premiums. These premiums can be very expensive so you may want to consider
shopping around for different coverage. Today there are insurance carriers
with lower premiums than offered by COBRA.
Take Home and Asset Inventory.
Know what you have! Write down your assets, debts, and what is in your
home. It’s helpful to compile lists. The more information you have,
the better. Your attorney or Mediator will thank you. You may want to
consider taking photos or videos of your home contents. This may help
in the division of personal property. You may want to make copies of family
photos and CDs. You would be surprised how the division of these items
can sometimes cause arguments and stress.
Divorce Has Tax Consequences.
There are important tax ramifications with real estate, deferred compensation
and other assets.
If a stock is valued at $3,000, it may only be worth $2,600 in cash after
capital gains taxes are paid.
It would not be the same as receiving $3,000.00 in cash in a divorce settlement.
In fairly dividing the assets, you must consider the tax consequences
before the division. Consult with your accountant to discuss the tax ramifications
of your possible asset allocation.
Fully Understand the Assets You Choose.
When you are choosing which assets you want, choose carefully. If you want
the house, educate yourself about the fair market value. Keep in mind,
you have to make mortgage payments, pay taxes, interest, insurance, utilities
etc. Will you be able to afford this once the divorce takes place?
Pensions are usually taxable when you take out the funds. Choose wisely!
Stay in Your Home.
Unless you fear physical or emotional harm, don’t move out of your
home. Talk to your lawyer or mediator before you make your move. Leaving
the marital residence can have major ramifications.
Consider Different Professionals to Help You.
In some cases you will need experts such as an accountant, appraiser, or
therapist. A good attorney and/or mediator will be able to recommend these
types of professionals to help you. Divorce in more of an emotional issue
than you may realize.
Choose your Friends Carefully.
When you have developed relationships as a couple, you never know who may
end up on your spouse’s side and turning on you or even testifying
against you later. Consult with a therapist who can keep you thinking
clearly in order to focus on your divorce plan. Confide in your therapist
and let the friends that were part of your life before your marriage be
part of your healing process, not necessarily part of the divorce process.
Divorce can take its toll on you emotionally, financially and legally.
Being prepared will give you the tools and the strength to make better
decisions. My advice? Try to make your divorce as uncomplicated as possible!