Checklist for Protecting Your Money in Divorce
When thinking about a divorce, money and splitting assets often comes to mind. Each party wants to protect their own financial well-being and the property they value most. If a prenuptial agreement is not in place, the way in which assets like real estate, retirement accounts, and other property will be divided may not be very straightforward at first. Even so, many divorcing parties can work out a plan for distributing what needs to be split that does not include hiding assets or taking other devious measures to squirrel away cash.
Protecting your money in divorce can be made much easier by having the right information and strategies in place. Consider the items in this checklist to help you protect your money in a divorce.
- Know your state's laws. Get to know as much as you can about the divorce laws in the state that you live or where your case will be handled. These laws could directly impact the ways in which you can defend your money in your divorce. Check out this link for more about divorce laws in each state.
- Talk to a pro. Having the right information can help you keep yourself and your money protected throughout your divorce. A family law attorney can offer you legal guidance in your case. Other professionals, such as a Certified Financial Professional (CFP) or a Certified Divorce Financial Analyst (CDFA) can offer advice that is specific to safeguarding your money throughout the divorce process.
- Don't hide assets. This can prove to backfire on you tremendously. Getting caught concealing assets can leave you with monetary fines, loss of credibility with the court, and other penalties you won't want to pay. Being honest about your assets from the start will actually help you protect your money in your divorce.
- Close joint accounts and build your own credit. If you must pay off a remaining balance on credit cards before the accounts can be closed, do so. If you can't, talk to your credit card company about freezing the accounts to future spending while you work to pay the current balance. This will help to protect you from being liable for any more of your ex-spouse's spending. Also, open a credit card under your name only and work on building your own credit. This can be particularly important if you've never had your own credit card before and you want to do things like apply for an apartment or buy your own car.
- Change beneficiaries. It's common for spouses to name each other as beneficiaries on insurance policies, trusts, wills, etc. Get the beneficiaries changed on your accounts so that you can protect your money from going somewhere that you no longer what it to go someday. Take care of this sooner than later so that you don't find yourself forgetting to do so down the road.
- Know the value of your assets. When it comes to the value of your home, vehicles, art, and other assets, don't just guess what the totals are. Getting properties and other valuable assets appraised will help you to know how much money truly exists between yourself and your ex-spouse. If you can, appraise these items before you start the divorce process to help move things along somewhat.
- Ask about QDROs. Retirement accounts like 401Ks or pension plans may also be susceptible to division during a divorce. In fact, many couples will find that much of their net worth is stored in these accounts and plans. A Qualified Domestic Relations Order (QDRO) is used by courts to designate how retirement assets will be split. QDROs and dividing retirement accounts can be complicated, but they can be substantial when it comes to protecting your financial standing into the future. Talk to your divorce attorney early on about your retirement accounts and how to obtain a QDRO.
- Think about how you can lower divorce costs overall. Litigation can be an expensive and lengthy process, so if you can, consider other options for handling your case. Working with a mediator or collaborative practice to reach agreements can help you protect your money by lowering the overall cost of your divorce. Moreover, you could find yourself paying divorce-related fees if you continue to experience conflict over matters like child custody which lead you back to your lawyer's office or into the courtroom. In this situation, have a plan in place for how you will communicate with your ex-spouse about parenting matters. There are many ways that you can communicate, but using tools to help focus communication to just the important details can contribute to eliminating the brash commentary leads to conflict.
- Take care of your emotional well-being. Letting emotions get in the way of making smart decisions during your divorce can end up costing you. Protect your money by keeping your emotions at bay while you work out your divorce agreements. If you're having a tough time with this, talk to a counselor or therapist who can help you work through your emotions and teach you strategies to cope when you're in divorce negotiations.
This checklist contains only a few important points to keep in mind to help protect your money in a divorce, but there is much more you can do. As mentioned, speak with someone such as your attorney and a divorce financial professional to learn more ways to safeguard your money throughout this process.
NOTE: Many state and federal laws use terms like ‘custody’ when referring to arrangements regarding parenting time and decision-making for a child. While this has been the case for many years, these are not the only terms currently used to refer to these topics.
Today, many family law practitioners and even laws within certain states use terms such as ‘parenting arrangements’ or ‘parenting responsibility,’ among others, when referring to matters surrounding legal and physical child custody. You will find these terms as well as custody used on the OurFamilyWizard website.