How Do I Financially Prepare for a Divorce?
Many people going through divorce have the same questions: Are I financially prepared for divorce? Am I going to have enough cash flow to pay bills during and after the divorce? Am I aware of the tax ramifications of your divorce? There are many financial aspects of divorce that most people overlook.
Learn more about how a financial neutral can help with understanding and dividing finances during a collaborative divorce. If you’re ready to move forward with your divorce now, contact one of the professionals at Best Legal Choices today.
Here are 8 ways to financially prepare for divorce.
Divorce can be expensive, especially if you are planning on hiring a lawyer. You are going to need extra funds to pay legal fees and other expenses in addition to your regular household bills during the divorce process.
Close Your Joint Accounts
Do you have joint credit cards or back accounts with your spouse? Have a conversation with your spouse about whether and when to close those accounts or transfer them to only one spouse’s name. Avoid taking these actions behind your spouse’s back; financial decisions should be made together to the extent possible, even during a divorce.
Be Prepared to Update Insurance
If you will own a car or a home following the divorce, be prepared to insure them. You may also be responsible to provide health insurance for yourself and your children. Life insurance policies may also need to be updated following a divorce to make sure the death benefits make it to the correct beneficiaries. Make sure you do that right away to avoid future support payments going to the wrong beneficiaries.
Start keeping track of your household finances including income and expenses, assets, and debts to make it easy for your lawyer to comply with the mandatory disclosure process.. Make copies of credit card and bank statements, receipts for expensive purchases, tax returns, and paystubs. Store these documents in a safe location until they can be exchanged with your spouse.
Children’s expenses for items such as therapy, tutoring, music lessons, and sports activities don’t stop just because you’re getting divorced. The two of you will need to figure out how to share these expenses until the divorce is final as well as after. Consider using a mutually accessible bank account for child-related expenses into which both spouses can deposit and that both spouses can access.
Change Estate Plan
You will want to get qualified advice about preparing a new estate plan as soon as the divorce process starts. CFP states, “Begin working with an estate planning professional shortly after you start working on your divorce, so that you have an estate plan ready to go, a new successor trustee (and alternate) named, new powers of appointment and a new will.” Although these documents may not be executed immediately, having a plan-of-action will help you feel like you can check one more thing off your list.
Consider Working with a Certified Divorce Financial Professional
Consulting with a financial analyst can help you make informed decisions about your cash flow, assets, and other obligations. They can provide information about the financial implications of decisions made during a divorce, short- to long-term projections that can help you make informed decisions, and analyze tax implications of different scenarios for the division of capital gains and losses, assets and obligations, income tax filing scenarios and more. This is similar to the role a financial neutral would perform for both spouses in a collaborative divorce.
A financial neutral is a member of a collaborative divorce team who can help divorcing couples reach financial agreements and understand how those agreements may affect their plans for the future. Financial neutrals have extensive training, often as a Certified Divorce Financial Analyst, a Certified Divorce Financial Planner, or similar qualifications.
Consider Collaborative Divorce
Collaborative divorce and divorce mediation are great options when both spouses are open to settlement discussions. The collaborative process is one of the most productive and cost-effective methods of divorce for couples. This future-focused approach can help save time and money as both sides work together to reach an agreement.
- Person. “Divorce Financial Planning: 6 Things That Matter Most.” Financial Planning – CFP Let’s Make a Plan, Certified Financial Planners, 17 Jan. 2018, www.letsmakeaplan.org/blog/view/lets-make-a-plan-blogs/plan-long-term-after-your-divorce-6-things-that-matter.
- Gambone, Angie. “How to Prepare for Divorce While Married.” LegalZoom Legal Info, 18 July 2016, info.legalzoom.com/prepare-divorce-married-25040.html.
- 9 Ways to Reduce the Cost of a Divorce
- What is the Role of a Financial Neutral in a Collaborative Divorce?
- Are you financially prepared for divorce?
- Collaborative Family Law Financial Neutrals
Collaborative Divorce Is a Peaceful Divorce Option
Divorce litigation can be scary and emotionally draining for you, your spouse, and your children. But it doesn’t have to be that way with collaborative divorce. The collaborative process can result in a less expensive, more efficient, and less harmful outcome for everyone involved. The legal, financial, and communication professionals at Best Legal Choices can help you navigate this difficult time in your life.
OUR PROFESSIONALS CAN HELP WITH THE COLLABORATIVE PROCESS IN ARIZONA!
The collaborative divorce process is designed to help people who are willing to work together to make an agreement that benefits the family. Resources that help parents communicate effectively during this process can help them model appropriate behavior for their kids. With love and support, children can more effectively deal with their parents’ divorce. Contact a professional at Best Legal Choices if you’re ready to take the first step toward starting your new life.
Brendan J. Kennedy is a partner with the CPA firm of ATLAS CPAs and Advisors PLLC with offices in Arizona, Colorado, Iowa and Illinois.