Divorce requires some financial preparation, or homework, to protect the interests of the divorcing spouse. How much is the marital estate worth? What could qualify as marital property? What is our real marital income? In order for you and your attorney to assess the issues to address in your divorce, take these ten steps first.
First, copy all of your financial records (bank statements, income tax returns, business records, credit card statements, pension and retirement account statements, receipts of key purchases, insurance documents). If you can, you should go back at least three years, and preferably five years. In Missouri, you will be required to produce some of these items early in the divorce process; for other documents it just will be easier and less costly to have them in your possession rather than pay to procure them later.
Second, obtain a copy of your credit applications from banks or creditors in the last year, as they will often include key financial information that will help determine net worth. You might discover whether a spouse has been hiding assets.
Third, run a credit check for yourself with all the big credit reporting agencies. These reports will indicate if your spouse has been running up credit card accounts in your name or otherwise taking steps to damage your credit.
Fourth, tabulate the marital debt. Remember, any debt accumulated during the marriage is a presumed marital obligation for which you could be responsible.
Fifth, cancel joint lines of credit to the extent allowed by local court rule (some local rules do not allow parties to alter existing accounts until the court has a chance to divide all of the property).
Sixth, contact Social Security to determine the extent, if any, of your share of your spouse’s Social Security benefits, as that might factor into your property settlement discussions.
Seventh, examine the pros and cons of maintenance with respect to tax implications. Maintenance counts as income to the spouse receiving it and a deduction to the spouse paying it, meaning that it has a very different net value.
Eighth, consider protecting yourself in the event of an illness or death through proper insurance policies, including disability and life insurance that your spouse should cover and for a given duration and amount.
Ninth, begin crafting a list of your preferred division of the marital assets. Remember that a court will seek to divide the assets evenly, but that can be done in a variety of ways, some more preferable and beneficial (especially from a tax standpoint) than others.
Finally, review your trusts and wills and insurance policies to see who is your named beneficiary and begin changing beneficiaries (as the law and local rules will allow) so that someone other than your soon-to-be former spouse will not be the beneficiary.
If you have questions about how to gather financial information prior to divorce, contact us – we can help.