How to Avoid Financial Pressure During Divorce

protecting finances during a divorce

Divorce can be difficult simply from the emotional aspects of ending a marriage and splitting up a family. But divorce does not end when a couple separates, it only begins – and the process can take many months, even as long as two years in high conflict divorces. The longer the divorce drags on, the more likely one or both parties feel financial pressure that could lead one party to take advantage and force a one-sided settlement. How can a person in this position avoid such an outcome?

First, understand the nature of the process. In all likelihood, one party will vacate the marital residence. If children are involved, temporary custody arrangements will be ordered by the court. Each party will begin to collect and disclose financial information. And the court will usually enter what is called a PDL judgment, intended to provide for the lesser earning spouse and the children during the pendency of the divorce. A PDL judgment is not a settlement and not a punishment; it is designed to maintain the status quo and avoid either party trying to dissipate or hide marital assets. So, if you are the lesser earning spouse, you will want to seek spousal and child support and to stay in the marital home; if you are the greater earning spouse, you will want to minimize the financial outlay for paying for two households. When you add in attorney fees and transitional costs, the divorce process will create some temporary financial pressure on both parties – the lesser earning spouse worrying about maintaining the status quo and how to pay for it after divorce, the greater earning spouse worrying about shouldering too much weight for two households.

In such a situation, the pressure to bargain will be strong, but a party should not let that pressure lead to a bad deal. For example, the lesser earning spouse, fearing an inability to live off of the support ordered by the court, may be urged to agree to give up long term benefits (like a share of retirement plans or other assets) to feel more secure in the short run, and that might be a terrible bargain. Similarly, the greater earning spouse, worried about a long divorce that he or she might have to finance for both parties, will want a quicker divorce and may be urged to sacrifice certain assets or a higher level of support just to end the process. Again, it may be a terrible deal in the long run.

The time between the PDL and the final outcome should be a time of cool reflection and not financially motivated fear. Remember that a court will divide marital property equally absent a showing of marital misconduct or some other basis for an inequitable distribution. And child support is based on a worksheet set up by the supreme court, and family courts do not stray often from the presumed support amount. And courts generally cannot order a combined spousal and child support amount over a certain percentage of gross income. So, you have a good idea of the narrow range of financial outcomes.

Also, it is generally smart to be very frugal during the pendency of the divorce because you will otherwise deplete the marital estate through spending retirement funds or incurring high debt. It will be better for the parties and their position before the court to do everything to live within means during the divorce. So, know how much money you can expect every month and budget appropriately.

As settlement talks develop, ask yourself what you really want most financially out of the divorce and measure that against what a court will likely do. If you are asking for too much, work harder to prioritize and think about what you would do to compromise. The more conflict, the more stubbornness, the longer the process and the more expenses drain the marital estate. You may feel very emotional and very angry, but at this time you need to be as rational and thoughtful about your long term outcome as possible. You want to leave the divorce in a solid financial position, not just in the immediate aftermath but in the long run future.

Talk with financial advisers and do not make snap judgments.

If you follow these essential steps you will be much less likely to “freak out” when finances begin to seem overwhelming. For other tips, consider this article from CBS News.

And if you have questions about financial pressures during divorce, contact us – we can help.