A recent U.S. News article offers a set of tips for avoiding a financial meltdown during a divorce. We thought we would share the advice. First, take a solid inventory of your assets. If you do not know all that you own, find out. If you do not have updated financial statements for bank accounts or retirement funds, get them.
Second, do not deplete or hide marital assets. Many counties in Missouri have local rules that specifically prohibit depleting or transferring marital assets after initiating a divorce, and all counties have penalties for doing so by the time of the entry of divorce.
Third, if you have not been earning an income or a sufficient income for your abilities, prepare to do so. In Missouri, courts expect spouses to become self-sufficient, so even stay-at-home parents will be asked to get work, though not necessarily immediately. But any attempts to underemploy or unemploy yourself will be countered by the court through an imputation of income based on your education and ability.
Fourth, begin detaching emotion from your financial choices. Certain items may have sentimental value or were gifts from a favored friend; you may want the marital home. But in the end, you have to be able to afford your future standard of living, and emotion can cloud judgment when it comes to long term rather than short term planning.
Fifth, as you begin to think about different property settlement arrangements, do not forget the tax implications of your choices. So, for example, if you agree to split the proceeds of the sale of a house but do not turn those funds into your new house, you will have to pay a capital gains tax, which could significantly alter what you thought was a fair distribution of property.
Sixth, be sure to have all your insurance issues vetted with your attorney and that you change beneficiaries to avoid having your spouse still attached to policies (unless the court insists you must do so).
Finally, do not shy away from getting professional help – not just the right attorney, but also financial planners or mental health counselors.
If you have questions about financial issues and divorce, contact us – we can help.