The process and experience of filing for divorce is anything but simple, and it can be difficult to make sound financial decisions while in an emotional state of mind, even in an uncontested divorce. However, it is important for both parties to plan ahead for their financial futures as individuals early on in the process, before the divorce is finalized.
An uncontested divorce is one where both parties have reached an agreement in regard to major issues without a court hearing. In this scenario, spouses and their individual attorneys will negotiate the terms of the divorce and finalize the Decree of Dissolution. The issues outlined in the decree typically include:
- - Child custody, parental visitation and responsibilities
- - Amount and duration of child support
- - Amount and duration of spousal support (alimony)
- - Taxes
- - Division of property (real and personal)
- - Division of debts
- - Division of assets (bank accounts, retirement plans, and life insurance policies)
Every divorce is different, even if it is uncontested. Though the process is still emotional and stressful, divorces without minor children involved and divorces between parties who are both employed can be negotiated and finalized more quickly. However, untangling joint financials still takes time and still requires planning. Therefore, long before spousal or child support is awarded and before the divorce is finalized, it’s important to prepare your individual finances. The following are six ways to prepare financially for life after an uncontested divorce.
1. Develop a Post-Divorce Budget
As soon as divorce becomes a reality, start tracking your income and expenses. Not only will this help you determine a post-divorce budget, but this can also assist the judge in deciding how to split assets and debts should the divorce become contested. Review your bank and credit card statements to estimate your average spending. Then estimate new expenses you’ll be handling on your own post-divorce such as rent, utilities, alimony, child support, childcare, transportation and food.
2. Gather Financial Documents
Reviewing financial documents is the best way to assess you and your spouse’s financial health. However, gathering them can be difficult and time-consuming so it’s best to start early. Aim to collect three to five years of statements. This list is a helpful place to get started.
3. Prepare Yourself for Resistance
Even if the relationship is cordial, always be prepared for some pushback. In some situations, a spouse might not want to release certain documents unless they’re legally obligated to do so. Try to gather as much information as you can before filing for divorce. If your spouse isn’t being cooperative, ask your attorney about the discovery process for gathering information and documents.
4. Avoid Major Financial Changes
Though it may be tempting to jump ahead on tasks like adjusting life insurance policies, wills, and retirement plans, it’s best to wait. Life insurance policy and retirement plan beneficiaries can be changed by way of the Decree of Dissolution, and a will is easiest to change post-divorce. Should the divorce become contested, a judge may find you in contempt if you were to make any of these major financial changes before your divorce is finalized. If you’re in doubt about a particular financial change or major decision, it’s always wise to consult with your attorney before acting.
5. Spend Conservatively
Separating joint accounts can be tricky and much of this process depends on state law. In some areas, the court treats income, assets and debts as a single financial pool. Emptying it or dipping into it more than normal before the divorce could be detrimental to your case.
If you don’t have money set aside for expenses, try coming to an agreement with your spouse. If your relationship isn’t cordial, ask your attorney about a Temporary Order. This Order would dictate how the finances and debts will be divided during the pendency of the divorce. Temporary Orders also dictate child custody, visitation, and support matters as well as how property and assets will be divided during this time.
6. Know When to Call in the Reinforcements
Whether you and your spouse are on good or bad terms, an experienced divorce attorney can assist with the separation of finances. In addition to an attorney, a financial analyst may offer additional insights concerning the divorce’s effect on your future financial health. If you and/or your spouse have a business, consider consulting a financial analyst along with your attorney to assist you in determining how to protect your business, savings, and lifestyle post-divorce.
Personal finance is difficult, and the stress of divorce, even if uncontested, can make it even harder. It can be easy to let emotions take over and affect your judgment. These six tips, along with an experienced attorney, can help you prepare for your next chapter post-divorce and protect your financial future.