How to Protect Your Finances During Divorce

This is a continuation of the article last week on division of property and debt during divorce. The article last week discussed the laws and how division of property and debt is determined. This week, we concentrate on steps you can take to protect yourself financially during divorce.

Divorce is an emotionally charged process. However, in order to survive and be successful post divorce, it is important to keep focused and calm. You can protect yourself by knowing:

  • what assets you have, 

  • what you want to keep, and 

  • what you are willing to give up or compromise.

Here are the general things you can do to protect yourself during the divorce:

    -    Know what you have and keep records (and copies). These will serve as proof of separate property, income and inheritance or family gifts. Some examples of these documents are wills, tax returns, loan applications, financial statements, credit card statements, car registrations or insurance policies. 

    -    Document valuables that you may have around the house such as artwork, jewelry, cars, antiques, etc. Take note of valuables that you brought into the marriage. Take photos, if you must. This is especially helpful for difficult divorces when one spouse might try to hide assets.

    -    Keep your half in mind. Half of what you acquired in marriage is yours. This holds true for property that was acquired during the marriage but perhaps for tax purposes or some other reason was put under the name of just one spouse. 

    -    Be practical.  Though you may want to hold on to the family house for sentimental reasons or for a sense of continuity for the children, consider the cost it will take to keep it. If it is not viable and high property taxes or maintenance costs can cause a big problem with your finances, then by all means, sell it. 

Other things to consider to protect yourself:

    -    Beneficiaries. Update the beneficiaries that you have listed on your investment accounts, insurance policies and bank accounts. If your spouse is a beneficiary, you would definitely be wise to change this.

   -    Credit Card Debt. Though credit card debt acquired during the marriage will be split, it is best to close all joint accounts or if not possible, have your name removed from the accounts. This way, you will not be partially responsible for any future charges that may be added on to the accounts.

   -    Mortgage Debt. As mentioned above, consider the practicality of retaining the home. In some cases, the most practical thing to do is to sell the house and split the earnings. However, if you do decide to keep the house and you are the one who retains ownership, have the home refinanced and update the title to reflect that you are the sole owner.

If the arrangements are opposite, have your name removed from the title and stipulate in the divorce settlement that the home be refinanced in your ex-spouse’s name. This can protect you down the line if it ever happens that your ex-spouse decides to default on mortgage payments.

    -    Other Debts. You will not be able to do anything about the debts incurred during the marriage, prior to the divorce. These are split in half. 

However, it is important to make sure that while the divorce proceedings are in process, you do not run up more debt. Also, ensure that you keep up with the payments in order to keep your credit record clean. Use joint assets to make payment and if you must use personal assets to pay off a joint debt, keep a record. This will be taken into account by courts and give you credit for your efforts.  

The process of dividing assets and debts during divorce can get confusing and complicated. It is important during this trying time that you stay focused. The decisions that you make during this crucial period will impact your future. 

Having a good divorce financial planner helping you and your lawyer can help you gain financial empowerment during the divorce and can also help you plan for the future. We at Kimberly Surber Divorce Planning will be your partner throughout. 

Tags: community debt, community property. joint property, debt division, property division, debt responsibility, financial responsibility, divorce property division, divorce debt, credit card debt, mortgage debt

Filed Under: Divorce Tips

This information is not intended to be a substitute for seeking legal advice from an attorney. For legal or tax advice please seek the services of a qualified attorney and/or qualified tax professional.

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Kimberly Surber is a Certified Financial Planner®  and a Certified Divorce Financial Analyst®; however such registration does not imply a certain level of skill or training and no inference to the contrary should be made. Information presented is for informational purposes only, does not intend to make an offer or solicitation for the sale or purchase of any securities, and should not be considered investment advice.  Kimberly Surber has not taken into account the investment objectives, financial situation or particular needs of any individual investor. There is a risk of loss from an investment in securities, including the risk of loss of principal. Different types of investments involve varying degrees of risk, and there can be no assurance that any specific investment will be profitable or suitable for a particular investor's financial situation or risk tolerance. Asset allocation and portfolio diversification cannot assure or guarantee better performance and cannot eliminate the risk of investment losses. Be sure to first consult with a qualified financial advisor and/or tax professional before implementing any strategy discussed here. Past performance is not indicative of future results. Investments involve risk, including loss of principal and unless otherwise stated, are not guaranteed. Information provided reflects Kimberly Surber's views as of certain time periods, such views are subject to change at any point without notice. For a copy of our Privacy Policy, see below.

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