3 Tips for Protecting Your Finances in a Divorce
Financial matters can complicate a divorce. Although it might be tempting to delay proceedings, it is important to act quickly once it becomes evident you and your spouse are headed for divorce. Failing to take action can result in an unfair division of assets and debts. Here are some financial steps you can take if you are divorcing.
Get Familiar with Your Marital Assets and Liabilities
Unless you have been solely responsible for handling the assets and debts in your relationship, there might be some aspects of your marital finances that are you not familiar with. Unfortunately, your lack of knowledge could be exploited by your spouse.
One of the first actions you should take is obtaining copies of all financial statements and records, including your and your spouse's retirement account statements. You also need to know what liabilities have been accumulated by both of you. Even if your spouse was the one who opened a credit account, you could also be responsible for it, so find out everything you can about it.
Consider the True Value of Marital Assets
During negotiations with your spouse, decisions have to be made regarding the division of assets. It is important that you understand that not all assets are created equal. For instance, a home valued at $125,000 is not the same value as a retirement account of the same amount. Over time, the retirement account will grow, and the value of the home could drop. The home will also require fees to keep it up and has an annual property-tax bill attached to it.
If you are unsure of the present and potential future value of an asset, work with your divorce lawyer and a financial planner. Both can help ensure that you do not under- or overestimate the value of an asset.
Remember Your Estate Planning
Estate planning is often forgotten in divorce proceedings, but it is an important element of ensuring that your finances are detangled from your spouse. If you fail to make any changes to your estate planning, your spouse could potentially end up still being the beneficiary of your estate.
Making changes to your estate planning includes updating your will, changing the beneficiary on your payable-on-death accounts, and selecting a new executor if your spouse was appointed to fill that position in your will. You also need to ensure that you have a new power of attorney created.
Consult with a divorce lawyer as early as possible in the process to find other ways to protect your finances.