5 Financial Steps Before Divorce
Finances: Trying to Get Out of Your Marriage? 5 Financial Steps to Help
If the time has come to file for a divorce, you may be thinking there’s no point in putting off the inevitable. Your marriage just isn’t going to work out, so it’s time to file for divorce, right? Not so fast, says Susan Carlisle, a Woodland Hills, California CPA. A divorce is a business deal that revolves strictly around numbers. Before you split from your spouse, you need to re-evaluate your financial situation in order to guarantee a successful financial future. Try to find an outlet for your emotions during this time so you can focus solely on establishing your assets, figuring out your finances and building your credit. Use these five tips from divorce experts to help guide you along your way to financial freedom.
Not so fast, says Susan Carlisle, a Woodland Hills, California CPA. The hard truth is, divorce is a business deal that revolves strictly around numbers. So, before you split from your spouse, you need to re-evaluate your financial situation in order to guarantee a successful financial future. This is not a time to be rash, no matter how ready you are to start over. Try to find an outlet for your emotions during this time so you can focus solely on establishing your assets, figuring out your finances, and building your credit.
Use these five tips from divorce experts to help guide you along your way to financial freedom.
1. Get a copy of your credit report.
You can obtain a free copy of your credit history from three major credit reporting agencies: Experian, TransUnion, and Equifax. The credit report will show you outstanding loan balances, mortgages and credit card debt that you and your spouse will split in due course. “This is also a good way to find out every account that is in your name — including any your spouse has never disclosed to you,” says Belinda Rachman, Esq. “There may be joint accounts you are not even aware of and balances that might surprise you,” she adds. Hopefully, by pulling your credit report you can ensure any disagreements are worked out before the divorce is final.
2. Open up credit cards in your name.
If you haven’t already done so, it is important to have a credit card and bank account in your name, said Rachman, and easier to do so before the divorce is over. Since you most likely share joint credit cards and bank accounts now, it should be simple to open some in just your name. However, once your divorce is official, applying for a credit card can become difficult, especially if you’ve never established credit in your own name. Also, be sure to take stock of any debt that has amassed while you were married. “Consider not only mortgage debt, but home equity loans, car payments and credit card debt,” advises Jody C. D’Agostini, a certified financial planner at AXA Advisors in Morristown, New Jersey. “That’s why it would be prudent to run a credit check. Even if you personally didn’t borrow the money, if it was taken out while you were married, it is considered to be marital debt, and you can be held liable. If your credit rating has been hurt, you need to start by securing credit in your own name.”
3. Asses your ability to retire.
If divorce comes while you are close to retirement, get acquainted with the Social Security Administration to make sure you get the retirement package you deserve. A 62-year-old person who was married for at least ten years and divorced for more than two may be eligible to collect benefits as a result of the Social Security record of their ex-spouse. “Also, ask someone in the human resources department at your place of employment for the current balances on your various retirement vehicles,” suggests Rachman. “Ask if they need a certain kind of order to divide them. Some plans need specific court orders; ask if they can email you a sample order,” she says. “Check your life insurance — especially your disability insurance, too. If you are the main breadwinner, your disability insurance should be brought up to date. It is far more likely that you will become disabled during your working years than die. Others are homeowner’s insurance and an umbrella policy. Make sure you shop the rates, as the premiums can vary greatly, but be most clear to get the amount of coverage that you need.”
4. Support yourself and your children with ample savings.
“You should have enough cash to sustain you and your children, if any, for six months,” advises Carlisle, who has handled about 250 divorces in the last eight years as a financial consultant. “If you haven’t been working outside the home, assess your abilities to support yourself. Plan a possible future career, and enroll in school. If you are working, and you are dissatisfied with your job, start actively pursuing alternatives,” she says. Legal fees, moving costs and other expenses must be paid on time, so having access to cash is imperative. Steer clear of obtaining extra joint debt by closing any joint accounts or credit cards. If your spouse doesn’t have any means of support, wait until they open a credit card in their name. Not doing so will only hurt the children involved.
5. Take note of all your possessions.
Carlisle suggests videotaping the contents of your house and anything you may have in a safe. Assets that you acquired before you got married (cars, money, real estate, etc.) are yours to keep when your divorce is final. However, anything that is put into a joint account — even if it was once yours — can be deemed joint property by a court. “As much as possible, you should make every attempt to fairly divide marital property without any drama or lawyers,” advises Rachman. “You’d be surprised how much more you get if you split it in two rather than splitting it in four with the lawyers,” she says. A bonus, albeit a unique one. If you’re a woman planning on dating and you’re husband had a vasectomy, you might want to visit the OB/GYN and brush up on current birth control methods. Why does this have to do with money?
Any child born into the marriage (in most states) is the child of the husband, no matter what,” notes AdryennAshley, author of Every Single Girl’s Guide To Her Future Husband’s Last Divorce. DNA won’t get you out of it. “So for guys getting out, don’t forget the condoms, or better yet, freeze some sperm for later if you need, and get fixed now, before you get stuck with 18 years of child support for another mans child,” she says. Also, if you’re considering marrying someone who has already been divorced, Ashley recommends a few key steps. “Make sure that your pension beneficiary is changed. I know a shocked second wife who found out too late that her hubby of 25 years never changed the form and his first wife got it all,” she says. That’s the kind of financial surprise that no divorced person needs.