When it comes to concerns about divorce, finances typically rank near the top of the list. Navigating the tricky waters of joint bank accounts, mutual assets, and division of property is never easy, and it often requires the help of a skilled divorce attorney. Here are five financial tips to keep in mind when going through the divorce process:
Copy your records ahead of time.
Accurate financial records become extremely important during divorce negotiations. Make copies of all your financial records before beginning the divorce process, including:
- Personal income tax returns (for the last 3 years)
- Business tax returns
- Business records
- Account statements from banks, investment firms, and pension offices
- Pay stubs
- Life insurance information
- Credit card statements
- Annuities
- Stock certificates
- Receipts for “big-ticket items”
If you and your soon-to-be-ex spouse have a contentious relationship, making copies of these documents ahead of time can prevent him or her from trying to hide certain assets or misrepresent your financial situation. Plus, obtaining copies of these records during the discovery process of your divorce is much more difficult, expensive, and time-consuming.
Check out credit applications.
Credit and mortgage applications from banks or creditors can come in handy during a divorce. If you filed a joint application, this document will contain a list of assets, liabilities, and income for both spouses, which can be a great source of asset discovery during the divorce process.
Divide your possessions as a team.
Family court judges do not take kindly to petty disputes in court over who should take small household items. Instead of dividing up your furniture, DVD collection, pots and pans, and other small items in court, try to divide property on your own (with the help of mediators and/or attorneys). Create a clear list of who gets what after the divorce and be as specific as possible in the final divorce papers to avoid any confusion or conflict later on. The more thorough you are at the start of the process, the less likely it is you will have to go to court to argue and/or amend part of the divorce agreement (which is costly and time-consuming).
Don’t forget the debt.
Just like property, any debt acquired by either spouse before the divorce is fair game during the divorce proceedings. If your spouse fails to pay the debt assigned to him or her after the divorce process, the creditor could come after you instead. Therefore, it is extremely important to get in writing who is responsible for what debt. In addition, marital debt can allow you to negotiate certain big ticket items; for example, one spouse may be awarded the house, but will also take on the majority of the shared debt.
Consider alternatives to court.
There are serious downsides to going to court for a divorce. Instead of negotiating the intimate details of the divorce with your spouse, you are leaving major life decisions up to a judge who is barely familiar with your situation. Going to court also requires setting a court date (or several court dates), which draws out the process quite a bit, and it can be extremely expensive to negotiate in the courtroom.
Instead of going straight to court, consider mediation, arbitration, or another form of dispute resolution instead. These options are much cheaper, and they typically result in a better outcome by allowing you to negotiate complex issues in a more friendly environment.
