It is no secret that divorce is a complex affair. Both financially and emotionally, divorce forces couples to transition to a new lifestyle, housing and financial goals. During such draining times, separating emotions from important financial decisions can be overwhelming, but protecting your financial assets should always be a priority.
If you are drafting divorce negotiations, you must educate yourself about all your financial options to avoid missing anything and ensure you get the best possible settlement.
Financial Planning Tips for Divorcees
If you are not sure where to start your financial planning to protect your assets, the following tips can help you prepare:
Learn How Much Money You Own
You may possess more assets than you realize, and you can’t protect what you don’t know is there. “In a high-net-worth divorce, it is crucial to make sure that all property interests are disclosed,” note high net-worth divorce attorneys at Fernandez & Karney, “Whenever a divorce is filed, there must be a listing of all property and debts.”
Find out the balance of your 401k, credit card bills, savings plan, 529 accounts, and everything in between. When you know the sum of your assets, you can start creating an estimate of what you own and what could potentially be your financial future during the divorce.
Don’t Hide Anything
Concealing your assets may be tempting, especially if you don’t trust your spouse, but it is never a good idea.
Hiding money in the event of a divorce is a dangerous decision and may lead to legal penalties and loss of credibility in divorce proceedings. You should take the appropriate steps to safeguard your assets; just do it openly.
Separate your Finances Sooner
When anticipating a divorce, separate your finances as early as possible. Get a separate bank account and keep a written record of everything you spend your money on. Detailed record-keeping will be vital should you end up in a marital court; it will also serve as a starting point for creating a budget following a divorce.
Draft a Prenuptial Agreement
A prenuptial agreement or marriage contract is an agreement between two people highlighting how their assets and liabilities will be split in case of a divorce. Prenups can effectively safeguard your assets in a divorce since they provide a binding and clear contract between the parties.
If you are entering a second marriage or have substantial assets, it is best to consider contacting an experienced lawyer to draft a prenuptial agreement. Remember that marriage is a business contract with financial perks and legal aspects, such as inheritance rights. It may not be the conversation you want to have, but it is one that you will benefit from the most.
Reviews your Assets and Taxes
People going through a divorce generally overlook assets and taxes. An “equal” pre-tax split can lead to an uneven distribution of assets upon applying the tax liability. The person with a lower income should also factor account assets that generate income rather than growth alone.
Hire a Professional
It is crucial to seek expert advice when doing financial planning for an upcoming divorce. An experienced divorce attorney and financial planner can help you understand the divorce’s impact on your assets, offer legal advice and represent you in court.
Know When to Settle and Move Ahead
We want to fight for our rights until the end, but often, there is winning in a settlement – you can minimize stress and save on hefty legal fees. Fight for what’s yours, but be ready to let go and move on if necessary. Connecting with an experienced divorce attorney and financial planner can help assess what is worth fighting for and what can be considered a good outcome.
Meg is an author at Cinnamon Hollow. She writes on a variety of topics sharing tips and ideas for daily life.