There are several legal complications associated with getting divorced and those involving personal finances can cause a great deal of stress between divorcing spouses. By planning ahead, however, you can avoid losing certain assets, including your retirement.
USA Today offers several ways you can safeguard your assets in the event of a divorce.
Post-divorce budget
Knowing what your monthly expenses will look like after a divorce is a good way to know what to expect. According to Lili Vasileff, author of Money and Divorce: The Essential Road Map to Mastering Financial Decisions, your post-divorce expenses may include:
- Payments on a new car
- Monthly rent for a new apartment
- New health insurance policy
- Other insurance, such as auto, renters, or homeowners
- Cost of groceries and fuel
This list should only serve as an essential starting point. You may then move on to other expenses, such as retirement or college savings for your children. In addition, getting divorced is a major life event. That's why it's best to consider the costs ahead of time. You may have to pay for legal fees, hire an attorney, hire a mediator, and consult with a financial planner.
Dividing marital assets and property
Here is where things get complicated. You must first take your liquid assets into consideration. These are assets that can easily be converted to cash. In addition, tax implications may apply to assets that are divided and may include funds in certain retirement or investment accounts.
You should also compile your pre-marital assets, such as valuable possessions. These will likely stay in your possession after finalizing a divorce. Determining who keeps mutually-owned property may depend on who was responsible for paying for or caring for it.
Handling debt and mortgage
If you and your spouse share mutual debt, it's best to pay it off prior to finalizing a divorce. That's because if your spouse decides not to make payments after the divorce, the responsibility will still fall on you in the eyes of creditors. This can also hurt your credit history.
If you have joint credit card accounts, it's important to close them out prior to divorce so no future charges can be made.
It's important that whoever gets the house refinances so that he or she is responsible for paying the mortgage. Both spouses names should only remain on the title if one spouse doesn't qualify to refinance the mortgage or afford to buy out the other spouse's share of the home.
Covering costs for your children
It's very important to take your children's basic needs into account. This includes food, clothing, education, extracurricular activities, and other living expenses. If your kids are about to graduate high school, divorcing spouses should determine who will cover college costs.
Updating documents
Once you have finalized a divorce, your financial documents and accounts need to be updated to reflect those changes. This includes:
- Changing titles on cars and houses to show who owns them
- Updating your will, power of attorney and health care directive
- Removing your ex-spouse as an authorized user on your credit card accounts
- Opening new banking or investment accounts only in your name
- Changing your passwords on all online accounts
- Changing beneficiaries on retirement accounts and life insurance
Consulting with an attorney
If you and your spouse are planning on getting divorced, consulting with an experienced family lawyer can save you a heap of legal and financial troubles.
Indianapolis divorce lawyer Rachel A. East can work with you every step of the way and help you navigate this complex legal process. To learn more, contact Hocker & Associates LLC online and set up your free initial consultation.