This post may contain affiliate links. Read the full disclosure here.
Divorce isn’t how people getting married see things going. However, with the current divorce rate around 46%, nearly half of all unions end this way. The reason people get divorced can vary from person to person, and each relationship will have its own breaking point that leads to this conclusion.
Protecting yourself finally when anticipating a divorce is vital for both parties, whether you’re instigating it or not. Knowing that you have finances and ways to support yourself once you end your marriage can take a weight off your mind and help you move through the process easier.
So, how can you ensure financial preparedness in the event of a divorce? This post will explore some practical strategies to help you safeguard your financial interests during this challenging time.
Know The Figures
Empower yourself by knowing exactly how much money you have and what is solely yours. This knowledge will not only prepare you for the financial aspects of the divorce but also give you a sense of control over your future, making you feel more confident and in charge.
It’s crucial to view your finances comprehensively, as part of the couple, from your credit cards to your mortgage, income, savings, 401(K), and more. The clearer your financial picture, the easier it will be to identify what’s yours and what needs protection.
Don’t Hide Anything
At this point, it might seem like you should be squirreling away funds just for yourself, which no one else knows about, and this is a huge mistake. Always have a paper trail of your income and accounts and be open and honest about what you have and where you stand so things can be sorted evenly.
Separate Debts and Accounts
If divorce is inevitable, it’s crucial to start the process of separating your finances. This includes bank accounts, credit cards, joint debts, etc. Setting up accounts in your name alone ensures that your income or benefits are paid directly to you, providing a sense of security and protection from potential financial hostage situations where your spouse could use joint accounts to control or limit your access to funds.
File for Divorce
Once you’re confident this is the right decision, you must file for divorce immediately. This then goes on your file as the start of your new life, so everything after this date is classed as your own. This is important because if you don’t and you separate, any money you make, and debts accrued after you separate will be legally joined and considered in any division of assets down the line. Not filing for divorce can leave you financially vulnerable, as any income or debts accumulated after separation could be considered joint property in court.
Even if you file for divorce six months before proceedings start, anything you earn or that comes into your possession from the point of filing is yours and won’t be considered joint property in court.
Monitor Your Credit Activity
The last thing you want is for your credit or to be harmed during the divorce, so knowing your credit score and monitoring for signs of abuse if your spouse takes on more fat in your name without your permission can alert you to what is happening so you can put measures in place to stop this and remove any union. By being proactive and vigilant in monitoring your credit activity, you can take control of your financial situation during this challenging time.
Your credit report enables you to monitor your financial activity and report fraudulent activity before it does more damage.
Go Through Assets
In a divorce, assets are usually split down the middle. Typically, men believe they get everything, and women presume they won’t receive anything. However, this is wrong; all assets are split except for pre-marital or inheritances.
Know exactly what you own and what needs to be split and remove any emotion from the process to help you keep a clear head and defend what is rightfully yours.
Have An Emergency Fund
Everyone should have an emergency fund, but not everyone does. Starting one in the face of a divorce can be a cushion if things drag on or become more expensive than you anticipate.
Knowing you have them should you need them, specifically for legal bills, for example, or to cover expenses outside of what you expect to uncut, can help you move forward with your new life.
It is important to remember that you don’t hide this in the directory as it will only go against you, but having one is a good idea to protect yourself financially.
Hire Professionals
Even if the divorce is amicable, you need legal representation and the help of professionals who are skilled in working in these situations and can assist you. They will know exactly what the law requires during a divorce and what you’re entitled to so you don’t miss out on anything that you should get or are taken advantage of. This professional guidance can provide you with a sense of security and ensure you’re not navigating this challenging process alone.
Divorce professionals can be a lifesaver here, as can mediators if you need a third party to help you reach agreements. In the event of financial disputes, you might want to look into hiring a forensic accountant. A forensic accountant can go through your accounts and those of your soon-to-be former spouse to identify irregularities or hidden accounts, such as undisclosed assets, unreported income, or fraudulent transactions, providing you with a clear picture of your financial situation and ensuring a fair division of assets.
Don’t Relinquish Control
In some cases, divorce settlements can drag on for years, especially if there is a lot to lose for one or both parties. While it might seem tempting to sign over your home via a quitclaim deed, this might work against you and result in you not getting what you’re realistically owed.
Even if it feels like the end isn’t in sight, it’s worth holding on to what you own and persevering so you can come to a fair conclusion for everyone involved. The last thing you want is to end up worse off, so be prepared to fight for what is yours.
File Forms Correctly
It’s vital that you understand all of the forms you’re required to submit and that you fill them out correctly. Incorrectly filled-in forms can lead to the process taking longer than required, additional scrutiny of your finances, or a reduction of what you’re entitled to. Talk to your divorce attorney or divorce coach, who can help you understand the forms and what details you need to include so you don’t miss anything and make any costly errors. Filing forms correctly is crucial as it ensures that your financial situation is accurately represented, reducing the risk of disputes and delays in the divorce process.
Check Your Tax Obligations
Understanding your tax obligations as a newly single person can help you to make better financial decisions. If you relinquish one account for another or property for a retirement fund, for example, there will be different tax obligations for each decision you make. What might seem like a good idea on paper can result in you being worse off financially due to taxes, or you find that you can’t afford to keep a property due to taxes and need to make a different decision. The more you understand your tax status as divorced, the easier it will be to make decisions that benefit you.
Check Your Insurance Policies
It’s important to be looking at changing details on your insurance policies in the event of divorce. Those allowed to deal with your account on your behalf need to be evaluated.
Ex-spouses need to be removed from life insurance policies as beneficiaries, and names need to be removed from things like home or vehicle insurance to avoid any fraudulent claims being made in your name.
Review any benefits, payment details, and person on places to make sure you’ve accounted for your change in marital status.
Avoid Court Where Possible
Letting your divorce layers hash things out and go to war can be a costly endeavor. It can seem like this is the only way you can win what you are entitled to, but in the long run, the only people who will benefit from your divorce will be your legal representatives.
Where possible, do everything you can within reason to avoid taking things as far as court.
Mediation can be faster and much cheaper than court, allowing you to divide assets and dissolve the marriage more creatively than a judge. Mediators will work with you to come to a solution that works for you both per your needs and lifestyles.
However, a judge will examine the facts clinically and determine what is legally necessary to end conflict during divorce. Depending on the level of disputes involved, this process can take up to 18 months, if not longer.
Protecting yourself financially in the face of divorce is vital. These steps can enable you to put measures in place to support yourself and avoid being left destitute. Separate finances, don’t hide anything, be open and honest, and be prepared to fight for what you’re entitled to. Divorces can be long and messy, and you need to be able to fight for yourself and what you’re entitled to in the event of a marriage that has run its course.
*This article is based on personal suggestions and/or experiences and is for informational purposes only. This should not be used as professional advice. Please consult a professional where applicable.