Steps to Take Before You File
If you plan to file for divorce and have time to prepare, taking the following steps can help to set you up to avoid financial problems.
1. Meet With a Financial Adviser
Meeting with a financial adviser before you file for divorce is a good way for you to learn how getting divorced will impact your finances and your post-divorce budget. Choose a financial adviser who is not someone you have met with your spouse before. Your adviser should instead be someone new who will be focused on helping your financial health without potential conflicts. A financial adviser can review your debts and income and help you understand where you might need to make cuts in your budget. They can also help you create a post-divorce budget that can help to protect your financial interests and your ability to retire on time.
2. Open a Bank Account in Your Name
Opening a bank account in your name only is important when you plan to divorce your spouse. Change your direct-deposit instructions with your employer to route your paychecks to your new account instead of your joint account. This can help to prevent your spouse from withdrawing all of the money in your joint account upon learning about your divorce and leaving you without anything to live on. Save small amounts of money in your new account to build up an emergency fund.
3. Close Joint Credit Cards
If you have joint credit cards with your spouse, close the accounts if possible. You should contact the creditors and ask about removing your name from the cards or canceling your spouse's status as an authorized user of your credit card. If you can't close your credit card accounts, try to pay them off in full. This can make the process of dividing your debts much smoother during your divorce and prevent your spouse from running up debt in your name. You should also consider opening a credit card in your name only to begin building credit.
4. Gather Your Financial Documents
While your spouse will be required to provide copies of financial documents to you after you file for divorce, it's much easier to get copies if you gather them before you file. Make copies of the following documents and store them in a safe place outside of your house:
- Two to three years of income tax returns
- Credit reports to identify all debts
- W-2s for both you and your spouse
- 1099s if self-employed
- Most recent account statements for all credit cards and loans held by you or your spouse
- Deeds and titles
- Most recent retirement account statements
- Most recent investment account statements
- Inventory of all property owned by you and your spouse
- Mortgage loan statements
5. Obtain Training or Education if Needed
If you've been out of the workforce and have enough time, consider obtaining education or training that will help you build the skills needed to get a job to support yourself.
6. Consider Whether Wating to File Might be a Good Idea
If you and your spouse have been married for less than 10 years, and you are nearing retirement age, it might make financial sense to wait to file until you have been married for at least 10 years. If your spouse has had a much higher income than you, waiting to file until after you have been married for 10 years can help you qualify for Social Security retirement benefits based on your former spouse's income instead of your own.
You will be eligible for spousal benefits if the following criteria apply:
- You are 62 or older
- You were married for 10 or more years
- You never remarried
- You and your spouse are entitled to Social Security retirement benefits
- Your potential benefits are less than what your spouse would receive
- Your divorce occurred at least two years before you file for spousal retirement benefits
Steps to Take During a Divorce to Protect Your Financial Interests
After you have filed for divorce, the following steps can help to protect your finances.
1. Think Logically Instead of Emotionally
When you are going through a divorce, it's easy to get caught up in emotional conflict. However, taking a step back and viewing your case objectively can help to prevent critical errors. Think about what a fair division of assets and debts would look like. Keep your long-term plan in mind instead of focusing on short-term needs or trying to get revenge on your spouse. Remaining logical and objective during your divorce might also help you reach a full settlement agreement with your spouse, which can be a much more affordable way to resolve the issues in your case than engaging in bitter, protracted litigation in court.
2. Consider Downsizing Your Lifestyle
For most people, getting divorced means going from two incomes to one. Your income after divorce might not be sufficient to afford the payments, property taxes, and upkeep of your family home. While it might be difficult to decide to move from your home, it might be the best option. You and your spouse can agree to sell the home and split the equity, allowing both of you to purchase new homes that are more appropriate for your respective incomes and budgets.
3. Think About Asking For the Court to Order Your Spouse to Carry Life Insurance
If your spouse will be paying you alimony and child support following your divorce, you should think about asking the court to order your spouse to carry life insurance naming you as the beneficiary. This can protect you if your spouse subsequently dies.
4. Hire a Forensic Accountant if You Believe Your Spouse is Hiding Assets
If you think your spouse might be hiding assets to prevent you from getting them in your divorce, you should consider hiring a forensic accountant. This type of professional works to uncover hidden assets to ensure you get what you are entitled to receive in your divorce.
Steps to Take After Your Divorce
Taking the following steps after your divorce can place you on sound financial footing.
1. Change Your Beneficiaries and Will
Once your divorce is final, contact your retirement plan administrator and life insurance company to change your beneficiary. You should also review your will and modify it to prevent unintended consequences if you pass away. You likely don't want your ex-spouse to receive the proceeds of your retirement account, life insurance policy, and estate if you unexpectedly pass away.
2. Create and Follow a Good Budget
Getting divorced means that you will have a fresh start on your life as a newly single person. Review your budget and make adjustments to reflect your new financial reality and avoid going into debt. Make sure to set aside money each money to save toward your retirement. If your retirement savings took a hit in your divorce, you might consider getting a second job or performing some gig work to accelerate your retirement savings.
3. Get Health Insurance for You and Your Children
If you had health insurance through your former spouse's employer-provided plan, you'll need to get health insurance for yourself. If your spouse wasn't ordered to provide insurance for your children, you'll also need to add them to your new health insurance policy.
Talk to an Experienced Divorce Lawyer in New Jersey
Engaging in financial planning before, during, and after your divorce might help you avoid mistakes that could harm your financial future. An experienced divorce lawyer in New Jersey at the Ziegler Law Group can work with your financial adviser and you to protect your financial interests in divorce. To learn more, contact us today to schedule a consultation by calling 973-878-4373.
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