10 Financial Steps to Consider Pre-Divorce
Thinking about divorce? Taking some financial steps before filing for divorce can help protect your financial interests and lay the groundwork for a successful financial transition into post-divorce life.
1. Take Inventory: Take stock of the current financial situation, including all income, monthly expenses, assets, and debts of both partners. Sometime one party is in the dark about finances. If that person is you, do some investigation at home to see what you can find.
2. Get Organized: Collect and make copies of all financial documents such as bank statements, tax returns, investment account statements, retirement account statements, mortgage documents, 529s and any other records that reflect your assets, savings, debts, and income.
3. Protect Your Credit: Order a copy of your credit report. Everyone can get a free monthly credit report at https://annualcreditreport.com/. Close joint accounts if possible, to prevent your spouse from incurring debt in your name. Consider freezing joint credit accounts to prevent new charges.
10 Financial Steps to Consider Pre-Divorce
Setting up for a successful financial future post divorce
4. Establish Credit: Having a credit card in your own name is important for your financial independence post-divorce.
5. Hit the Pause Button: Do not make any major financial commitments during this time such as buying or renovating a home, or enrolling the kids in private school.
6. Monitor Spending: Begin to track all money coming in and going out. This will help you understand your financial needs and also make sure any marital funds spent by your spouse is considered during the divorce process.
7. Draft a Budget: Draft a budget to manage expenses during and after the divorce process. Consider how the division of assets and potential spousal or child support payments may impact the budget. Remember that the budget will have to stretch across two separate households, and that will add complexity.
8. Update beneficiaries of your accounts: Beyond your will, you likely have accounts that name your spouse as a beneficiary such as your 401(k), life insurance policy, or brokerage accounts. You should change the beneficiary designation on these accounts as soon as possible. If the divorce is not finalized yet, then some of these changes may require your spouse’s written permission. If that is the case, you may want to consult your legal team before moving forward.
9. Understand Your Rights and Obligations: Talk with an attorney to educate yourself about your rights and obligations under divorce law in Massachusetts. An attorney will help you understand how property division, spousal support, and child support are determined and give you examples of what you can expect your financials to look like post-divorce.
10. Seek Professional Advice: Depending on how complicated the finances are, it may be prudent to consult with advisors. A financial advisor can provide guidance on asset division, tax implications, and long-term financial planning, while an attorney can advocate for your legal rights and ensure that your financial best interests in settlement.
Having the support of professionals during this major life transition will save you financially in the long run.