Divorce can be expensive, and it can be challenging to estimate how much it will cost you presently and long term. Even amicable divorces can be financially challenging depending on how long you and your spouse were married and your assets, debts, and intertwined finances.
Whether you are financially well off or think you have nothing to lose, working with a divorce attorney who can help protect your interest can significantly improve your long-term financial situation and quality of life.
Divorce takes a toll on almost everyone emotionally, mentally, and financially. So it is essential to do what you can to mitigate the damage. We have compiled a list of steps you can take to help protect your finances during your divorce.
Top Steps To Protect Your Finances During A Divorce
Step #1. Determine How Much Money You And Your Spouse Have
Whether you think you have a little or a lot of wealth, you must have a clear and accurate picture of your finances. You can only protect the assets that you know about, and you may even have more assets than you realize. Find out what money you and your partner have, including any 401(k), savings plan, 529 accounts, credit card bills, mutual funds, cryptocurrencies, absolutely everything. Once you have a complete picture of your and your spouse’s liquid assets, you can begin to develop a plan for the financial aspects of your future and your divorce.
Step #2. Avoid Hiding Money
You may be tempted to hide money, especially if you and your spouse have a rocky relationship, but it is a big mistake. It can lead to a loss of credibility with the judge, increased legal fees, and tension in an already stressful situation.
Take any steps you need to protect your assets and income. Do it with integrity and out in the open.
Step #3. Create Separate Bank Accounts
Once you decide to file for divorce, it is an excellent time to establish your checking and savings account. While it may be challenging if your relationship with your spouse is complicated, do your best to begin separating your finances.
If you are concerned about telling your spouse you want separate accounts as you fear you may end up with no money, you may wish to withdraw half the money to move to an individual account. It is also essential to immediately notify your soon-to-be ex-spouse about what you did for transparency purposes and take action to close all joint accounts as soon as possible.
While one spouse may abruptly withdraw all of the money in the account, the judge will not view it favorably unless there is an excellent reason.
Step #4. Start An Emergency Fund
Your new savings account can double as your emergency fund for now, or you can open an account specifically for this purpose. An emergency fund is a great idea even if you are married and ideally should have enough to sustain you for three months.
Step #5. Hire A Divorce Attorney
During a divorce, emotions will often run high, and hiring a divorce attorney to help navigate the complexities of family court, help to protect your rights, and watch out for your best interest is critical. If you fear you will end up with nothing, the law is there to help and protect you.
For example, your lawyer can free any accounts at risk or free up funds for your living and legal expenses. If your ex-spouse empties a joint bank account, spends money on gifts or travel for a third party, transfers money, or takes on debt. In that case, your attorney can bring attention to it during the settlement if it can be proved the actions were taken in anticipation of the divorce.
Step #6. Hire A Forensic Accountant
Not everyone needs or can afford a team of high-level professionals during a divorce, but if you have a high net worth and think your spouse is hiding money from you, consider hiring a forensic accountant.
A forensic accountant will reconstruct your income and asset picture based on your expenses and lifestyle. When assets are kept in a domestic asset trust or offshore, they can be difficult to access even if they are considered mutual. Hiring an attorney with experience in asset trust can be beneficial; however, even then, you may not be successful.
Step #7. Hire Professionals To Ensure Paperwork Is Filled Out And Filed Correctly
Hiring an experienced divorce attorney will ensure that all necessary paperwork is completed accurately. If you and your spouse are splitting a retirement or pension plan, your lawyer will likely need to file a QDRO (qualified domestic relations order). If you choose to navigate your divorce on your own and fail to file the proper paperwork, you will not be able to receive your share even if you are entitled to it under the terms of your divorce.
Step #8. Require Insurance For Your Ex-Spouse If You Are Relying On Support
If your ex-spouse is paying child support or alimony, they need to carry life and disability insurance just in case of injury or death to mitigate further financial hardship.
Step #9. Consider Insurance For Yourself And Update Existing Policies
you may want to add life insurance for yourself if you don’t already have it. If you do, update the beneficiaries to someone else, like a sibling, your children, or parents.
Step #10. Monitor Your Credit
Make sure you check your credit school regularly and ensure creditors are aware of your upcoming divorce.
Step #11. Keep Possible Taxes In Mind
Make sure assets that carry significant taxes are split fairly. For example, money in a checking account will be taxed differently than money in a 401(k).
Step #12. Remember To Include Extracurricular Activities In Child Support
If your children play sports, go to camp, dance, etc., these fees can add up fast and need to be included in child support payments to avoid returning to court or renegotiating child support later.
Hire An Experienced Divorce Attorney To Protect Your Rights
At Azemika & Azemika, we understand the needs of those going through a divorce in California. Our skilled expert attorneys specialize in family law, divorce law, division of property, adoptions, child support, and custody in Bakersfield, California. Contact us today to get the support you need, and let us help protect your rights.