Protecting your Assets During a Divorce
Getting divorced will impact your finances in numerous ways. Whenever you go from supporting one household to two on the same overall income, you can expect to have some financial challenges. The situation can be mitigated, however, if you are proactive and take steps ahead of time to protect your assets.
Here are several helpful tips for protecting your assets during a divorce:
Understand your Entire Financial Picture
What you do not know about your marital assets cannot be factored into a fair and equitable distribution of property. Make it a top priority to find out as much as you can about the household finances, especially if you are not the one who normally handles them. Log into every account you know of and have access to and obtain the details of each. Look for any paper statements that are kept in files and obtain copies of credit reports for both you and your spouse.
If you suspect that your spouse is hiding assets, a forensic accountant may be able to help uncover them. This is sometimes necessary with couples who have a high net worth and/or a more complicated financial picture. Your attorney will be able to provide additional guidance on how to deal with this issue if it applies to you.
Know what Everything is Worth
You should not only have a good understanding of everything you have, you should also know what it is all worth. It is fairly easy to understand the value of a bank account or IRA/401(k) by looking at the statement, but it is a little more challenging to determine what a piece of real estate is worth, or a small business, a piece of expensive jewelry, a rare painting, or some other unique asset. In many cases, professional appraisals will be needed to obtain an accurate valuation of your marital estate.
Close Down your Joint Accounts
Having joint accounts that link you to your spouse could become a serious financial liability. If you have joint credit accounts, they should either be paid off and closed down or transferred into one of your names only. Otherwise, your spouse could run up a high credit balance, which is even more of a risk if he/she is a spendthrift and/or prone to acts of vengeance. Joint bank accounts should also be closed or transferred to one party, and you should open a personal bank account which your spouse cannot access. Again, leaving a joint bank account can put you at risk that your spouse could drain it completely before you have an opportunity to withdraw what belongs to you.
Obtain a Separate Mailing Address
In addition to separating your accounts, it would be a good idea to receive your mail somewhere other than the marital home. The last thing you want is for your spouse to be snooping through your private mail when you are about to start living separate lives, so find a new place to send your mail. You could rent a PO Box or use a private mailbox service, or you could have your mail forwarded to the home of a family member or close friend.
Protect your Valuable Property
If you have valuables that you believe your spouse might try to take, find a safe place to store them while the divorce process is ongoing. If these items belong to both of you and are part of the marital estate, do not hide the fact that you have possession of them, or you could be accused of trying to hide them yourself. Keep a detailed record of the items you have and their value so all of this can be included with the distribution of property. If you are moving out of the marital home and your spouse is staying in it, before you leave take a photographic inventory of all the major personal property and furnishings throughout the home. This will make it easier to account for later, and could assist a personal property appraiser, if you end up hiring one, to be sure all property is appraised in the event some goes missing after separation.
Understand and/or Get Help with Tax Issues
Getting divorced will most likely cause some tax issues. For example, your filing status will change, and there is a good chance you will end up in a different tax bracket. Certain actions could trigger tax consequences as well, such as selling a piece of real estate. Be sure to consult with a tax professional so you fully understand how your financial decisions will affect your taxes.
Know What you Want
The division of your marital assets is going to be a negotiation, which means each side will need to be willing to compromise and give up some things in order to reach a settlement. But still, it is far less mentally and emotionally taxing to do it this way than to battle it out in court. Going into the negotiation, it is very helpful to let your attorney know what is most important to you.
This is true not only from the standpoint of which assets you want to keep, but also for other issues that must be resolved, such as the parenting plan, visitation schedules, etc. if you have minor children. When your attorney knows what you value the most, they can better represent you and secure the most favorable outcome possible from the divorce proceeding.
Get Experienced Legal Help Early On
If you are facing a divorce, it is best to retain skilled legal counsel as early as possible in the process. Having an experienced attorney by your side from the outset will help ensure that you are taking all of the right steps (during each phase of the process) to protect your assets and blaze a smoother trail toward the post-divorce new life you are looking forward to.