Financially Planning Your Divorce
When you start the divorce process, you will probably think about hiring a lawyer, but carefully planning your finances will help you maintain stability during what can be an especially difficult time. You’ll be taking on a multitude of new expenses while navigating financial agreements with your ex-partner. To prepare for this time, you need to take stock of what you have and what you need.
Get Copies of Every Financial Document
Before you can begin to nail out a financial agreement, you need to collect copies of everything related to finances from receipts to investments. Make readable copies of:
- Wills
- Trusts
- Deeds
- Debt information
- 401K and retirement documents
- Insurance policies
- Loan documents
- Tax returns
If you aren’t sure you need it, make a copy just in case. In a divorce, these is no such thing as too much documentation.
Inventory All Assets and Property
Grab a pen and a pad of paper. Start making a list of everything that is community property as well as anything you owned before your marriage. If you have a safety deposit box, be sure to inventory everything inside. Even if you know you don’t want a house or asset, write it in your inventory anyway. Regardless, mutual assets will be a key part of any financial agreements and negotiations during the divorce process.
What Are the Tax Consequences?
It’s understandable to want to settle your divorce agreements quickly and with minimal hassle to both parties. However, give due thought to the tax consequences of your financial actions. Every situation varies, but don’t forget you will still have to negotiate the tax laws regarding any change in finances. For example, do you want to take alimony in a monthly allotment or lump sum? The money will be subject to taxes regardless, but one path may lead to more money than the other.
Think About the Long and Short Term
What do you need to survive in the long term? Do your best to take emotion out of the equation and focus on what will benefit you most for years to come. Additionally, don’t forget about the present. Create a budget that factors in your new living expenses and legal fees. Next, plan a budget for the future and figure out how your financial agreements will factor into that budget.
During a divorce, you have plenty on your mind, but you cannot neglect your finances. Follow these steps to ensure you are prepared for whatever may come next.