Eacol Money and Finance

The writing is on the wall: your marriage is ending and the fallout of your once-blissful relationship will leave some painful and visible scars. Divorce is inevitable, and if you think the process is going to get nasty, it`s time to prepare for the worst and get your finances in order to mitigate any collateral (literally) damage. Here are some tips to financially prepare for a divorce and make sure you survive without any permanent monetary scars.

Get an attorney
It might cost you a couple of thousand dollars for a retainer, but hire an attorney as soon as you can when you are trying to financially prepare for a divorce. You do not necessarily have to strike first and serve papers, but you want some assistance in beginning correspondence with your future ex-spouse and some help putting things in writing. For instance, your joint credit card or home equity line: As long as you are married and both names are on the account, the liabilities of those credit lines are split 50/50. The creditor could care less if your ex spent $5,000 on her girls` shopping trip to spite you or get you steamed -- you are responsible for half of it. However, if you have a documented, certified communication to your ex from your attorney, in a nasty settlement proceeding the judge may award you damages in your favor. It may not directly get you off the hook from the creditor, but it can’t hurt. At the very least, your attorney can help advise you on the entire situation -- he or she has likely seen every imaginable divorce situation.

Get financially up to date
You may hate talking to your spouse about anything, much less something as sensitive as finances, but now more than ever, you need to be fully aware of the complete financial situation at hand. You need to understand all of your outstanding debts -- not just what the two of you have jointly, but also individually. With the assistance of your attorney, ask for a full disclosure of all financial records and accounts. You want to understand the full picture as it pertains to credit card accounts, home equity lines and even other items such as past IRS taxes, student loans, business debts, and department store charge cards to avoid any unforeseen surprises. You should also be prepared to disclose your full financial position.

Get your own accounts
Once it is certain that divorce is inevitable, you should immediately begin establishing your own accounts that are only in your name to financially prepare yourself. This includes checking, credit cards, savings, retirement, and even things like car insurance. You should start routing all of your deposits and paychecks through this account. Any asset account with both of your names on will potentially be split 50/50, and you may not be so fond of your spouse using your money to pay off her credit cards and attorney fees.

Sort out mortgage/rent payments
If you`ve purchased a home together or are both on the lease of your current domicile, you need to take this issue under strong consideration when you financially prepare for a divorce. The creditors expect the payments to be made regardless of your personal situation. You may want to move out as soon as you see this relationship is toast, but doing so may hurt your claim to the home and, again, you are still responsible for at least 50% of the mortgage payments. In some cases, the two spouses can come to an arrangement about who keeps the house and what concessions are to be made. However, more often than not, a sale of the home can be mandated by the judge to make the settlement process simpler and cleaner.
You do not want to be in a worst-case scenario where your spouse is living in your old home and you are still paying the bills. If you are the primary breadwinner, you should continue to make mortgage payments and enlist your attorney to keep records of these -- you will not want late payments or foreclosure to show up on your credit score (which will be very important in your newfound single life). Divorce proceedings can take months, and if you`ve been 100% footing the mortgage during that time, you can take the position that the settlement agreement reflects your contributions to the mortgage.

Changes to the will
If you have a will, this should immediately be discussed and adjusted based on the divorce settlement agreement when you financially prepare for a divorce. It may not happen for many years, but imagine how you would be rolling over in your grave if your estate were passed to your ex-wife 40 years from now. You should have your attorney consider things about who would be the executor of the estate or, if you have children, how children from your current marriage may be treated when compared to possible children or stepchildren from a future marriage. There are often horror stories of the children from the first marriage being left with nothing as the second wife takes control and passes on the goods to her children. Divorce is best when it is a clean break from a legal perspective. So, to financially prepare for a divorce, reviewing your estate plan, no matter how small, will help to avoid any gray areas down the road -- some that may take years to surface.

Child support
If you have children, child support will be an absolute issue when you financially prepare for a divorce. Child support rules are established by each state, but there are no formal rules. Basically, the state expects the parents to be able to come to an agreement that is equitable to the children and that does not affect their accustomed standard of living. That may not be reality, but the state will always put the children first. The state publishes guidelines based on your combined incomes and how many children you have, so that would be a starting place to review what is actually real when you financially prepare for a divorce. If you won`t have primary custody of the children, accept that you will be paying some form of child support. How much you pay is up to you and your spouse, and your financial situation as it pertains to the children. If you and your spouse cannot find a common ground, you will be at the mercy of the court to make a recommendation based on the information presented by your attorneys.

Divorce Dos and Don`ts
In a rocky relationship, divorce may seem like the quick and easy answer to personal liberation and an opportunity to start again. It may very well be just that and it can be, but if you don`t come to terms with the financial picture from the onset of divorce proceedings quickly, you may find yourself in a world of financial hurt for many months -- or even years -- to come. When it comes to financial planning and divorce, maintain your composure, get your records together and consider enlisting the help of qualified professionals. A definitive agreement now will save both you and your spouse a lot of financial and emotional pain down the road, and will make it infinitely easier to establish your own life and even to get involved with someone else later on.

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