8 Easy Ways to Protect Your Money In a Divorce
Everyone knows divorces are difficult. They take a mental and emotional toll on everyone involved. While it’s important to take care of your mental health in such trying times, it’s equally important to ensure you maintain your financial health. In my career, I’ve counselled many individuals through the sometimes confusing process of separating their wealth from their partner upon separation. Some of the steps involved in securing your finances are quite simple: you just need to remember to get them done.
To help you manage your finances after separating, I’ve compiled this list of 15 simple steps to get your finances in order following a divorce.
Set up your Personal Bank Account and Cards
This may seem overly simple, but it’s important to take care of these basic things in a timely and organized manner to avoid headaches down the road. Make sure you have a personal bank account, credit cards, and even points or loyalty rewards cards in your own name. It’s a straightforward, simple first step in separating your finances from your partner’s.
Know What’s Yours to Keep
Not every financial asset is up for grabs in a divorce. Assets you owned prior to the marriage may not be negotiable for settlement. For instance, if you owned a family vacation property, or any family heirlooms such as jewelry, furniture, or even firearms or clothing, those items may not be included in a settlement except in the most extreme and unlikely situations. While I can’t give legal counsel, I recommend you speak to your lawyer if you have any doubt about what assets you have that may be yours to keep.
Prepare For the Cost of Divorce
Not every divorce needs to be arduous and expensive, but the fact remains that divorce is a major realignment of your financial situation. Be sure you’ve saved sufficiently and can cover expenses such as legal fees, rent, and moving that you may need during and after divorce proceedings. Even after the divorce is finalized, you may find your financial situation a little rocky. Plan to weather the storm for first two years following a divorce before a return to normal.
Cancel any Joint Accounts
Given the previous piece of advice, this may seem extra obvious. It can be easy to forget the little things, though. Try making a list of every joint account, whether it’s a formal joint bank account, or just a shared PIN or password for other accounts. Where appropriate, change your PINs and passwords, and make sure any formally joined accounts are separated or closed.
Make Sure Your Separation Agreement Covers All Debts and Responsibilities
Divorce isn’t all about separating assets. Sometimes, marriages include complex and substantial debts and financial obligations. Make sure any agreement that you come to with your ex considers how your collective and individual debt will be divided. In some instances, you may want to assume more debt in exchange for retaining more assets.
Reconsider Your Life Insurance
So you’ve separated your assets as much as possible, closed your joint accounts and signed off on a separation agreement. You might be surprised to hear that your life insurance policy might be worth keeping in place. Despite the fact you’re separated, your former spouse still has a stake in your life and the lives of your loved ones. If you have children together, it’s likely they will be their caretakers should you die. Wouldn’t you want to make sure your life insurance can still benefit them as best as possible?
Don’t Hide Anything
A divorce is a legal matter. Settlements are binding contracts, and you do not want to end up in breach of one. Whatever advantage you feel you may gain by hiding assets or gaming the system is not greater than the losses incurred if any of your non-disclosures are found out. Protect yourself by obeying the letter of the law.
Talk to an Advisor
There’s no replacement for legal counsel, and I’m not a lawyer. I am, however, a financial advisor and expert on personal finance. While a lawyer helps you understand and decide on the details of your settlement, financial advisors can recommend the best ways to divide your assets to minimize your risk and financial while maximizing future opportunities. Working during a divorce can protect you from undue financial loss.