Marriage is an economic partnership and divorce involves the untangling of the partnership. Besides custody and parenting issues, most aspects of a divorce relate to financial issues. Understanding your financial circumstances is critical to being prepared for a divorce.
There are important steps you can take to prepare your finances for a possible divorce.
Track Your Expenses
If divorce seems imminent, it’s a good idea to track your monthly expenses. Almost every divorce involves filling out a Statement of Net Worth which includes a schedule of your monthly expenses. Most people do not keep close track of how much they spend on everyday items or how much they spend on vacation or clothing expenses throughout the year. Tracking your expenses for a few months by reviewing credit card or bank statements, or using an app or other website, can be very helpful in establishing how much you actually spend.
Additionally, the attorneys advising you will need this information to start their negotiations for spousal support, child support, and other important financial matters. The judge will need to know your household budget if they have to determine these issues, especially on a temporary basis while further financial discovery is in progress.
Gather and Organize Financial Documents
In a divorce, full disclosure of all financial statements and documents is required. Many times one party has not handled the finances and has relied on their partner to take care of the bills or manage their investments. In order to be prepared and help your attorney advocate for your interests, locating financial records is an important part of preparing for a divorce. These financial documents are essential to the process and should be gathered sooner rather than later.
Some of the potential documents and records you should gather include:
- Three years of income tax returns
- Bank account statements
- Credit card statements
- Brokerage account statements
- Retirement account statements
- Real estate closing statements
- Mortgage statements
- Complete list of assets
Once you have these documents, keep them organized and ready for your attorney. Fortunately, you can find financial information for most accounts online, making it convenient and easy to find and keep your records on hand.
Prepare for a Fight
Litigating a divorce can be expensive. Consider whether you have access to bank accounts or credit cards that your spouse cannot stop you from using in the event you need to retain an attorney. Speak with family and friends about the possibility of needing their financial support if things get tight at any point in the proceedings. Sometimes it is vital to have access to a bit of cash or credit in order to get by until your attorney can get the court involved, or sometimes it is necessary just to retain an attorney to protect your rights.
A divorce typically means that whatever income is being used to support one household is going to be needed to support two households at some point. Spending conservatively and reigning in discretionary spending can be helpful in managing your budget now to prepare for what life might be like after you separate. There are other times, especially in high net worth divorce cases, where claims are made that a party has been overspending to exaggerate their lifestyle expenses. Spending a bit more conservatively just preceding a divorce may help refute such claims when compared to prior periods of spending.
Divorce is an Opportunity to Take Control over your Finances
Many clients going through a divorce have dealt with financial problems, stress, or arguments over money with their spouse. Often we find that one party has been less involved in the financial decisions. Going through a divorce can empower individuals to take control of their own finances. Whether that means you make sure you are fully aware of your assets and liabilities or understand how much you need to spend each month, or whether it might entail getting out of debt or feeling confident that you have enough saved for retirement, a divorce can be an opportunity.
Our goal is to help you get ready for the next chapter of your life. In large part we are assisting clients in resolving the financial issues in their marriage, ensuring that they receive their fair share of the marital assets, that they receive or are obligated to pay a fair amount of support, and that they are in a strong financial position after the divorce is finalized.
Sometimes clients benefit from speaking with their accountants, financial advisors, divorce coaches, or other professionals in order to obtain more comprehensive financial advice or to develop a plan for the future.
At Aiello & DiFalco LLP, we understand how difficult divorce is. Over the years, we’ve helped numerous clients through this trying time with the preparation of their finances and other important matters impacted by a divorce.
For help preparing your finances, or for any questions you have regarding divorce, please call us for a free confidential consultation. We serve clients in Nassau, Suffolk, and Westchester Counties, as well as in New York City. Our main office is in Garden City, NY.