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Preparing for divorce: A financial checklist

On Behalf of | May 23, 2024 | Divorce & Family Law

Divorce can be one of the most challenging experiences in life, not only emotionally but also financially. To navigate this difficult transition, it is essential to prepare thoroughly and understand the financial implications of your decisions. What steps should you take?

Gather financial documentation.

Kick things off by collecting documents that can create a clear picture of your finances. This includes bank statements, investment and retirement account records, tax returns and recent paychecks. Make a list of everything you own, including your house, cars, furniture and family heirlooms. Figure out what you co-own with your spouse and what is just yours.

Know what you make and spend.

Develop a comprehensive budget reflecting your current income and expenses. Look ahead and estimate future expenses, taking into account the cost of living on your own and any expected changes in your financial circumstances. Keep track of your expenses as you go through the divorce.

Shut down your joint accounts.

To stop more debt from piling up, think about closing or freezing any bank and credit accounts you share. Open new accounts in your name to start building your own credit and financial freedom.

Understand your marital debt.

Find out which debts are in both names and which are just in yours. Be prepared to discuss, negotiate, or assume responsibilities for these debts as part of the divorce proceedings.

Update your insurance.

Change your life insurance, retirement plans and will to make sure they show who you want to benefit now. Check out your health insurance options, especially if you’re covered by your spouse’s plan, to keep your health insurance going.

Prepare for tax season.

Property division, alimony and child support can all impact your taxes. Talk to a financial professional to help you understand these details and work with them to figure out how to minimize your tax liabilities.

Talk to the professionals.

Hire a divorce lawyer who will work with you to understand your financial situation and help you make decisions that work for you. A financial advisor who knows about divorce can also help you prepare for the changes ahead of you.

Plan for your finances post-divorce.

Think about your money goals after the divorce. You might need to start saving in new ways, take another look at your retirement plan and put some money aside for emergencies to make sure you are financially solid. If you have kids, you should also learn about child support rules and how that support will impact your finances moving forward.

Protecting your finances during a divorce takes careful planning. With the right approach and support, you can set the stage for a stable financial future and begin the next chapter of your life with confidence.