Proactive Strategies to Protect Your Finances in a Divorce

Irrespective of the circumstances prompting a divorce, some degree of emotional upheaval is inevitable.  In the midst of challenging and possibly even psychologically chaotic times, it is important not to lose sight of the fact that the financial implications of divorce are also vast and can have life-long repercussions for each former partner.  Attention to strategies for managing the financial fallout of divorce can ease both the emotional and the fiscal challenges associated with dissolution of a marriage.

A recent Money magazine article profiles important steps each couple should take before filing for divorce in order to protect their collective and individual finances.  Taking some of the proactive measures highlighted below can help ensure you are able to get a fair share of the assets in the split and can reduce your chances of getting blind-sighted by surprise debt.  Before announcing you want a divorce and the emotional pitch escalates, consider taking the following measures to secure your future and mitigate the adverse financial impact of a marital break-up:

1. Gather Key Information

It is important to begin gathering copies of any documents that list and verify assets, liabilities, income and expenses.  These documents can include bank, brokerage, and retirement statements, tax returns, property deeds, and the all-important “pre-nup” (if you and your spouse had such an agreement covering division of assets). 

Having a paper trail describing your finances already in your possession when you first consult a divorce attorney will save time and expense, and most certainly will help secure your share of marital assets. Once divorce proceedings are initiated, even the most amicable of relationships can develop adversarial posturing.  Financial information can become difficult to access or may even disappear.  You will not want to be reliant on your spouse to provide the documents and information.

Particularly if you think your spouse may be hiding assets or debt, look for unusual withdrawals from existing accounts.  If envelopes from unknown banks or brokerage firms come in the mail, take a picture of the envelope (instead of opening it) and present this evidence to your lawyer.  This evidence could allow your lawyer to ask for records from that institution. 

Remember to initiate this pre-divorce information gathering process as early as possible and to be patient.  This step can take three to six months, depending on how accessible the documents are and how open or transparent your financial relationship with your spouse has been. 

2. Build Cash Reserves

Be aware that divorce proceedings often take a long time – often six months or more.  In addition to legal fees and possible payments to financial advisors or investigators, while the divorce is pending you may have to incur new expenses for a separate place to live or for alternative child care arrangements.  Also, if you are a stay-at-home parent, you could lose access to spousal support. 

Recognizing such eventualities, ideally you will want to have a year’s worth of basic living expenses in a personal account prior to filing for divorce.  Money advises that if all your assets are combined and you have no way of opening your own account without alerting your spouse, you may want to consider opening a credit card with a low interest rate for managing expenses and accessing cash advance options when necessary. 

3. Sever Credit Ties

Finally, it is important to separate shared credit cards if you and your spouse have them.  If your spouse is an authorized user on one of your cards, ask the issuer to remove the second user since you could be held accountable for any debt they accumulate.  If you are joint users on a credit card, request a freeze on the account.  Unlike the record-gathering and cash-reserve steps that should be initiated well in advance of a divorce filing, measures to sever joint credit ties should occur at the relative last minute since your spouse will likely become suspicious when an attempted purchase is denied.

While undertaking these protective financial measures in anticipation of filing for divorce, an effective companion resource is attorney Van Smith’s book, The Ultimate Guide to Divorce and Custody in Virginia: Quickly Get Back to Fully Living Your Life.  Reading this comprehensive and approachable guide would be a good place to start to discover the smartest and most effective way to file for divorce.