Four Must-Do Money Moves Prior to Divorce
Navigating a divorce is tricky – even for the most powerful and poised of women. Over the years, we have observed that, to “get it over with” quickly, women often leave assets on the table or make quick decisions without fully understanding the long-term implications. For example, is $500,000 in a retirement account the same value as $500,000 in a checking account? Or what about the house – something that is easy to be emotionally tied to but not without drawbacks, like capital gains taxes should you eventually sell?
Even among the most amicable soon-to-be former spouses, there are likely to be pitfalls and landmines women must be aware of and avoid. We’re sharing our tips, from years of professional and personal experience, to help ensure your divorce is not a financial headwind but instead a launchpad into your new chapter.
1. Find areas of agreement.
Can you and your soon-to-be ex-spouse find big-picture areas of agreement? By starting with big-picture priorities you can both agree on, hammering out the details becomes easier. Some common goals we’ve seen include keeping the kids in the same school or ensuring the kids’ schedule or lifestyle is minimally disrupted. The more you can maintain open communication and identify areas of agreement, the less you’ll spend in attorney’s fees and the less adversarial the process will feel.
2. The more you know, the better.
Understanding your complete financial picture puts you in a position of power and minimizes the odds that you’ll leave money on the table that you’re entitled to. Start by gathering documents to share with your attorney or trusted advisor. Our divorce guide provides a full list, but at a minimum, you should gather:
- Investment statements
- Bank account statements
- Credit card statements
- Income tax returns for both parties (if possible)
- Benefits and retirement information
- Mortgage statements
- Paycheck documentation
- List of assets and debts
- Marital and non-marital property inventory
- Insurance documents
Armed with this information, you will have a better sense of what you have together so you can determine how to separate the assets fairly and efficiently with the peace of mind that nothing was left on the table (or swept under the rug).
3. Map out your post-divorce life before negotiation gets underway.
Envision your life post-divorce. How much income will you have? Where do you want to live? What routines, memberships, properties or services do you want to keep? What can you live without? Thinking through every detail and decisions – and the effects of those decisions – will save you from unexpected shortfalls. For example, if you need to move to a less expensive neighborhood, how are the schools? Will you be facing the need for private school?
Using the financial documentation you provide, a trusted advisor can run projections to help you navigate these questions and develop a post-divorce plan best suits your preferences and your financial reality.
4. Don’t go it alone.
As the saying goes, it’s hard to read the label from inside the Coke bottle. The same can be said for those who are in the middle of an emotionally draining divorce. Working with an objective team who has been through it before is an investment in your future well-being.
An experienced divorce attorney is a key component of your team. Find someone who has an extensive track record of results and experience but also someone with whom you connect and communicate well. An advisor with a Certified Divorce Financial Analyst designation can also play an important role in securing a settlement that protects your financial well-being. While divorce attorneys are excellent at fighting for whatever the client wants, financial advisors who specialize in divorce can help clients think through the right things to fight for in the first place.
Remember, the decisions you make today have the potential to impact not just years or decades but an entire lifetime. The more you can do to plan and prepare, the better decisions you will make and the better your outcome will be in your new chapter.