Did you know that approximately 40 to 50 percent of married couples in the U.S. divorce? And, the divorce rate among divorcees who go on to marry again is even higher.
For the vast majority of couples, the divorce process can be a distressing one. The priority, of course, should be protecting the welfare of your children. Other than that, it’s essential to keep your money safe throughout the process.
So how do you go about it?
If you suspect that the separation is going to be an acrimonious one, then, by all means, start taking precautions as early as possible. In this article, we give you several tips on how to protect your money during divorce so you can remain financially secure after it is final. Below are a few pointers to get you on the proper path to protect yourself.
1. Open a Personal Banking Account
In case you don’t already have a bank account in your name alone, now’s the time to open a personal savings and checking account. Let your partner know in advance that you’re doing so. Give them an accounting of how much money you’re depositing in those accounts, so you’re not accused of attempting to hide marital funds. If you are worried about “he said, she said accusations” then email the correspondence, print a copy and keep this paper trail.
2. Close Joint Credit Accounts
Start the process of paying down and closing any joint credit accounts you hold with your spouse. The alternative is to put any credit accounts in the name of one spouse or the other alone.
If you can’t afford to pay off the credit accounts, talk to your creditors to find out what steps you need to take for your name to be removed from the accounts. During the divorce or mediation, you and your spouse will split all debts as part of the settlement process. To minimize complexities during negotiations, it’s always best to have less debt.
To keep investments or money held in joint accounts safe, you can also opt to withdraw half of the money or change the signature authority, so both of you are required when completing a transaction on a joint account.
3. Keep Your Valuables Safe
Another tip on how to protect yourself in a divorce is to secure any of your possessions that you believe your spouse will destroy or take away from you. Keep in mind, however, that you can only protect possessions that you bought with your own money. If the items were purchased using marital funds, they’ll have to be valued and split during the divorce process.
Make sure that you disclose to the court any possessions that you have removed from the house when you file for a divorce. And by all means, don’t sell any of these valuables until the divorce settlement obligations are over.
4. Ask for a Copy of Both Credit Reports
As you file for a divorce, it is beneficial to know how your personal credit and that of your spouse look like early on. This is extremely helpful to discover open credit accounts that you may not be aware of, now’s the time to find out. It is also better to find out if your spouse may have made any unwise decisions that could negatively impact your credit score so you can start cleaning it up.
5. Get a New Post Office Box
As soon as you’ve created any new personal accounts and begun to clean up your credit report, you’ll want to make sure that your spouse can’t intercept any of your new banking information. You also want to keep information private regarding anything you desire pertaining to the divorce, such as the divorce assets you’re trying to retain.
One of the best ways to guarantee your privacy and keep your spouse from accessing important personal documents is to set up a new P.O. Box, so all your mail safely goes there.
6. Document All Your Valuables
One of the smartest divorce strategies for individuals looking to protect their money is to make a record of all their cash sources and any valuables before they ever file for the divorce. You’ll want to be able to readily produce evidence of marital possessions in court should you find that items are missing from your house. This will also help you make sure that the divorce settlement follows an equitable distribution.
For example, if you bought an expensive Moroccan carpet during your vacation, take a picture of it. Be sure to make copies of investment statements and bank account statements. Keep the pictures and copies in a safe place, with dates written on them in case you need a reference to present during the divorce proceedings.
7. Do Away With Financial Power Imbalances
Who’s in charge of paying the bills in the house? Who keeps up with the finances? If it’s your spouse, then this needs to also change right away.
It’s essential that you know how much money is coming into your household and how much of it is going out. This way, you are on a level footing with your spouse once you start the divorce process and begin any negotiations for a divorce settlement.
8. Find Out the Value of Pension and Retirement Accounts
Often, a couple’s retirement funds are their largest marital asset. A smart tip on how to protect your 401k in a divorce is to thoroughly familiarize yourself with the value of your account and that of your spouse. Keep in mind that the retirement funds you receive will also determine your post-divorce lifestyle.
Find out how your retirement funds are going to be divided in accordance with the divorce laws of your state. This information empowers you, so you avoid being taken advantage of during the negotiations for settlement.
9. You May Want to Avoid Asking for Alimony
Some couples going through divorce think one of the smartest divorce tactics to win is by asking for alimony. That can be a big mistake. Why? Because alimony is taxable income.
We recommend doing your best to come to an agreement that does not label the payments that you get from your spouse as alimony in the legal documents. A payment that is not labeled as alimony in the final decree of divorce doesn’t need to be claimed as income when you’re filing your taxes. Consult with your CPA or tax professional to understand what will best suit your personal income and tax situation.
Understanding How to Protect Your Money During Your Divorce
The divorce process can shake up your emotions, but it doesn’t mean you should make irrational decisions when it comes to your finances. By knowing how to protect your money during divorce and taking proactive steps, you can come out of the process with the assets and peace of mind you deserve.
To maintain control of your financial life during and after divorce, talk to us for assistance. We’re happy to offer you a complimentary consultation.