Divorce Planning: 5 Financial Tips

    Before you divorce, here are five financial tips that can make the process easier if you decide to move through the process.

1. Copy all of your documents and gather all of the financial information you have.
You’ll need to get a handle on your finances like never before. Whether you are a financial professional, yourself,  or whether you have not worked outside the home in 20 years, man or woman, you will need to know everything possible on your finances. And You’ll need to preserve it for your review and use in your upcoming divorce before the actual divorce starts. One reason it is so critical to do this before the formalities of divorcing begins is that this information can often disappear once the divorcing begins. It can become more difficult to find regardless of the cause or circumstances. And once the tax returns, bonus calculations, w-9’s start to disappear – you can no longer use it often  until formal legal steps take plce How can you know or plan for what to divide if you don’t know what you currently have?  

2. Start seeking out competent, proactive, expert advice to help you flesh out the “what next" or "what if” scenarios. 
With some of the financial information you’ve collected above you can start establishing your priorities. This may not sound like a financial step on the face of it – but when you sit down and write the things that you’d like to have from your marriage, or try to envision what you might like or need in order to carry on into the future – these can and will actually be translated into numbers. Do you think you and the children want to stay in the same neighborhood or house? Do you want to hold onto most or all of your pension? If these are your priorities they will have a range of dollar signs eventually attached to them.  

3. Safeguard your credit. 
Order a copy of your credit report early and now – from all three reporting agencies: is crucial since you can now have this as a base line to know where you stand now, at the end of your marriage. This way you’d be able to see whether any new unauthorized debt is being added in your name only And if you have no credit in your own name now, you you may want to apply for a credit card. To begin building your own credit now  may be far easier while still married than after, all things being equal, especially if you have not been the primary breadwinner.      

4. Do an insurance check-up. 
Get to know the details of all the kinds of insurance that helps to protect your family. Just the sheer number of types of insurance may be overwhelming, but take it methodically and a step at a time. The goal is to get your hands around what coverages your family has and needs. What are your policy numbers -- deductibles, limits, premiums? Life, car, medical, dental, home-owners, renters, flood, insurance and the list goes on and on. How important it is to keep your insurance-related financial issues in order can not be over-emphasized. As just one example: On your life insurance policies, it’s really quite critical that you locate and know now about who are the owners of the insurance – you, your wife, your husband? And who are named on your beneficiary designations? A family trust, your spouse, your children? Knowing this now is essential – if for no other reason, you’ll now have this on your radar.   

5.  Make sure your tax returns are prepared in a way that you will be comfortable with for years to come. 
If you are preparing to divorce but have not yet started and it’s anytime around tax season, this is an area of great potential hazard and you should proceed with caution. Consult your accountant and have him or her advise you not only the possible tax savings now that married jointly filing couples enjoy, but also on the potential future liability you could face in should the returns be found deficient.   Know that on returns where you sign jointly, you will be jointly held responsible. This is most often the case whether or not you have any first hand knowledge of the all the financial information on your return.   

As always, The best offense is a good defense – and to arm yourself with knowledge is often the best first step in trying to achieve an equitable, fair outcome. By trying to anticipate problems ahead of time you may avoid serious financial issues. And get good – proactive advice throughout your entire  process – starting as early as possible in the process.           




Cynthia Anderson Thompson, Certified Divorce Financial Analyst (CDFA ™), MBA (Harvard), is founder of Divorce Planning Solutions LLC, a fee-only financial planning firm in New York.  She can be reached at cindy@divorceplanningsolutions.com or 914-906-2919.