The divorce process can be a stressful one that can easily bring out the worse in people. Some people sometimes see divorce as a way to seek revenge on a spouse by seizing assets and money.
Although divorce can get you out of an unhappy marriage, it can also completely clean you out for all you are worth if you don’t know your rights. Here are many secrets from attorneys to help you protect your assets and to try to give you thoughts on what to be aware of in dealing with your divorce.
1. Don’t Let Emotions Control Your Financial Decisions
Divorcing people often want to take out their hurt feelings on their soon to be ex, however it’s important not to let emotions interfere with the matter at hand. In the long run, being spiteful could harm and effect your own pocketbook. For example, asking your lawyer to write a letter to your ex over who gets the end tables and the lamps makes absolute no sense. A letter like this could hypothetically cost you $500 in attorney fees. Understanding that divorce can be costly, savvy petitioners opt to pick their battles.
2. Everything Is Almost Divisible
Individuals often make the mistake of assuming that assets that are in their names can’t be claimed by spouses in a divorce. However, divorce experts caution that the opposite is true. Practically everything is divisible. For example, frequent flyer air miles or royalties from a book you wrote. Because the same holds true for liabilities like debt and credit cards, couples should be sure to consider all factors when doing their financial planning.
3. Make Large Purchases before You File for Divorce
Have a big purchase in mind, such as a new car? Most states may issue automatic financial restraining orders prohibiting people from making big purchases or liquidating assets after the divorce is filed, absent a court order or an agreement. Many expert attorneys advise those considering divorce to buy big items before filing.
4. Keep Track of Your Spouse’s Finances
If you’re thinking of filing for divorce or even marriage separation, it’s a good idea to take a look at your spouse’s financial situation. Some attorneys even suggest tracking your partners’ new credit card and loan applications. People are more generous in their income reporting on credit or loan applications than they are in, say, in filing their taxes. Many attorneys agree that loan applications could be crucial parts of a the divorce discovery process.
5. Collect Key Evidence before Filing for a Divorce
If you’re thinking of filing for divorce, it can be difficult to keep your cool when your spouse is pushing your buttons. However, experienced divorce counselors have suggested that individuals take time to gather evidence before a split. Along with taking pictures of assets, individuals should make copies of account statements and write down any important numbers. Preparation is key if you hope to come out ahead in court.
6. Get Property Valued Before You Go Your Seperate Ways
When it comes to divorce, almost all property is up for grabs. However, spouses can’t hope to get their fair shares if they don’t know the value of assets. No sense in guessing on the worth of his coin collection or her jewelry, never mind a house or a business. Remember that there are experts available who can appraise just about anything. Doing your homework now is the best way to come out ahead down the road.
7. Don’t Hide Any Assets
You can try to deceive your spouse by hiding or concealing assets, but don’t forget that you’re also messing with the law. If what you’re hiding is discovered, you’ll lose your instant credibility in court. There could also be stiff penalties, including monetary sanctions. To protect yourself and your property during a divorce, it’s best to disclose all assets upfront.
8. A Former Spouse Can Be Used As A Great Tax Shield
People who pay alimony are rarely grateful for the opportunity. However, ex-spouses can actually help you out come tax time. People who pay alimony to their exes often might be able to write it off as a tax deduction. On the other hand, those who receive alimony should have to report it as taxable income. It’s important to note that alimony is different from child support, which is neither taxable nor deductible. Consult with an expert/accountant to find out exactly how you might be handle these situations and the tax implications that may apply.
9. If Not Considered Alimony, the Income May Not Be Taxable
If the transfer of money in a divorce is not considered alimony, the receiving spouse may be in luck: these funds often aren’t regarded as taxable income. Not so lucky is the payer, as there is possibly no tax break for money transferred during the divorce process. Consult with an expert/accountant to find out exactly how you might be handle these situations and the tax implications that may apply.
10. There Are Hidden Tax Implications To Watch Out For
During a divorce, it’s important to stay alert to potential hidden tax obligations. For example, let’s say that the husband purchased a piece of property for $10,000 during the marriage. The property has gone up in value so that at the time of the divorce, the husband ends up transferring the current value of the property which is $15,000 to the wife. If not otherwise addressed in the divorce settlement, the husband will be on the hook to pay taxes on the $5,000 gain on the property. Also, spouses who are receiving any sort of treal estate, stocks or bonds need to understand that taxable gains can leave them vulnerable. Consult with an expert/accountant to find out exactly how you might be handle these situations and the tax implications that may apply.
11. Get Job Training Or Update Your Education Before Filing
If you are currently being supported by your spouse, you might want to consider taking the time to get out that old resume and freshen up your skill set before seeking a divorce. Even if you receive support, the courts can impute income and expect you to be working if your kids are schooled and you are not of retirement age or disabled. Remember, don’t get your hopes up depending too much on a hopeful spousal support award. Updating your education now can help protect you later if things don’t go your way in court.
12. Familiarize Yourself With All Finances Before You Split
Normally, one person in a household manages the finances. However, this arrangement can create a power imbalance when it comes time to negotiate settlements. So what can you do to protect yourself? Seek professional advice to help guide you in making more informed decisions about finances being filing for divorce. Doing this will help you prepare when you get your day in court.
13. Consider Possibly Mediating Your Divorce
It’s no secret that divorce can be very expensive. Attorneys have said that the average cost of legal fees in a divorce is an astounding $15,000! One way to cut down on these expenses is to use a mediator. A mediator doesn’t work on behalf of any one party, just facilitates agreements between both parties. If you want to keep your divorce details behind closed doors while cutting costs, a mediator might be the best bet for both you and your bank account.
14. Determine What Is Your Biggest Asset
Many people mistakenly believe that their house is their biggest asset when it is actually a retirement or pension account. Even if your retirement account is less than robust now, the court will likely consider its future value when dividing assets. There are many ways to divide your portion of your spouse’s retirement assets, so give that due consideration.
15. If Your Lawyer Recommends A PI Or Forensic Accountant – Take This Seriously Into Consideration
Many individuals are hesitant to shell out for a PI or forensic attorney when going through a divorce. Private investigators are useful for investigating people who own small businesses, which can give a much fuller picture of a person’s true finances. Forensic accountants can give insight as to whether a person going through a divorce is getting accurate information from their soon to be ex-spouse. By spending a little now, you might be able to save yourself a fortune in the future.
16. The Most Expensive Lawyer Isn’t Always The Best
Pick your divorce lawyer wisely, as it could save your bottom line. Find one that is experienced and knowledgeable, but is also a good fit for you. You have the ability to set the tone for your divorce. The attorney should advise you, but also respect your position on how to approach the negotiations. Just because an attorney has a high hourly rate doesn’t necessarily mean he or she will honor your wishes. For best results, go with your gut tells you.
17. Understand All Debt Obligations
They are too many clients assume partners debt are joint when they’re not. Some states do not divide marital debt if it’s just in one person’s name, so if possible, during separation you may want to pay down that debt preferentially. The last thing you want is to be obligated for debts you didn’t accumulate.
18. Don’t Forget About Beneficiary Designations
Divorce attorneys note that many clients fail to remove former spouses from their beneficiary designations. If you fail to remove these designations, those amounts may end up being paid out to a former spouse. For best results, handle beneficiary designations and other tedious paperwork as soon as possible.
19. Pay Court-Ordered Attorney Fees
Court-ordered attorney fees are not to be taken lightly. The court can order one spouse to contribute to the other spouse’s attorney fees. When it comes to court-ordered attorney fees, the judge can throw the offending spouse in jail for failing to pay. In light of these regulations, spouses who are receiving financial help should have language drafted into agreements clarifying how much money must be paid and by what date. Doing this gives spouses the ability to enforce the agreement should the paying spouse fail to follow through with his agreement, many attorneys say.
20. Being The Higher Income Earner, You Might Not Necessarily Want To Ask For All Of The Deductible Items
Clients typically strive to get as much as possible in a divorce. However, remember higher incomes can disqualify individuals from important tax deductions. In light of this fact, individuals might not want all the items they originally requested in a divorce. For best results, speak to a financial professional/expert about your specific fiscal situation and options.
21. Take Advantage Of Free Legal Advice
Many attorneys will offer free consultations. Take advantage of this and get some basic information, see if the lawyer is the right fit for you. To ensure you make the right choice, be sure to consult with a few attorneys before coming to a hiring decision. After all, the outcome of your divorce depends in large part on the quality of your legal advice.
22. Be Mindful Of The Date When Initiating Divorce
While you might be tempted to file as soon as possible, it’s important to note that property division is based on the date of marriage separation in some states. Typically, the court uses a formal date of separation to determine property division and the value of certain assets. If you are expecting a large increase in the value of a major asset upon a certain occasion, be mindful of that when you decide to initiate the divorce.
23. Consider Wisely When Designing A Joint Parenting Arrangement
Unlike claiming a child as a tax dependent, claiming head of household may not be assignable. If you’re negotiating who will claim a child as a dependent, you can include a provision that the right to claim the child is dependent on the parent being up to date on their support obligation.
24. Plan Finances For After The Divorce
Clients often neglect to consider how their financial planning can change after a divorce. Your risk tolerance may be very different than your former spouse and you may not want to keep the same investment approach that you had before the divorce. If you don’t know where to begin, you might want to hire a financial adviser or an expert to give you the guildance you need.
25. Keep A Paper Trail
While most assets are divisible in divorce, there are some exceptions to the rule. Documents can help preserve what you believe to be separate property when it comes to divorce proceedings and should be collected beforehand. Too many times the necessary documents seem to disappear after a divorce starts, so to the highest degree possible, gather those documents before you start the divorce.
26. The Division of Property Can Be Complex
Dividing assets and properties isn’t always a simple thing. Negotiating the division of property is an art form all its own. Usually, it’s a three-step process: characterize the asset, value it, divide it. After the asset is identified as community property, separate property or both, figuring out the value can be tricky. For instance, a bank account with cash in it is pretty easy to value, look at the balance. But a retirement account, a house or securities can have more complex issues. Seek the advice of a qualified professional to ensure the best outcome for your individual situation.
27. Retirement Accounts Are Not Worth The Statement Balance
Just as it can be difficult to value assets, couples often struggle to determine the true value of their retirement accounts. One reason that retirement accounts pose problems is that deferred tax will have to be paid at some point. In light of this fact, individuals that have retirement accounts might be worth even less than the balance minus tax. If one of the parties will be liquidating a retirement account early, then the highest marginal tax rate and the early withdrawal penalty might possibly be needed to be subtracted from the value of the account. Remember that the value of these assets is often drastically reduced as a result. Even if the account is not going to be liquidated, the taxes which will be paid on the money at the time of retirement can be considered and a reduction of the overall value of the asset might be, and very often is, appropriate. Seek the advice of a qualified professional/accountant to ensure the best outcome for your individual situation.
28. Division of Property Depends On Where You Live
When a divorcing couple heads to court for a property dispute, state law is often used to divide the property using one of two classifications: community property or equitable distribution. With community property, both spouses own income and assets equally and items can be divided evenly. Additionally, individuals can keep separate property. Community property can apply to the states of Alaska, Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin as well as Puerto Rico. On the contrary, every other state usually uses equitable distribution, which involves “fairly” dividing up the assets and money accrued during marriage. Knowing the law of the land can help you avoid surprises during your divorce proceedings. Seek the advice of a qualified professional to ensure the best outcome for your individual situation.
29. Some States Are Better For Getting A Divorce
The five states with the easiest and most lenient divorce laws are Alaska, South Dakota, Wyoming, Iowa and Washington. The ease of filing, fees and processing times are all considered as part of the rankings. If time and cost are of the essence, you might want to consider where you live before filing divorce papers.
30. Be Mindful Of The Worst States For Divorce
The most difficult states to get a divorce can be Arkansas, New Jersey, Rhode Island, South Carolina and Vermont. Arkansas takes the longest amount of time which can be over 500 days. If you live in one of these states, you and your spouse might want to consider relocating to expedite the divorce process.
31. When In Doubt, Seek A Professional Or It May Cost You
Many top attorneys advise clients to seek professional help at all costs. For example, a simple mistake that drops your credit score can cost you thousands on your next mortgage. Making a mistake separating accounts, renaming beneficiaries or not setting up life insurance properly can cost you hundreds of thousands and impact you for years.
32. Make Sure You Actually Implement The Divorce
Despite their eagerness to be divorced, many people actually fail to complete all the steps needed to make their divorces legal. For best results, clients should make sure all their bases are covered and check up on spouses to ensure they have completed the necessary steps. You don’t want to find out that your ex-spouse never refinanced the house five years ago like he was supposed to and it’s now in foreclosure. By the time you find out about it, your credit can be destroyed for years.
33. Compromise Could Pay Off
You win some, you lose some, right? Unfortunately, divorcing spouses often refrain from compromising out of spite. While you might be tempted to fight every battle that comes your way, agreeing to compromises could save you a lot of headaches and money on legal fees when going through a divorce. As an added bonus, your decision to compromise could encourage your spouse to do the same.
34. Don’t Forget About Health Insurance
Although federal law might dictate that you have health insurance under your former spouse. Do not rely on COBRA coverage long-term due to the high cost. Start thinking about all the available options that may be less expensive. Better yet, try to find a job for yourself that has benefits.
35. Tighten Your Belts During The Divorce
While individuals tend to factor the price of getting divorced into their budgets, they often forget the other everyday expenses incurred during the process. Try to save a little extra money to care for your personal needs during this difficult time. Being as healthy as you can to help your kids and other loved ones through the process might be a smart play.
36. Be Proactive But Be Wary
Savvy divorce attorneys advise their clients to be cautious when filing for divorce. For example, if your spouse has a brokerage account, try to collect an account statement for that account before announcing and filing for the divorce. After all, a deceitful spouse could very easily liquidate the account with no paper trail by neglecting to cash checks until later. The last thing you want is to find out your spouse set up a new account after the divorce settlement while leaving the current brokerage statement with a zero balance.
37. Avoid Underestimating Living Expenses
It should go without saying that divorcing individuals need to find out what their spouses earn and where their money goes. When considering the cost of future living expenses, it’s important to take into account the effect of inflation. Accumulate receipts so you have a good idea of what everything actually costs. Doing this will help you maintain your quality of your life after a divorce.
38. Don’t Let Your Emotions Get In The Way Of Selling Or Handing Over Family Home
Whether you have an emotional attachment to your family home or are just seeking vengeance against your former spouse, be sure you’re thinking rationally about your decisions with regard to shared property. You don’t want to discover later that you gave up other assets just to keep a home in which you can’t afford to live.
39. Know What You Value
When considering a divorce, it’s important to know what assets you value most and be prepared to let some things go. A major mistake in divorce, that everyone can get trapped into, is spending hundreds or thousands of dollars fighting for something that you don’t even want. Take your time so you can make the most rational and intelligent decisions.
40. Dress Appropriately for Court
It might seem like a small matter, but buying nice clothes for court can boost one’s confidence. You will feel better and likely fair better with the judge. Of course, clients should remember to keep it professional and avoid dressing in a manner that’s flashy or overly pompous. Play it safe by keeping clothing neutral and accessories to a minimum.