Going through a divorce is an unquestionably stressful and emotional time in a person’s life. Regardless of the surrounding circumstances, protecting your personal finances should always be a priority.
If you’re preparing for divorce negotiations, it’s important to educate yourself about your financial options to ensure nothing is overlooked and you are getting the best possible settlement. To help, a panel of Forbes Finance Council members shared some essential financial steps people often overlook during a divorce. Here’s what they believe you should do and why each action is so important.
1. Separate Your Finances Sooner Rather Than Later
When going through a divorce, separate your finances as early as possible in the process. Keep a transaction record of everything you spend money on from your personal account. Meticulous record-keeping will serve as your ally should you end up in divorce court. It will also act as a starting point when it’s time to create a budget following divorce. – Jared Weitz, United Capital Source Inc.
2. Collaborate With A Financial Advisor
There is so much to consider at once, such as accounting for your assets while trying to keep your family from collapsing. Not every asset is considered equal, so collaborate with a financial advisor to ensure you are getting the best scenario possible out of this turbulent situation. A financial advisor will ensure you are doing what is best for you in each situation when the lines get blurry. – Letitia Berbaum, The Zandbergen Group
3. Craft Your Financial Plan
When going through a divorce, which is a highly emotional time, most people are in a reactive mode. They don’t realize that the divorce process can be a good time to craft their personal financial plan. When you shift into that proactive mode, it gives you confidence: You see what resources are available, and you have visibility into what you need as you’re negotiating your divorce. – Bill Keen, Keen Wealth Advisors
4. Review Your Taxes And Assets
Those going through a divorce often overlook taxes and assets, so this is an area where we see mistakes occur. For example, an “equal” pre-tax split can result in an uneven division of assets upon applying the tax liability. The individual with the lower income should also consider assets that generate income, as opposed to growth alone. – Sonya Thadhani Mughal, Bailard, Inc.
5. Pay For A Professional Asset Valuation
Not all assets are of equal value, even if they appear to be. A bank account with $50,000 and a 401(k) account with $50,000 are not equal. When splitting the assets, consider the tax implications. Real estate, real property and business valuations should be done by a professional. Allow your attorney to do the job they were hired to do. What appears pricey on the front end will pay off in the future. – Cynthia Hemingway, Fourlane, Inc.
6. Analyze Account Ownership Policies
Many financial accounts are either single or joint ownership. Couples must review the account ownership policies of each financial institution. Certain institutions require joint accounts to be closed and new accounts opened, while others may simply allow the removal of one of the owners. Beneficiaries are generally easier to change but necessitate due diligence on the part of each spouse. – David Herpers, Credit One Bank
7. Maintain Your Personal Credit
Often, business owners come out of a divorce with tarnished personal credit, which leads to higher financing costs and can even keep your business from securing future loans. Make sure to review your credit report and figure out what accounts are in your name. Ensure that payments are made on time during and after the divorce. Your family and business will thank you. – Leo Kanell, 7 Figures Funding
8. Don’t Forget About Car And Health Insurance
Make sure you look at the basics of who is going to get new car insurance and health insurance. There are lots of important big issues that need to be addressed, but sometimes the little things can have a big impact. – JD Morris, Red Hook Capital
9. Understand The Cost Of Playing Defense
In divorce, there’s an often-overlooked financial consideration: The cost of playing defense. Many people want an amicable divorce and do not want to be petty. But what if you are divorcing a narcissist? Even lawyers may underestimate this personality. Taking it seriously will save you money. Be honest with yourself, and then do your due diligence to find the right attorney for your divorce to safeguard against constant litigation. – Faith Teope, Leverage Retirement
10. Try To Remain Empathetic
Maintain empathy for your former spouse. An amicable divorce may seem impossible if trust was destroyed by lies and betrayal. A vindictive couple can run up legal costs far beyond a calm and rational division of assets. It can take a tremendous amount of emotional strength to get into an empathetic and peaceful mindset when you may be experiencing rage and sadness, but go amicable for your wealth and health. – Dave Sackett, Visibility Corporation
11. Know When To Settle And Move Forward
Oftentimes, we want to fight for what’s ours. But many times, there is victory in a settlement—you can save on legal fees and reduce stress. Fight for what you can get, but at some point, you need to understand when it’s better to settle and move on. Remember, peace of mind is worth a million dollars. – Justin Goodbread, Heritage Investors
12. Create A Certified Appraisal Of Your Balance Sheet
The average person enters the union of marriage with the hope that it will last forever. When it doesn’t, one often wishes they had better prepared up front to protect themselves. One important step is to work with your financial advisor to create a certified appraisal of your balance sheet. This memorializes premarital assets and can provide financial clarity if things don’t end up as planned. – Michael S. Schwartz, Magnus Financial Group LLC
13. Consider A Prenuptial Agreement
Do you have a prenuptial agreement? No one wants to think about divorce when they are planning a wedding. Why would you if you plan to spend the rest of your life with this person? But at the end of the day, marriage is a business contract that has financial benefits and legal aspects, including inheritance rights. It is not the conversation you want to have, but it is the one that will help the most. – Joseph Orseno, Tiltify