This article is from a three part series written by Mathew Scott. The entire article can be found at the links below.
Getting a divorce can be traumatic. It’s an ordeal that can take a financial and emotional toll on everyone involved. Even when the intent is to have a “friendly”, uncontested divorce, both parties must make sure they’re doing everything possible to protect their financial futures. But, quite often, people in the midst of a divorce don’t know which financial decisions will serve their long term interests best.
The website http://www.divorcerate.org/ which monitors statistics on divorce from a number of organizations and foundations, estimates that anywhere from 40%-50% of all marriages in the U.S. end in divorce. Second and third marriages have an even worse track record – with more than 60% of those unions ending in divorce.
Unraveling once intertwined lives and finances can become a real challenge – especially if both parties plan to meet their current financial obligations and future goals. To help with that process, a new type of financial planner is gaining popularity: the certified divorce financial analyst who specializes in helping clients make educated decisions during times of transition such as divorce, retirement or death of a spouse.
Most certified divorce financial analysts are already financial advisers who have obtained additional certification to specialize in divorce cases. Hiring a certified divorce expert may make a difference in the type of marital settlement you reach, but most experts don’t advise hiring one if the couple’s net worth is less than $250,000.
Carole Peck, a certified divorce financial analyst licensed in Florida and Illinois, says that interest in her specialty is growing. That is because it’s difficult for many people to navigate through financial issues while they struggle with the emotional aspects of divorce. Most breakups are complex and many times tax and retirement issues require specialists in those fields rather than just relying on a divorce attorney.
A lawyer’s job “is to give legal advice, not tax advice or financial advice” says Noah Rosenfarb, a licensed certified divorce analyst and managing director of Freedom Divorce Advisers in New Jersey.
Carole Peck has developed a five point financial checklist that she says couples contemplating a divorce should review. Going through this checklist can help both men and women determine any financial needs their divorce settlement must meet. So, before going into settlement negotiations, Peck advises to:
1) Check your credit report – This report will alert you to any outstanding credit, liabilities or other debt that may be in your name – but you might not be aware of. Peck advises to verify the accuracy of all accounts and determine if any lines of credit have been opened in your name without your approval. Your spouse may have created debts that you may be legally liable for.
Checking your credit report before a divorce will also let you know if your spouse has affected your personal credit profile. Joint accounts may show up on your credit report and damage your credit. Responsibility for joint accounts must be established and resolved as part of the marital settlement agreement.
Rosenfarb suggests that its a good idea for all individuals to establish at least one personal credit card and if you know a divorce is possible or imminent, establish an account asap. He also recommends that couples with joint credit card accounts reduce their credit limits to small, manageable amounts. If you already have high limits on your existing cards, call the credit card company now and have them lower it, this may prevent your spouse from going on a shopping spree.
2) List all of your assets – When starting the divorce process, you need to tally up all of your financial assets so you know what they are, where they are and what they are really worth. This can often serve as a wake up call about what each party has to lose during mediation, negotiation or trial. Additionally, if your spouse owns a business, you’ll need to gain access to its tax records to determine how profitable it has historically been, if possible. The business could be a valuable asset that produced significant income for allowing the married couple to maintain a particular lifestyle. For example, if one spouse had access to a company car that the business paid for, should she continue to get that perk after the divorce if the business isn’t dissolved? Compensation received from the business is also considered an asset.
3. Have Assets Appraised – When dividing property, some items may have to be appraised to determine their real current value. Most people realize that houses and other forms of real property should be appraised, however sometimes personal items should be appraised as well. The perceived value of assets such as furs, jewelry, paintings, memorabilia and family antiques can become sticking points during the settlement process. It may be necessary to prove what individual items are worth because your spouse may set a very high value for an item in the expectation that you’ll have to give them cash compensation to keep it. You want to know what things are worth because you want to know if they are actually worth fighting for.
4. Project What Your Expenses Will Be After The Divorce – The budget you had prior to the divorce will definitely change afterward, so determine if your income plus the settlement will accommodate your expenses. Many newly separated people find themselves shocked, having failed to realize how expensive a lifestyle they’d been leading until they have to pay for it on their own. Be prepared to document your expenses so that you can receive a fair settlement, but also be prepared to trim your expenses, because alimony payments may not be what you expect.
5. Determine How Child Care Will Affect You Financially – Whether it’s paying for babysitters, day care or expenses for child visits, you’re likely to face new costs that you’ve never had to budget for before. Arranging for help to care for small children in the home is a sizable expense that you don’t want to leave out of settlement negotiations. It may also be necessary to add to your financial outlay during the negotiations the cost of additional food, clothing and other items needed to raise a child properly.
Andrew G. Storie is a family law and divorce attorney who serves Orlando and all of Central Florida. For more information, or if you are contemplating a divorce or modification of your parenting plan please visit http://www.storielaw.com/ or call us at (407) 838-0887