Preparing Financially for Your Divorce
Divorce is not only an emotionally and personally taxing time; it is also a major financial milestone. With approximately half of all marriages ending in divorce, this financial transition can be all too common, and many people leave their divorces with greater financial stress and more difficulties in planning for the future. However, with attention to planning before, during and after your divorce, you can help to increase your financial confidence and preparation for the new single life ahead.
Making a Plan for Your Divorce Finances
There are steps you can take in order to be prepared for the changes that can accompany a divorce, especially the long-lasting financial effects. After all, long after the personal and emotional aspects of the divorce have faded, the financial changes can linger for many years to come. In order to begin the process with important knowledge and guidance, consult a New Jersey family law attorney. A divorce lawyer can help you to understand your rights under the law as well as the responsibilities you have toward marital finances while preparing for divorce.
Your New Jersey divorce attorney can advise you about how cases like yours are handled under state law, including issues around how property is divided under equitable distribution, the potential for alimony, and guidelines for child support and custody if you are a parent. A family lawyer has the experience and information needed to help ensure you are protected under the law.
While a family lawyer is the first professional to consult in a divorce, a financial planner can also be of help. Your attorney may have a financial planner that they recommend for their clients going through a divorce in your specific situation. Such a person can help work with you to develop a plan to maintain your lifestyle and protect your retirement savings and ability to plan for the future. While there is much that you can do on your own, professional assistance can provide significant help to get prepared for your future.
Of course, one of the best things you can do is to study and learn about your own financial situation. In some relationships, one partner handles the majority of financial matters and the other may not know much about investments, property values and other major marital assets. During the divorce, you will need copies of all of your key financial documents. The asset division process is based on determining which assets are held by the couple as marital property and then making an equitable distribution of these items.
Collect key documents that establish your financial status. These are necessary to present to the court and to help your divorce attorney represent you throughout the negotiations process. Some of the documents that you will need to gather include:
- Tax returns
- Pay stubs
- Investment account statements
- Bank statements
- Retirement account materials
- Insurance documents
- Employee benefit handbooks
- Pension plan information
- Credit card statements
- Property and real estate deeds
- Mortgage agreements
- Car loan paperwork
- List of household items and valuables
- Cryptocurrency wallet records
Consider Your Divorce Needs
In order to help your attorney develop a plan to represent you through negotiations or in court, it can be helpful to consider the types of assets that are most important to you. For many people, the marital home is particularly significant, especially if there are young children from the marriage. The value of the home itself may vary significantly, as people who bought their homes recently and carry significant debt may make different choices than those who have a paid off or largely paid off home.
In New Jersey, assets are divided using the standard of equitable distribution. This means that your marital property will not necessarily be split by a judge on a 50/50 basis but in an appropriate way to ensure a fair outcome. For some couples, the marital home is the most valuable asset at stake in the divorce, and it can also be an emotionally weighty matter.
When developing your position on the marital home, consider its importance to you. In some divorces, one spouse keeps the home and gives up other assets in exchange, while in other cases, the home will need to be refinanced with a new mortgage in order to buy out the other spouse. When considering the latter option, ensure that you will have the income to support your purchase of the home and to get approved for a solo mortgage. If not, you may wish to consider selling the home and dividing the proceeds and expenses as part of the divorce settlement.
When making any decision in this regard, take into account property taxes, carrying costs, maintenance and other expenses that will persist after the divorce.
Getting Ready for Your Single Life
There are also valuable steps to take when preparing for your single life. Make sure that you can access money of your own or in your own account. This does not remove your income from the marital estate but simply ensures that you will maintain access to the funds. Divorce is an crucial time to be prepared for financial emergencies.
Similarly, this is a useful time to build your solo credit rating. If you do not already have credit in your own name, this is an important time to open a credit card, seek copies of your credit reports and improve your credit score. Since your access to credit will rely on your solo score moving forward, this is a key way to protect yourself and enjoy some insulation against a financial crisis.
After all the negotiations are settled and you have reached an agreement, you still have steps to take to keep your finances in shape. Once your divorce is finalized, it is time to implement the matters handled in the divorce decree. Close all of your joint credit cards and bank accounts and open individual bank accounts and credit cards. Remember to update your direct deposit agreement with your employer and others that provide regular payments.
Divorce is also a good time to update your insurance and estate plan. Insurance policies, like retirement accounts and investment accounts, are transferred to a named beneficiary rather than through your will. Change the beneficiary after the divorce is settled to the person other than your former spouse who will be your named recipient if that is your preference. In addition, you can update wills, trusts and other documents to reflect the changes made by your divorce. In some cases, you may need to maintain a life insurance policy as part of a child support or alimony order; in this case, the beneficiary should be named as your former spouse as provided for in the divorce agreement. If you do not update beneficiary designations where appropriate, your former spouse may receive these assets rather than your desired recipient.
In addition, make sure that deeds and titles are properly changed. How ever you determined the marital home should be divided, ensure that both the mortgage and the deed correctly reflect the current status of the home. The same is true for investment accounts, cars and other major property.
Consult a New Jersey Family Law Attorney
Your divorce lawyer can work with you to plan for the financial changes that come with the end of a marriage. Contact the experienced New Jersey divorce attorneys at Lawrence Law by calling 908-645-1000 or using our convenient and secure online form for a consultation about the effects of divorce on your business at our Red Bank and Watchung offices.