When couples divorce, it is easy to get sucked in to the emotional side of the decision. Unfortunately, when people make decisions based on emotion rather than based on reason, they sometimes make a less rational choice, or one that is not in their own best interests. Here are some financial dos and don’ts to consider before and during your divorce.
1. Financial Dos and Don’ts: Do gather all financial records.
Gathering important documents is a voluminous and time consuming task, however, it is necessary for a few different reasons when one is getting a divorce. It provides you and your lawyer with a complete financial picture. It is also necessary for purposes of discovery during the divorce. Gather the following:
- Auto registrations
- Credit card statement
- Financial statements
- Information on all bank accounts
- Insurance policies
- Loan applications
- Loan documents
- Real estate deeds
- Records that verify premarital property
- Records that verify separately held property, such as an inheritance
- Retirement accounts
- Brokerage statements
- Tax returns
2. Financial Dos and Don’ts: Do pull a credit report.
Pulling your credit report gives you more than your credit score. It also provides a complete picture of money owed in your name. A credit report can call your attention to any debt you may have overlooked.
3. Financial Dos and Don’ts: Do consider working with a financial planner.
As your attorney and your spouse’s attorney work to come up with a fair and equitable division of property, consider working with a financial planner. Many family law attorneys have relationships with financial professionals, such as accountants and financial planners. It is important to have a clear picture of your current financial relationship, as well as your retirement needs.
4. Financial Dos and Don’ts: Do take inventory.
Walk through the house and take a detailed inventory. Include valuable items such as antiques, jewelry, and art. Also include items you personally find priceless, such as the Christmas tree angel your child made when they were five, or the postcard from Richard Nixon thanking your great uncle for his generous political donation. Take some time to consider property your spouse finds valuable. Many people overlook these items. Don’t forget tools, firearms, and unique collections your spouse maintains. Property division discussions are best had when both parties have a complete understanding of the property being divided.
5. Financial Dos and Don’ts: Do keep in mind, everything is on the table.
In Maryland, property is divided equitably in a divorce. This is not the same as an equal property division. While you may have no interest in the tools in the garage, they are valuable. This is not to say you should demand the tools, but rather, it is to remind you that their value should be considered when allocating other property to one spouse or the other.
6. Financial Dos and Don’ts: Don’t insist on keeping the house at all costs.
Many people naturally have a desire to stay in the marital home. Keeping the house may provide stability for the children. It may offer comfort to the spouse that stays. Many people say their home has sentimental value. However, often times, keeping the house is not in a person’s best financial interests. The cost of owning a home doesn’t just include paying the monthly mortgage. It also includes insurance, upkeep, and property taxes. Not all of these costs can be controlled.
7. Financial Dos and Don’ts: Don’t forget about the cost of health insurance.
When determining the fairness of any settlement, don’t forget the cost of health insurance. While married, many couples rely on one person’s health care benefits from their job. Options after a divorce include the Consolidated Omnibus Budget Reconciliation Act (COBRA) provisions. However, sometimes the state health insurance exchange under the Affordable Care Act offers a better solution.
8. Financial Dos and Don’ts: Don’t forget to consider tax consequences.
Some financial decisions can result in a higher tax obligation. This is another reason why consulting with a financial planner or qualified accountant is a good idea.
9. Financial Dos and Don’ts: Don’t forget to address joint accounts.
After the divorce, you shouldn’t remain on joint accounts with your ex-spouse. Some institutions will allow a person to remove one name from the account. Others will require the closing of a joint account, followed by opening an account for a single applicant. Unfortunately, closing accounts of long standing can impact one’s credit score. Take the time to explore options.
10. Financial Dos and Don’ts: Don’t forget to examine end of life documents.
If you don’t have a will or trust, a living will, and other end of life documents, now is the time to get them. If you do have them, take a moment to review the documents. It is likely you have identified your spouse as the person who will make end of life and quality of life decisions in the event of your incapacitation. These documents need to be updated unless you still want your ex to make these important decisions about your care.
Do Hire a Divorce Attorney
In Maryland, divorcing couples may represent themselves in the proceedings. However, the courts will hold them to the same standard as they hold a family law attorney. It is a good idea to divorce with the assistance of an experienced divorce attorney, who will recognize potential pitfalls, as well as provide guidance when approaching the many topics that present themselves in a divorce. At Fait & DiLima, our attorneys focus their practice on divorce and family law issues. From child custody and parenting time, to property division to the allocation of debt, we work with our clients to resolve their divorce cases with an eye towards the best interests of the client and their family. Contact us today to schedule a consultation.