Don’t Let Divorce Ruin Your Finances: 5 Key Steps
When Ron left Mary after just shy of 10 years of marriage, he thought their divorce would be quick, clean and leave him free to pursue the life he always wanted. Because they didn’t have kids and Mary was steadily employed, Ron didn’t pay much attention to the divorce documents he filled out, just estimating as best he could on certain items, like his income and his own expenses. Though he knew Mary had hired a divorce attorney, Ron thought, why bother?
When the two showed up in court, Ron was shocked when the judge handed down a decision that required Ron to pay Mary alimony. How could this be? Turns out all the sloppy estimating Ron had done when reporting his finances had opened the door for Mary’s lawyer to successfully argue for spousal support.
Ron went to see a attorneys for help lodging an appeal and learned the errors and omissions he made on his original statements would make it very difficult to eliminate the support order, especially, especially since Ron didn’t have much supporting financial paperwork to back up his revised claims. Long story short, Ron is still fighting the alimony decision — and still making monthly payments. His blunder in taking his divorce paperwork lightly has, in the end, cost him thousands more dollars, countless headaches, and has done the exact opposite of he wanted: in no way does Ron feel free to pursue the life he wants.
Getting a divorce can be a messy business, but unlike Ron’s situation, divorce doesn’t need to spell financial ruin. Recently split from your spouse? Here are five steps to help you keep your financial future looking bright:
1. Fill out all financial forms completely and accurately. Divorce requires quite a bit of paperwork, so be prepared. In New Jersey, of central importance is the Case Information Statement (CIS), the lengthy intake document that paints the financial picture the judge considers when making decisions about such matters as child support, spousal support, and division of assets. Do not overlook how critical it is for to make sure all information is correct. As Ron found out, small details overlooked in your CIS can significantly harm your chances of getting any relief.
2. Be prepared for possible tax consequences. If you go through your divorce in May, by the time April 15 rolls around again, you may be shocked to find your taxes are through the roof. Take into account that liquidating certain retirements accounts may come with a tax penalty. What to do instead? Figure out the tax liability for any tapped accounts now and have this factored into your divorce settlement.
3. Organize statements, bills, and receipts before seeing your lawyer. Time with your divorce lawyer is valuable, don’t waste it by coming in unprepared to work on your case. Get a list from your attorney of all needed paperwork and then spend your own (unbillable!) hours collecting and organizing it. This can help maximize time with your lawyer and help you fill out your CIS more accurately. For tips on how to set up a file system, see our blog on divorce organization.
4. Make a list of non-material assets. Maybe you and your spouse racked up quite a few frequent flyer miles over the years. What happens to these when you get a divorce? Though frequently overlooked, especially when individuals decide to represent themselves, frequent flyer miles and other types of bonus points redeemable for cash and goods, can come in handy as a bargaining chip during divorce negotiations, especially if they are only really valued or wanted by one spouse.
5. Underestimating asset values. Just because you don’t like that dusty old grandfather clock your spouse picked up at an estate sale — or never really cared about that limited edition art print you received as a wedding present — don’t forget to asses their value as you go about dividing assets. It’s a great time to have any art, antiques, or any other kind of valuable that the two of you acquired appraised. Valuable items in the home are often great tools for bargaining or can be an untapped source of cash to split if you both decide to liquidate.