As everyone knows divorce can be mentally, emotionally and financially exhausting. While there’s not always much to be done about the mental and emotional pain, financial damage can be mitigated with a little advanced planning and proactive effort. The following are several tips by Angela Colley of BusinessInsider.com on how to ready your money for a divorce.
- Separate your bank accounts.
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Protect your credit.
If you and your former spouse have joint credit accounts all the hard work you put into building a solid score can evaporate after a series of poor financial decisions by your ex. Establishing separate credit and loan accounts critical.
First things first, order an official copy of your credit report from all three credit reporting agencies: TransUnion, Experian, and Equifax. Review the reports carefully and flag any accounts you share with your spouse. Though it may be uncomfortable, have a direct conversation with your spouse and decide who wants to keep what and how the accounts ought to be divided.
Dividing these debts isn’t as easy as that, however. You cannot just call a lender and ask to have your name removed if it’s a joint obligation. Instead, the debt must usually be repaid or refinanced in the name of only spouse. If the spouse responsible for the debt isn’t capable of having it refinanced alone then selling the asset or paying off the bill is usually the best move. Signing over control of an asset while leaving your name on the loan is a recipe for disaster and should be avoided at all costs.
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Check on your insurance coverage.
If you’ve shared insurance coverage with your spouse you may now find yourself out of luck during a divorce. Plan ahead and negotiate a specific time to change the insurance, allowing yourself enough time to secure new coverage. Make sure that you have the necessary health, auto, and homeowners (or rental) insurance.
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Last but certainly not least, taxes.
According to IRS rules, the year your divorce becomes final is the year your tax status changes to single. Other issues may arise to complicate the already tricky tax situation such as alimony payments or child tax credits. The first year of filing will likely be the most difficult and it may be a good idea to hire a tax professional for help.
Many couples preparing for a divorce will leave their joint checking accounts open, not wanting to appear angry or bitter. However, a spiteful spouse might not be so considerate and could easily drain your joint account before you realize what has happened.
Establishing separate bank accounts and dealing with whatever uncomfortable conversation that causes is better in the end than taking the financial risk. The best advice would be take half the money from any joint account and place it in your own checking account.
Though separating money can be tedious and upsetting, it’s absolutely necessary to avoid opening yourself up to bigger problems later on. If you or someone you know is facing the daunting prospect of divorce, you need the advice of an experienced South Carolina family law attorney to help along the way.
Source: “4 Steps To Getting Your Finances Back On Track After A Divorce,” by Angela Colley, published at BusinessInsider.com.
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