Covering Your Assets In Divorce

August 23, 2010 | By Steven DiGregorio

Nothing like a little foresight to protect yourself!  Even a mutually agreed upon divorce can turn ugly when the issue of money arises.   When the process of litigation can run up the legal fees quickly, financial pain for both of you is not far off.

Preparing Well: While a peaceable divorce can be a simple division of assets, many times the process becomes more of an emotional than a legal issue.   If you want to be smart about divorce, do your homework and keep your emotions in check.  You can protect yourself by taking a few basic steps:

  • Gather and organize all financial records and make copies of everything, one for yourself and a second for your attorney.
  • Close, or at least freeze, access to all joint accounts.  Create new accounts in just your name.
  • Keep a written record of all expenses run up before and during separation, including bills jointly paid and improvements made to the house.
  • Document your net worth and keep a record of cash flow during separation.
  • If you suspect your soon-to-be ex is hiding assets, you may have to hire a forensic accountant to sniff out the stash. This can be expensive, and if your ex is unusually devious, there’s no guarantee of success.
  • Before you sit down to a settlement conference, make a list of all items you want covered in the agreement. Consider the tax ramifications of forced sales of stock or other investments and consult with your financial planner.
  • If there’s something you know your former spouse will want in the property settlement, don’t give it away in a futile gesture of goodwill, use it as a bargaining chip and trade it for something you want. Divorce is a business negotiation, don’t let yourself be taken advantage of.
  • Plan to settle out of court. The attorney fees will be significantly less, and the majority of cases don’t go to court. Check the settlement against your wish list before signing off.

The Chief Financial Points:

  • Be careful not to focus on the present and miss the future. Make sure you understand the financial implications of your decisions. Rather than accepting a BMW worth $35,000, for example, consider taking a mutual fund with the same current market value. The car will depreciate; the fund, if chosen wisely, probably won’t.
  • Count the tax. Don’t forget to factor in the tax costs of every financial decision you make. For instance, two stock portfolios of seemingly equal dollar value might really be worth completely different amounts, depending on capital gains.
  • The devil is in the details. In the struggle to keep your divorce simple, make sure you have information on absolutely everything that will affect your financial future: all assets, investment funds, retirement pensions, and so on.
  • Failing to untangle all joint finances. Keep your finances mingled and your financial future could be jeopardized if your former spouse defaults on payments, commits fraud, goes bankrupt, or becomes disabled. You might also be liable for any debt that your spouse has incurred under your name. Make sure you have worked out a way cut or minimize all financial ties that bind you before the divorce rather than after it.
  • Give yourself time to get your career back on track. If you gave up your career when you got married, it probably won’t be easy to jump back into the workforce. Don’t be surprised when the costs–both financially and emotionally–of resuming your old business turn out to be greater than you’d thought.

Last but not least:

  • Divorce is governed by state law, and some details may differ from state to state.
  • Your attorney should tell you only what’s been done in other cases and discuss likely outcomes without making promises.
  • Remember that your attorney is an advocate, not your friend or confidant. The attorney doesn’t want to hear the details.
  • Getting nasty is expensive, and it’s nastiness not division of property that leads to skyrocketing attorney’s fees.
  • Learn how to listen to your former spouse.  While listening becomes harder in divorce, it will lessen the pain and the cost.
  • Think about what you want in the divorce. The answer is usually simple: out of a dead relationship.
  • Most fathers want regular contact with their children, but few want to be the custodial parent. If the kids are going to live with their mother, she will need money to raise them and may need money to cover her expenses until she returns to work. This is about the children, be understanding of their wants and needs.

In the end, divorce is rarely simple. Divorce has become a multibillion-dollar industry complete with psychiatrists, mediators, accountants and sometimes private detectives.  Yet, with a little planning and consideration you can save yourself literally thousands of dollars.

Compass Asset Management Group. LLC does not provide legal or tax advice.

For more information contact us at 845.563.0537 or Contact@CompassAMG.com

The author of this blog, Steven M DiGregorio is President of Compass Asset Management Group, LLC and an Investment Advisor Representative with Spire Wealth Management, LLC a Federally Registered Investment Advisory Firm.  Securities offered through an affilliated company Spire Securities, LLC a Registered Broker/Dealer and member FINRA/SIPC.

Tags: Divorce, estate planning, financial planners, financial planning, QDRO, retirement plan, Taxes

STEVEN M DIGREGORIO is President of Compass Asset Management Group, LLC and an Investment Advisor Representative with Spire Wealth Management, LLC.
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