5 Ways to Prepare Finances for a Divorce

As widely reported, the stressors of 2020 are leading to more splits and more divorces.

Beyond being highly contentious and aggravating, divorce has significant mental and emotional impacts. Finances are often a lead contributor to this as the most prolonged part of any negotiation where both parties seek to protect what’s theirs while working to prevent their former spouse from taking too much. However contentious the divorce may get, there are a few things spouses should consider before those discussions begin to prepare for what’s to come. 

1. Credit monitoring

If both spouses have excellent credit and are fiscally responsible, credit is a quick step. With solid credit on both sides, joint accounts can be separated faster and hidden credit surprises won’t appear later on. Most big banks offer basic credit checking that won’t harm a score, making it easy to know where things stand. 

2. Track spending and keep impeccable documentation

Before a divorce, both spouses should prepare a budget to understand how much money they’ll need to maintain a standard of life (or simply for essentials) as their ex-spouse likely won’t be in a giving mood when it comes time to negotiate. It’s important to account for things like home costs (if one spouse is moving out), healthcare (if leaving a spouse’s plan), and all child-related expenses as a starting point. Keeping these files organized and updated is crucial.

3. Digital organization 

Having all passwords, account numbers, usernames, etc. in one place or on one physical piece of paper could offer peace of mind during the divorce proceeding. It’s not uncommon for one spouse to block accounts for another or change passwords on a whim with no prior notice. Although couples may not be at the point of completely splitting accounts, having this information documented will help identify if any changes have been made without consent before the divorce is finalized. 

4. Update financial and estate documents

In more established marriages, there may be wills, trusts, life insurance, and other high-value considerations. Each spouse is going to want to protect their high-value assets and may even have their eye on property of their ex’s. Couples (or spouses who have majority ownership of said document) should add provisions for divorces if they haven’t already been established or consider removing spouses as beneficiaries before proceedings end. 

5. Considering finances for children 

If children are involved, having open discussions (no matter how fiery things get) is crucial to protect their best interests. This can look like anything from setting aside funds from both spouses or adjusting their names as beneficiaries on investments that they could continue to benefit from following a divorce. Considering a child’s financial future is also a great way to divert funds from a spouse should an ex not want them to enjoy those financial benefits. 

A common reaction to a divorce is to cash out an IRA or other retirement account. This should not be done unless absolutely necessary as the penalties will result in getting less money than a loan would cost. Most courts also require a financial declaration. This should be filled out with the aid of an experienced divorce lawyer.

As you can tell, financial planning for a divorce can be complicated, but you don’t have to go it alone. In Mississippi, hundreds of spouses heading for divorce have trusted the Law Offices of Rusty Williard to advise and guide them through this difficult time. Call us today at (601) 824-9797 to schedule your free consultation.