Making the decision to divorce your spouse means you’ve just overcome one of the biggest hurdles you’ll face in the divorce process. The next challenge is to begin preparing financially for divorce. This will start with gathering your financial information for analysis.
A task like this can feel overwhelming and intimidating. But if you are like most people, the main thing that is probably holding you back is knowing what to look for and where to start. The good news is that this blog post will provide you with a solid starting point, including a convenient financial checklist you can refer to throughout the divorce process.
You’ve likely heard horror stories about divorces dragging on for years, causing incredible stress and financial ruin. Will this be your experience? It doesn’t have to be.
How well you prepare for divorce during the early stages before hiring a lawyer can significantly influence the divorce process. Being well-prepared can reduce your stress because you won’t have to scramble to find missing information or unnecessarily be caught off guard by surprises from the other side, though this can always happen.
Think of your divorce as a mystery you must solve: The more information your lawyer has from the start, especially regarding your finances, the better they can represent you and secure your desired outcome. This applies to issues beyond your basic finances, such as child custody or alimony, which can likewise affect your bottom line later.
In the meantime, you might be concerned about the sheer volume of information to sort through. However, there’s no need to worry if you stay organized. By systematically gathering all of the necessary information beginning today, you’ll help your lawyer get a clearer financial picture plus identify what additional documents and records are still needed from your ex, which your divorce lawyer can request on your behalf during discovery. So, without further adieu, let’s get started.
Assembling Important Financial Documents
Financial information usually falls into groups, making the discovery phase of your divorce more manageable. Below is a financial checklist detailing the documents you should start assembling.
Financial Documents
- Income tax returns for the past three to five years
- Social security statements
- Financial statements and loan information
- Debt records
- Liens
- Bankruptcy
- Foreclosure
- Credit card accounts
- Investment account statements
- Pension plan information
- Retirement savings accounts
- Employment records and paystubs
Estate Planning Documents
- Wills
- Trusts
- Advanced healthcare directives
- Powers of attorney (financial and medical)
Asset-Related Documents
- Deed(s)
- Mortgage(s)
- Home equity line(s) of credit (HELOC)
- Real estate interests
- Vehicles
- Cars
- Boats
- Farm equipment
- Airplane
- Personal property
- Jewelry
- Art
- Collectibles
- Antiques
- Stocks
- Bonds
Personal Documents
- Marriage certificate
- Divorce decrees (from any previous marriages)
- Annulments (from any previous marriages)
- Social security numbers/cards for both spouses
- Birthdates for each spouse
- Legal decisions and filings involving both spouses
- Life insurance policies, including those offered through the employer of either spouse
- Internet history (emails, texts, social media)
Child Documents
- Bank accounts
- Investment accounts
- 529 plans
- Trusts
- Report cards and school records
- College savings plans
- Birth certificates
- Social security numbers
- Passports and Visas
- Adoption papers
- Embryos
- Cord blood and dental pulp storage
How to Keep Your Finances Clean and Organized During the Divorce Process
Even if their finances are in good shape, people often take actions, intentionally or not, that disrupt their previous efforts to prepare financially for divorce and create additional problems for themselves. You don’t want to be one of them. Therefore, it’s important to understand how to keep your finances clean and organized during divorce.
Maintain detailed records of present income and expenses.
If you haven’t done this before, now is the time to start. Your lawyer will need a complete understanding of your income and expenses, down to the smallest purchases, like your daily coffee. Small expenses can accumulate to significant amounts over a year, especially when paying with cash, so it’s necessary to keep track of them, too.
Remember to document unexpected expenses, such as repairs. Any additional income from a second job or side hustle should be included as well, even if it varies monthly.
Communicate respectfully regarding your finances.
It might be tough, but speaking politely to your soon-to-be ex, even if they’re making your life difficult, should become a habit. They may not appreciate you tracking their spending or questioning them, but a bad attitude from you can worsen the situation.
The same goes for interactions with customer service representatives at utilities, banks, and insurance companies, as frustrating as these experiences can be. These people hold the keys to valuable information, so being polite can make them more willing to help.
Create an organizational system.
Creating an organizational system can be challenging, especially if you’re not naturally organized. Once you have gathered as many documents as you can, see how you can arrange them into categories for easy storage. File new statements as they come in, too, so everything is available for easy retrieval when you need it.
You don’t need to have physical copies, either. Computer files work just as well, if not better. Statements can be backed up by cloud technology, which will prevent them from being lost.
Maintain your usual spending and saving habits.
Avoid making large purchases that deviate from your normal spending pattern. As tempting as it may be to splurge on an extravagant item because you “deserve” it, such actions can look bad to a judge and anger your soon-to-be-ex-spouse. In response, the court might intervene, which could result in consequences you won’t like.
Don’t worry if your ex has changed their spending habits. You can only control your own behavior, so just continue keeping records of theirs (as much as you can) so your divorce lawyer can include any asset depletion in negotiations.
Avoid major financial changes.
On a similar note, don’t make significant changes to bank accounts, beneficiaries to financial accounts, or other financial arrangements that involve you and your spouse together. This can create ill will with them and the court. You’re under scrutiny now, so, again, act with integrity and honesty, even if your spouse does not.
That said, some estate planning matters should be addressed even in the planning stages of divorce. These include non-financial matters such as who you would want to make medical decisions on your behalf or, if you have any separate property, who you would want to will it to upon your death. It’s best to talk to an Alabama estate planning lawyer to understand what you can and cannot change before your divorce commences, throughout the various stages of the divorce process, and then after it concludes.
Project what your life will cost post-divorce and what it will take to finance it.
This exercise is a large part of the “why” you are doing all of this work — because time will march on, and your life will inevitably look different from the way it looks now. Envisioning what that post-divorce life will look like and how much it will cost to support it helps inform your lawyer of the settlement they are going to seek for you.
Be discerning about the advice you get.
As you share your decision to divorce with friends, acquaintances, strangers, and the various divorce professionals you speak with, you’ll receive a lot of advice, which could conflict at times. While well-meaning, not all advice will be accurate or helpful, especially when it comes to finances, which is why it’s important to be discerning. Your divorce lawyer can help you with your decision-making.
Similarly, be wary of information you read online, as not every source is reliable. Take all advice with a grain of salt unless it’s from a trusted, reputable source, and then evaluate it accordingly in light of your unique situation. Again, consult your Alabama divorce lawyer.
Seek professional help organizing, evaluating, and, if necessary, cleaning up your finances.
There’s no shame in asking for assistance during the divorce process, including help cleaning up your finances. A competent legal team, along with the financial professionals they work with, can guide you through your divorce’s financial concerns efficiently and cost-effectively, helping you emerge prepared for your future.
Find an Alabama divorce attorney to help you prepare financially for divorce.
One of the most stressful parts of the divorce process is sifting through finances. However, it’s also one of the most important because finances lay the foundation for life after divorce.
At Summit Family Law, we recognize your divorce financial journey can be riddled with complications, from missing documents to surprises. We are here to help, armed with decades of cumulative experience among our divorce and estate planning teams and insight from the talented financial professionals we work with daily to support our clients.
We are here for you at all stages of your matter, beginning with any questions you have. Contact us at either our Huntsville or Birmingham offices today to set up a consultation.
