Avoid Financial Catastrophe in Divorce
While many divorces can be friendly in nature, this does not mean that they will not be costly. When it comes to divorce in today's society, it is all about the division of assets, namely items of monetary value. Without this knowledge, people can wind up losing a significant portion of their assets in a divorce, potentially leaving them in financial ruin; however, this does not have to be the case. Fortunately, there are a few tips that everyone should keep in mind to ensure that they have some semblance of financial stability on the other side of any divorce proceeding.What was Brought Into the Marriage?
One of the aspects of the division that every judge is going to look at is what assets are marital in nature and what assets are non marital. Assets that were brought into the marriage by one spouse are likely to remain non marital in nature. This means that the assets are owned by one of the spouses, not both, and that they will not be subject to the division of assets during the divorce. Make sure to make note of the assets that were owned prior to the marriage to ensure that these are not inappropriately counted during the division of assets. It is important to keep in mind that non marital assets should always be kept separately from marital assets. Once non marital assets are placed in a marital account, it may be difficult to separate non marital assets from those that are marital. This concept is referred to as commingling of assets and one runs the risk of all funds in an account being considered marital even if non-marital assets have been used to fund the account.Are All of the Assets on the Table?
It is not unusual for one spouse to try and hide certain assets from their partner. If the assets are successfully hidden, it could mean that they are not included when the assets are divided, potentially leaving one spouse at a severe disadvantage. Make sure this does not happen by following the money. Make sure that all of the other spouse's business holdings, bank accounts, and credit cards are on the table. Understand where all of the assets are coming from to ensure that the division of assets is fair and equitable. A party may benefit from the services of a neutral forensic accountant or simply a forensic accountant to investigate the marital estate and to educate the party as to the marital and non marital assets.Never Plan on Receiving Alimony Forever
Part of ensuring financial stability on the other side of a divorce is planning accurately for the future. Many people will make the mistake of budgeting for alimony payments in perpetuity. Unfortunately, this often is not the case. There are many reasons that the alimony payments might stop, including financial disaster from the other spouse that causes the money to stop. Further, the paying party may retire or pass away. Both those situations will result in termination of alimony, or at the very least a decrease in alimony. Ensure that an accurate budget and solid financial plan are both in place prior to the divorce agreement going final. This will help keep the bank accounts afloat going forward. Separately, one may want to consider entering or re-entering the workforce if the other spouse’s income and financial situation is simply not enough to support two different households. It may be challenging to find employment when a party has not worked in many years or at all, but it may be the only option in some tough instances. A court will typically impute minimum wage on the non-earning spouse when calculating alimony and spousal support, so a court starts with the assumption that any person can at least earn minimum wage. That is something to keep in mind when entering into alimony discussions.
Article updated October 15, 2020.