Renting or Buying
If you are moving due to the separation or divorce, consider renting for a year or so until the emotional and financial turmoil have subsided. This is a time of major changes, often resulting in moving again. Typically, if you purchase a home and sell within two years, expenses such as real estate commissions, closing expenses, and moving costs will cause a net loss on the transaction.
Steps to Take to Prepare for the Financial Divorce
In order to be prepared for the financial aspects of divorce, you should take the following steps:
- Establish credit in your own name.
- If available, set aside some cash in an account under your own name to have available during the period from separation until the actual divorce.
- See that any needed repairs or maintenance are completed on your car.
- Take care of any medical or dental procedures for you or your children. (Do the children need braces?)
- Purchase needed clothing for yourself and children.
- Consider child care arrangements following the divorce.
- Consider career possibilities for post-divorce employment.
- Take courses to increase your income-earning abilities.
- Videotape the inside of your home and the contents. Items sometimes have a way of disappearing during a divorce.
- If you or your spouse has a safe deposit box, take photos of the contents.
- Gather financial records of income.
- List debts.
- Estimate current spending in detail.
- Contact a financial planner trained in divorce to help with the calculations concerning future financial needs, especially determining an equitable settlement (this may mean 60% of assets to one spouse, for instance, in order to stabilize her financial future).
- If you or the spouse has applied for a loan in recent years, find a copy of the paperwork. A financial statement is usually attached listing assets and liabilities. Copy this paperwork.
- Make copies of tax returns for the past three years. Also copy bank statements, brokerage statements, retirement account statements, credit card statements and legal documents such as wills and trusts. By filing Form 4506 with the IRS and paying a nominal fee you may obtain past tax returns. Past bank statements can be obtained from your bank.
- Cancel joint credit cards and bank accounts.
- Read a book on do-it-yourself divorce, even if you plan to use an attorney.
- Counseling is recommended for you and your children to help in coping with the emotional issues of divorce.
- Estimate post-divorce spending in detail.
- Do not accept a settlement offer without discussing the situation with a qualified financial expert.
- Have your will redrawn to change the primary beneficiary. Also change the beneficiary on your IRA, company retirement plan and insurance policies.
While this list seems onerous, you might consider tackling a couple of items one week and more the next. Beginning to complete these tasks will provide a measure of comfort through the feeling of control in planning for your own divorce.
Remember: Knowledge Is Power. In order to reach a financially equitable settlement, you must first be educated about your own financial picture and how the divorce will affect your future.