How to Protect your Assets During a Divorce
By Andrea Young on June 4, 2019
Getting a divorce can be one of the most difficult events you can experience. Not only is it emotionally and physically draining, it can also put a strain your finances. Going through a separation can be particularly scary when you don’t know what to expect. It is extremely important to understand the process and how your finances can be affected. In a perfect scenario, your divorce would be amicable, but that is not always the case. Here are some tips to help get you through the process and to protect your assets.
One of the most important things you can do is to create your own financial identity. This can seem daunting if you have been a stay at home parent without an income of your own. You should start by opening a bank account in your name. You’ll also want to start establishing credit. You can do this by opening an individual credit card if you don’t have one already. Even if it has a low limit, it’s a start. Building credit is vital to being able to get a car, an apartment or purchasing a house on your own.
If you have any joint accounts you should put a freeze on them. This might be an especially good idea if you and your spouse are not on good terms. By freezing the account they can’t attempt to withdraw funds. Once you have settled any bills associated with that account you will have to decide how you want to divide the remaining money. This can be another source of contention, if one spouse feels they contributed more than the other. Once you have agreed upon the division, close the account. Have the money divided and transferred into your personal account. As always, you should consult with your advisors such as accountants, lawyers, mediators and financial advisors. There are many legal, financial and tax considerations that should be discussed.
You will want to establish a budget and stick to it. In many cases, your income is going down but expenses will most likely go up. Even if you are still going through the divorce process, it is never too early to plan. Planning will help eliminate any financial surprises. Divorce brings a lot of big changes such as relocation, employment change, and/or custody changes. There are a lot of variables to factor in and until you know what your financial situation will be, it’s best to err on the side of caution.
One thing most people overlook is their beneficiary designations. You will want to update your beneficiaries on 401(k)’s, IRA’s and life insurance policies. It is generally a quick process requiring minimal paperwork. Along with your beneficiary changes you’ll also want to update your name, should you change it.
Divorce is not something that you ever want to experience, but if you are going through it, there are ways to help minimize the stress that accompanies it. Hopefully, your divorce is amicable and everyone is able to agree with each other about decisions, but if not, take these steps to help protect you and your assets. Remember your health and wellness are also important, so be sure to take the time to take care of yourself during this process.