Divorce can be an emotional process. However, when emotions run high, many people forget to focus on their financial survival pre- and post-divorce. Not preparing yourself financially for divorce can be a massive mistake and leave you and your family struggling.
At Leigh Daniel, Attorney at Law, our compassionate family law attorneys can help guide you through the divorce process. Our experienced legal team can formulate a strategic financial plan for you and your family so that divorce leaves you in the best financial position possible.
Divorce financial planning should be a significant component of any divorce or legal separation, especially in cases involving high-net worth divorces. To discuss your situation and how our family law attorneys can help you with financial planning during and after divorce, contact our Alabama office and request a confidential case consultation.
Strategic Financial Separation Before Divorce
It is crucial to involve a skilled divorce attorney early in the separation process. An attorney can offer proactive advice on preemptively segregating finances from your spouse and untangling joint accounts to safeguard your assets.
Without legal assistance, it is easy to make mistakes that can appear to a judge as if you are cutting off your partner financially or hiding assets so they cannot be divided equitably. Experienced divorce attorneys can complete an intensive financial inventory of your assets and debts. They may work with a forensic accountant to locate all marital assets for distribution.
Here are some key financial planning moves to make leading up to a divorce:
- Collect all vital documentation about your financial situation. This might include paystubs, tax returns, bank statements, mortgage paperwork, and other documentation regarding real estate ownership, investment accounts, statements for retirement accounts, and family expenses.
- Make a list of your assets. Asset division is sometimes one of the most contentious aspects of divorce. Help your lawyer with a clear list of assets and their estimated value. Make a separate list for marital and separate assets. Property earned during the marriage, subject to a prenuptial agreement, or received through an inheritance or a gift is generally considered separate property. In contrast, marital property is everything else acquired during the marriage.
- Make a list of your and your ex-spouse’s debts. Consider running credit reports so that you do not miss anything.
- Consider working with a financial advisor. A financial planner may be able to help you make sense of your finances and create a manageable budget before and after divorce. Financial planners can also address your financial concerns, discuss potential tax implications of various options to resolve your divorce, and provide an honest assessment of your family finances.
Going through a divorce can be difficult, but an experienced divorce attorney can provide you with the knowledgeable guidance you need during this time to secure a fair settlement.
Addressing Joint Financial Responsibilities
As a married couple, you and your spouse are equally responsible for your household’s shared financial responsibilities, debts, and assets. A family law and divorce attorney can help you understand your legal and financial obligations and offer strategies regarding asset distribution.
Alabama subscribes to the equitable distribution model for dividing assets that are considered marital property. The equitable distribution model assumes that the couple shares all marital property and debts and that both should be divided fairly and equitably when the couple divorces. Equitable distribution does not amount to a 50-50 split. It only means that assets and debts are divided fairly and equitably based on factors a judge deems relevant to the case.
Addressing joint financial responsibilities means identifying and categorizing debts, identifying all marital property, and collaborating on division strategies. A stay-at-home parent may not contribute measurable income. However, they significantly contribute to their partner’s earning potential, ease the burden of childcare costs, and build a stable home environment. Identifying how each partner contributes to the stability of the household and determining each partner’s financial obligations and future needs is vital.
An attorney and financial advisor can help you understand the legal complexities of financial obligations, taxes, and shared debts while offering recommendations for post-divorce financial planning.
Creating a Sustainable Budget for Transition
One of the most frightening aspects of divorce is understanding how to manage your financial life after divorce proceedings have wrapped up. Devising a realistic budget reflecting your after-divorce finances is the best way to keep you and your family on track. An experienced divorce attorney can help you understand your financial situation after divorce so you can work toward establishing a budget that addresses your new life and potential income shift as a newly single person.
When setting up your finances for transition following divorce, some key considerations include:
- Establishing a new budget
- Reviewing your tax withholdings
- Reviewing and altering your retirement plans
- Reassessing insurance coverage options
- Making plans to build an emergency fund
Establishing your independence after divorce means taking proactive steps to manage your finances. You must review your cash flow, evaluate your lifestyle, and make informed financial decisions.
Spousal support, a payment that one spouse makes to the other when their incomes and earning capacities significantly differ, may help with this transition. An experienced divorce attorney can explain whether you qualify for this financial support.
Long-Term Financial Wellness Post-Divorce
What does your long-term financial wellness look like after divorce? First, your long-term financial wellness rests, in part, on following the stipulations outlined in the divorce decree. That means complying with all court-ordered alimony, child support payments, and other legal and financial obligations. Don’t skip payments or cancel health insurance policies without getting input from your attorney. Avoiding court-ordered financial obligations can jeopardize your legal standing and long-term financial health.
Part of your long-term financial health is making sure the decisions you make during the divorce process protect your financial interests. For example, many spouses may want to be awarded the primary residence. However, your financial needs might be better met by receiving retirement assets from your former spouse through a qualified domestic relations order. An experienced family law attorney and financial professional can discuss tax and financial considerations for your various options.
Next, take a closer look at your financial strategies. Evaluate your financial goals and timeline for specific life events, such as your child’s education and retirement. Do you need to revise timelines? Do you need to reassess your investment contributions? Adjust your saving strategies to ensure you have what you need for emergencies and the future. A divorce can derail your plans and financial well-being, but you can get things back on track with careful and strategic financial planning and diligent budgeting. Soon, you’ll be back on the path to financial growth, productivity, and independence.
Other Suggested Tips for Financial Planning When Divorcing
You have a lot to think about when going through the process of divorce. However, you mustn’t forget these other financial planning tips that can fall through the cracks when managing more significant financial decisions. Consider these strategies for stabilizing your financial situation after divorce:
- Open new accounts to establish a new credit identity as a single person.
- Check your credit score periodically.
- Reassess your tax planning strategies.
- Establish a new budget.
- Change your online passwords.
- Update insurance coverage.
You might also want to meet with an estate planning attorney. Many spouses name the other spouse as their primary beneficiary on their life insurance policies and other assets. You may need to update your beneficiary designations and estate plan to reflect your current situation.
An Experienced Family Law Attorney Can Help
How can you financially prepare for divorce? It’s easier with the help of an experienced Alabama divorce attorney. At Leigh Daniel, Attorney at Law, our supportive legal team can help you navigate the divorce process and create a stable financial future for yourself and your family.
Contact a skilled divorce attorney with Leigh Daniel, Attorney at Law, for compassionate and personalized financial and family law advice. Request your confidential case evaluation today.
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