Emotions tend to take over at the outset of a divorce, and generally heat up rather than cool down through the divorce process. When we let emotions take too much control, we can make decisions that might not be in our long-term financial best interests.
One easy way to eliminate the shortsightedness emotions can bring to divorce is to have a prenuptial agreement – prior to marriage, a couple in a positive head space can think rationally about how to divide assets and handle spousal support in the event of divorce.
A majority of marriages still end without a prenuptial agreement, so the financial urgency of thinking clearly and for the long-term should be at the front of one’s mind. What do you need to consider?
First, you need to take an accounting of your current financial status. Gather all of your bank statements, tax returns, retirement accounts and other key assets and liabilities. You may not know all of what you own or owe; you may not know if your spouse secreted some assets or indebted you without your knowledge. Depending on the size and complexity of your finances, a forensic accounting may be necessary and hiring a financial advisor could be helpful.
Second, once you know what is on your plate, you have to evaluate your current income stream. Have you been the principal earner or do you depend heavily on your spouse? If the latter, you will need to determine what level of spousal support you would require during and after divorce.
Third, you need to consider your priorities, which should first be long-term financial stability. If you are older, and have fewer work years or opportunities ahead, the need to downsize and assure you have suitable retirement assets and long-term care insurance may be your first considerations. If you are younger with good work prospects, you may want to trade some future retirement for current assets, like the marital home, or less debt.
As you can see, without taking a clear review of your assets and liabilities you run the risk of your spouse taking advantage of you. And without measuring your current ability to support yourself and gauging your lifestyle, you cannot make sound decisions about monthly support figures. And without thinking about your future, you can end up sacrificing far too much for what seemed like good short-term moves.
If you have questions about financial support during and after divorce, contact us – we can help.