The words “I do” don’t have a guarantee, unfortunately. The marriage that was all joy and sunshine in the beginning may end up raining on your parade. Once the marriage is over, both parties will have to adjust to life as two single financial entities, rather than one married unit.
Deciding to divorce your spouse is one of the hardest decisions you will make. You married a person who you assumed you would stay with forever. But people change. The person you married 5, 10, or 20 years ago may not be the person you are with today.
Divorce is the dissolving of the bonds of matrimony between two people. Deciding to divorce is already hard. But what follows is even harder; from who will get the house to custody issues, all aspects of divorce are potential landmines.
Once the initial shock has worn off, arm yourself with the tools to successfully navigate the divorce. Remember that you need to look out for yourself and your financial future. Tell friends and family when you are able. Chances are good that someone will know a friend who has divorced. Accept all tips, anecdotes, and helpful advice. You may not use it right away, but having knowledge is powerful.
Divorce issues encompass spousal support, child custody, child support, distribution of property, and division of debt per Wikipedia. While divorce laws vary by state and country, a divorce must be certified by a court of law. All terms of the divorce are decided by the court. A mediator may be hired by one or both parties to settle issues, such as custody and visitation.
Once upon a time prenuptial agreements were the domain of the rich and famous. As more people wait until their early 30s to get married, the need to protect assets earned before the marriage becomes of paramount importance. The terms of a prenuptial agreement avoid costly litigation during divorce proceedings.
The prenuptial agreement can cover property, salaries, future earnings, and more. If you and your spouse signed a prenuptial agreement, the divorce process will be straightforward. Each spouse will leave the marriage with everything that they brought to the marriage and everything earned after the marriage.
The Divorce Process
Before assets can be divided, both parties must do give the following to lawyers and mediators:
- valuations on all properties
- all mortgage documents to determine what is left of mortgage
- 12 months of bank statements
- statements to confirm value of investments, stocks, bonds, and insurance policies
- cash value for pensions and retirement plans
- list of all liabilities
- several months of salary slips
Once all financial documents are produced and collated, the legal counsel for each party will draw up an agreement. The agreement will address all issues. Don’t be surprised if you and your soon-to-be ex-spouse don’t agree on the first draft.
Custody Issues -- Draw up a list of what is most important to you. If you want sole custody, with your spouse having visitation only, demand child support to cover the expense of raising your child. Ask for provision for adjustments in amount of child support after each year to account for inflation and rise on cost of living.
The Home -- Will you live in the marital home? Will you and your spouse take turns living in the home while the children stay in the home all the time?
The marital home may be too large to live in or hold too many bad memories or be too costly to own. Without a prenuptial agreement, the sale of the house will be split 50-50. With the proceeds from the sale of the house, each spouse could purchase a house.
Community Property -- In community property states (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, or Wisconsin), bank accounts and other financial documents are thoroughly investigated. If you live in one of these community property states, you and your spouse will be responsible for any debts incurred. Generally, with an individual bank account, you are responsible for all income, assets, and debt.
Bank Accounts -- For persons who work part time or are stay-at-home parents, it may be difficult to develop a financial picture without relying on a spouse’s income. By opening an account in your name, you will establish credit for yourself.
With a joint bank account, both spouses are responsible for all bills, debts, and loans. Once the divorce is final ex-spouses are both responsible for all debts. Of course, with a divorce decree in hand you will want to close all bank accounts once assets have been disbursed.
The final step to securing your financial future involves record keeping. As a married couple, all assets were shared. Once the divorce decree is signed, you will want to remove your spouses name from all accounts that you now have joint custody of. Change beneficiaries on insurance policies. Rewrite your will. Decide on guardian for children.
Divorce isn’t pleasant, but if you’re armed with knowledge, the division of assets will go a little smoother.