If you are contemplating a divorce settlement, there are many steps you must take to ensure you fairly, accurately, and completely represent your financial circumstances, such as your assets, debts, and income. In fact, a settlement or judicial order can be reopened if there is evidence one party tried to conceal assets or represented an incomplete financial picture. It is also important to understand that the courts don’t automatically accept splitting all assets and debts 50/50 as being “fair” or equitable”. Here are some mistakes to avoid when contemplating your finances during a divorce:

  1. One Spouse is the Primary Spouse Making Financial Decisions: If you have been nearly “in the dark” about the financial decisions in your household, now is the time to start keeping a close eye. If your spouse has control of nearly all of the income, asset, and/or debt information and you have no information or no access to this information, your spouse may have an unfair advantage when it comes time to negotiate. An attorney can assist you in gaining access to all of the necessary financial information, including but not limited to, complete bank records, tax returns, pay stubs, appraisals and bills of sale for real estate and large assets, copies of all utility bills, and expense statements, all credit card/debit card statements, and anything else that accounts for the money spent and acquired during the marriage. If you are able to, it would helpful to start compiling and organizing any of these documents that you have access to, so that your attorney is ready to help you strategize.
  2. Not Producing an Accurate Budget: You will need to come up with a monthly budget that accounts for all your expenses – utility bills, rent/mortgage, insurance payments, subscriptions, entertainment, food, clothing- everything. Many people underestimate their living expenses and later realize they are unable to cover all their expenses. If you are struggling with producing an accurate and complete budget, consider utilizing a financial advisor to assist you with this.
  3. Not Putting Aside Cash to Sustain Yourself Through The Divorce: Between the date of separation and the time the divorce is finalized, you could be spending months, if not years, on attorneys’ fees. You will likely have a tight budget and will have to spend less during this time. You should create a “rainy-day” fund as a safety net in case the worst-case scenario occurs, such as losing your job or home. This fund should be comprised of 3-6 months’ worth of your monthly budget in savings.
  4. Failing to Insure the Divorce Settlement: It is possible your spouse may die prematurely or sustain a disability, which could result in a loss of income and thus, a loss of alimony, child support, education tuition, or settlement payments if not properly insured. Certain insurance policies can guarantee that such payments will continue.
  5. Failing to Consider Your Spouse’s Eligibility for Social Security Benefits: When a couple is married for over 10 years, the lower-earning spouse is entitled to derivative social security benefits on their spouse’s records. See https://www.ssa.gov/policy/docs/rsnotes/rsn2017-01.html. Speak to your attorney about this option.
  6. Forgetting to Update Estate Documents: After the divorce, remember to change the beneficiary designations on insurance policies, retirement accounts, wills, etc. Speak to an attorney to figure out what changes you should be making.

If you have a substantial amount of assets or debts, you should speak to an attorney to strategize a financial plan for the divorce. You should also likely seek out a financial advisor to create a realistic monthly budget and assist with future financial planning, both during the divorce and after. Contact our attorneys at Heimerl & Lammers to assist you with this process today.