It’s been said over and over again; nobody gets married expecting to divorce. And it’s been stated over and over again that 50% of all marriages will end in divorce. It is a classic "hope for the best and prepare for the worst" scenario. And part of the worst is being left without adequate or fair division of assets.
If you live in one of nine community property states, all assets within a marriage are divided equally. The rest of the States aim for “fair and equitable”. But will you know what an equitable settlement would be? There are many couples where one spouse is the sole financial care taker and the other spouse is essentially clueless about the income and outgo of the household cash.
This sounds exactly like the mistake it is. Even if it is death that takes the spouse looking after the assets of the home, the survivor still needs to figure out how to handle something that he or she has very little knowledge of. In a divorce, that ignorance can become even more burdensome.
What should a spouse do to preserve and protect assets in case of a divorce? There are actually several things that can be done; some are helpful even if divorce seems imminent.
Get a Lawyer
This seems pretty obvious but it should be done as soon as possible. Equally important is to retain a lawyer who is a divorce specialist. Like most complex systems, knowing everything about every law is asking a bit much of a single person. Someone who specializes is more apt to keep up with the latest changes and have more experience in what works and what doesn’t.
A good divorce lawyer should encourage both parties to go through mediated negotiations rather than through court. The outcome is generally better for all concerned.
Establish and Maintain Separate Credit
Separate credit has more than one positive. Of course, the one you care about in divorce is knowing that your credit history is not and will not be impacted by your soon-to-be-ex-spouse. The other is that you will have a credit history that will help you when you need a loan.
Having a personal credit history is especially helpful for non-working spouses such as the stay-at-home mom. Once divorce is on the way, all joint accounts, bank and credit both, should be frozen or closed. In addition, auto insurance should be adjusted to reflect your new status when the divorce becomes final.
Be prepared, however, to share retirement accounts even if you are no longer married. Those accounts may be considered marital property jointly held even though only one person’s name is on it.
Inventory Debts and Assets
Along with establishing credit, you should have a very good idea of all assets owned and debts owed by you and your spouse. Your lawyer can help you obtain a full disclosure of all joint and individually held financial assets.
You should also track “non-marital” assets such as inheritances and gifts to your spouse. While they may be thought of as belonging to only one of you, it is still best to know about them before negotiating the settlement that will spell out your financial future for years to come.
Keeping copies of all accounts includes keeping track of mortgage or rent payments. These must be paid on time regardless of your personal circumstance. To simplify things, it may be best to sell any jointly held property and split the proceeds. Be careful about moving out of the house and into an apartment prior to signing the final divorce papers; this could weaken any claim you have to it later.
Change Your Will
It’s hard enough to make out a will in the first place. Don’t shor-change your heirs by forgetting to adjust your will after a divorce. Check and change beneficiaries if needed. And make any other changes to help support anyone you are responsible for.
Fortunately most states prevent an ex-spouse from acting as trustee, estate administrator, or receiving any monetary return from your will.
Sign a Prenuptial Agreement
Not very romantic, but eminently practical, especially if you bring a lot of assets into a marriage. Prenuptial agreements can also cover child support and other items that would come into play upon a divorce.
Place Your Assets in a Trust
Certain types of trusts established prior to marriage can shield assets if it is done properly. This means a prenuptial agreement may not be needed. And the trust can be set up all on your own with no need for the fiancé’s approval.
A couple of last notes can help smooth along what will likely be a very bumpy journey.
First of all, become educated about your financial picture while you are still married. For example, like retirement accounts, most financial accounts can be considered joint accounts even if only one person’s name is on it. This mainly holds true for accounts started and maintained after the marriage.
Second, make sure both names are on all titles and deeds. And find out if property brought into the marriage could be considered shared property if you ever used it as a family.
Everybody loves a wedding. Nobody loves a divorce. But this is a storm that you can prepare for while working and hoping that your preparations will not be put to the test.
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