When I Do Becomes I Don’t: Five Strategies for a Financially Responsible Divorce
Divorce is likely one of the hardest thing you will live through. You may have to make more decisions with your spouse trying to get divorced than you might have made in the next 10 years of marriage. With every decision having significant financial, legal, relational and emotional impact, it often becomes a series of least worst decisions. Below are five key strategies that will create the healthiest restructuring of your family:
1. Know What You Really, Really, Really Want
This sounds so simple yet many people wander through their divorce wanting to know what’s fair without considering what they want, don’t want and what they need. It’s also important to consider what your spouse really wants and why. The more insight you and your attorney have in understanding what motivates your spouse, the better positioned you will be to decide what to ask for, what to fight for if needed, and what you can live without. “Top Financial Mistakes Divorcees Make”
2. Remember, it’s Business
Divorce is the legal dividing of your marital assets and responsibilities. It’s governed by state law and there are even county differences. Illinois focuses on equitable distribution. The goal is not 50/50 but “equitable” based upon a number of factors including the length of marriage, age and health of each spouse. There are three primary processes – Mediation, Collaborative or Traditional Litigation. Each has its benefits and drawbacks and selecting the right fit for your family’s unique interests will have a huge impact on the time and cost involved. It’s important to be aware of what the law is and know what a court might do, and then focus on creating settlement negotiations in the way that will get you divorced with the least amount of collateral damage. “Approaches to Divorce”
3. Know Your Numbers
Most people calculate the cost of divorce as the amount of legal and professional fees paid, but consider the time, energy and missed opportunities as well. It’s important to order your free credit report and understand where you are today by gathering your tax returns and financial statements on all assets you own and debt you owe. Make sure you have a bank account and credit card in your own name to have access to cash no matter what happens. “Divorce Expense Worksheet”
4. Create Your Empowerment Team
While your friends and family care about you, even the most well intentioned advice may cause confusion and unnecessary stress. Because you have to make the most difficult and important financial decisions of your life during an emotionally chaotic time, you need a professional team to help you deal from a position of strength, not weakness. You will need an attorney who specializes in family law plus experts in the tax, financial and emotional aspects of divorce. No matter how strong your team is, you are the CEO and it’s critical you manage the process as well as each team member. “Questions to Ask Your Attorney”
5. Own Your Future
While it’s ideal to remain amicable during the divorce process, it’s critical not to sign a bad deal. Once you have come to some agreement, your attorney will draft a Marital Settlement Agreement. The MSA is a lengthy document detailing all parameters of your divorce and it’s important to get a second and even third set of eyes before you sign. Keep in mind that the document is only as good as it’s legally enforceable. There are many logistics in terms of re-titling assets and removing names from debt so practical implementation cannot be stressed enough. “Post-Divorce Financial Checklist”
As you navigate this challenging transition, make sure to nurture yourself and protect hope. Focus on the business aspects. While the end of your marriage may not have been amicable, you can choose to manage your emotions and prioritize so that the divorce and co-parenting might be. Be open to all possibilities. Each step you proactively take as well as the miss-steps you don’t make will get you closer to the life you want to create.
BDF’s Women’s Service Team is experienced in helping families navigate the complexities of divorce. Please watch our webinar “When I do Becomes I Don’t: Five Strategies for a Financially Responsible Divorce” for additional details or call us if we can be a resource for you or those you care about.
A wealth manager and owner at BDF, Heather L. Locus, CPA, CFP®, CDFA® founded our Women’s Service Team and leads our Divorce Practice Group. She loves solving complex problems by balancing the financial and emotional components with tax and legal issues. Heather educates women and men on how to transition through new phases of life with confidence and peace of mind. She authored The Next Chapter: A Practical Roadmap for Navigating Through, and Beyond, Divorce and you can read her latest divorce tips at (Forbes Link). She has been named one of the Best-In-State Wealth Advisors by Forbes, a Five Star Wealth Manager according to Chicago Magazine and was named a Top 200 Wealth Advisor Mom by Working Mother.