Divorce can be a financially challenging experience, and preparing your finances beforehand is a key step to easing the transition. Here are a few tips from a divorce lawyer for women in Indianapolis, IN, to help you manage your finances before filing for divorce.
10 Tips to Get Your Finances in Order Before Filing for Divorce: Advice from a Divorce Lawyer for Women in Indianapolis, IN
1. Review Your Financial Situation Thoroughly
Start by taking a comprehensive look at your financial status. This includes gathering records for all assets, liabilities, income, and expenses. Compile documents such as tax returns, bank statements, mortgage information, loan agreements, credit card statements, and investment records.
Having a complete understanding of your finances will help you prepare for the division of assets and liabilities during the divorce. It also allows you to identify any discrepancies or hidden accounts that might need attention.
2. Separate Joint Accounts
If you share joint bank accounts or credit cards with your spouse, it’s wise to begin the process of separating them. Open a new bank account in your name alone and, if necessary, arrange to have your income deposited into this account.
Also, consider removing your name from any joint credit accounts or cards to protect yourself from future debts your spouse might incur. Doing this early on helps establish financial independence and prevents potential disputes about joint funds during the divorce proceedings.
3. Establish a Personal Budget
Divorce often brings changes in household income and expenses, so it’s important to establish a personal budget that reflects your new financial reality. List your expected income sources and calculate your anticipated expenses, including rent or mortgage payments, utilities, groceries, childcare costs, and legal fees.
Planning a realistic budget will help you understand how much you’ll need to cover your basic needs during and after the divorce. It also helps you identify areas where you can cut back or adjust spending habits to better manage your finances during this period. Additionally, setting aside a portion of your budget for an emergency fund or unexpected expenses related to the divorce can provide a financial cushion and help prevent added stress during the transition.
4. Monitor Your Credit
Maintaining a good credit score is important when going through a divorce, as it may impact your ability to secure loans, housing, or other financial resources. Obtain a copy of your credit report from a reputable credit bureau to review your credit history and score. Check for any errors or unauthorized accounts and take action to correct them. If your credit score is lower than you would like, consider taking steps to improve it, such as paying down outstanding debts or limiting new credit applications.
It’s also wise to monitor your credit regularly throughout the divorce process to detect any unusual activity that might arise from joint accounts or identity theft, ensuring you can address issues promptly. Having a solid credit score can provide a financial safety net and make it easier to move forward independently after the divorce.
5. Evaluate and Update Beneficiary Designations
As you prepare for divorce, it’s important to check and change beneficiary designations on assets such as bank accounts, insurance policies, and retirement plans, as necessary. Often, spouses are listed as beneficiaries by default, too. If you do not want your spouse to remain a beneficiary, consult with your attorney to make appropriate changes and to be sure any updates comply with Indiana law and any temporary court orders that might be in place during the divorce process.
Remember to review and update any beneficiary designations on your will and medical directives, as these documents often include provisions that may need to be revised to reflect your current intentions.
6. Secure Your Access to Important Documents
Make copies of all important financial and legal documents, including tax returns, pay stubs, bank statements, property deeds, and insurance policies. Store these copies in a safe location that only you can access, such as a personal safe or a digital storage service with secure encryption. This documentation will not only serve as a record of your financial status but will also be essential if you need to present evidence during the divorce proceedings.
Additionally, keep a backup set of these documents in a trusted location outside your home, such as with a close friend or in a safety deposit box, to ensure their safety in case of something unexpected. Having organized access to these records will also save you time and stress during the process.
7. Build an Emergency Fund
Divorce can be financially unpredictable, and it’s wise to prepare for unexpected expenses by building an emergency fund. Set aside a portion of your income to create a financial cushion that can cover at least three to six months of essential expenses, including rent, bills, and any costs related to the divorce. Having this fund in place provides a safety net that can support you through the transition and any unforeseen financial difficulties that may arise during or after the divorce process.
8. Consult With a Financial Advisor
To get a clear perspective on your financial situation and future planning, consider consulting with a financial advisor who specializes in divorce-related issues. An advisor can help you understand the tax implications of divorce, assess the value of your assets, and assist in creating a long-term financial plan that aligns with your new circumstances.
They can also provide guidance on investments, retirement accounts, and other critical financial decisions, ensuring that you make informed choices that protect your interests. Additionally, a financial advisor can help you create a strategy for managing debt, such as refinancing loans or negotiating repayment terms, to ensure a more stable financial future post-divorce.
9. Learn About the Tax Implications of Divorce
Work with a tax professional recommende by your lawyer to understand how your filing status, deductions, and taxable income will change after the divorce. For example, selling or dividing property may result in capital gains taxes, and alimony payments may affect your tax obligations.
Additionally, it’s important to consider how the division of retirement accounts like 401(k)s and IRAs may trigger tax penalties or require special handling through a Qualified Domestic Relations Order (QDRO). Preparing for these changes in advance can help you make financially savvy decisions and keep you from running into tax liabilities later.
10. Protect Your Assets Legally
If you are concerned that your spouse might try to hide or transfer assets during the divorce, take proactive steps to protect your property. This could include placing holds on accounts, securing valuables, or filing temporary court orders that prevent asset transfers. It may also involve conducting a thorough investigation with the help of a forensic accountant to uncover any hidden accounts or assets your spouse may have concealed.
Working with an attorney to understand your options and establish legal protections can be very useful in ensuring a fair division of property. This is particularly important if you believe your spouse may act dishonestly during the proceedings.
If you’re considering divorce and need assistance managing your finances during this challenging time, contact Woodford Sathappan McGee in Columbus, OH, Cincinnati, OH, Indianapolis, IN, Detroit, MI, or San Antonio, TX, to consult with an experienced divorce attorney. We can provide the legal guidance you need to move forward with confidence.
