Heading for Divorce: What to Consider?

Divorce can be a lengthy process that may strain your finances and leave you feeling emotionally drained and overwhelmed. But with the right preparation, you can protect your interests, take charge of your future, and save yourself time and money. So where do you begin?

First things first: should you hire an attorney or mediator?

If you and your spouse have similar knowledge of your finances, and can agree on most issues, you may save time and money by working with a mediator to file an uncontested divorce. Certain attorneys, members of the clergy, psychologists, social workers, marriage counselors, and financial professionals may offer their services as mediators, but you’ll still need an attorney to draft a separation agreement.

If you can't agree on significant issues, or there is an imbalance of power or knowledge, you may want to hire separate attorneys, who can help you resolve issues. Engaging a financial planner in the process can be invaluable to assist with complex financial issues.

The attorneys’ “style” will often dictate the path the divorce takes, and may force the process into a direction you had not intended. If you hire an attorney with a reputation as a bulldog, it will likely be a contentious process. On the other hand, if you hire an attorney with a focus on resolution, they may guide you through equitable compromise.

Consider the big questions, such as child custody and alimony

Although your divorce professional will help you work through the big issues, you might want to think about the following questions before meeting with him or her:

If you have children, what are your wishes regarding custody, visitation, and child support?
Whose health insurance plan should cover the children?
Who will pay for education?
Do you earn enough money to adequately support yourself, or should alimony be considered?
Which assets do you really want, and which are you willing to let your spouse keep?
Are there assets that will be hard to value, private investments or a family business?
How do you feel about the family home? Do you feel strongly about living there, or should it be sold or allotted to your spouse?
Will you have enough money to pay the outstanding debt on whatever assets you keep?

In addition to an attorney, you may want to hire other professionals to support you. A Certified Divorce Financial Analyst CDFA™ can assist with the financial affidavit, help you evaluate complex financial considerations, and run cash flow projections to assess the impact of various settlement offers. Consider seeing a therapist to help you clarify your wishes, express yourself more clearly, and deal with any child-related issues. Such counseling is typically covered by health insurance.

Save time and money by doing your homework before meeting with a divorce professional

To save time and money, compile as much of the following information as you can before meeting with an attorney or other divorce professional:

Family demographics
Date and place of marriage and length of time in present state
Existence of prenuptial agreement
Date of separation and grounds for divorce
Current occupation, income and name of employer
Social Security statement, if applicable
Extent of employee benefits
Details of retirement plans
Joint assets and debts of the parties
Life (and other) insurance
Separate or personal assets, including trust funds and inheritances
Family business records
Collections, artwork, and antiques

If you're uncertain about some of these areas, you can obtain the necessary information through your spouse's financial affidavit and/or the discovery process, both of which are mandated by the court.

Some dos and don'ts when divorcing

Keep the following tips in mind:

Do prepare a realistic budget and a financial plan to sustain you until your divorce is final. Get help if you don't currently have the skills and energy to do this on your own.
Do review monthly bank and financial statements and make copies for your attorney.
Do review all tax returns that have been filed jointly or separately by your spouse.
Do make sure all taxes have been paid to date.
Do review the contents of any safe-deposit boxes.
Do get emotional support for yourself--talk to friends, join a support group, or see a therapist.
Don’t involve your children or alienate them from your spouse, unless you have documented safety concerns.
Don't make large purchases or create additional debt that might later cause financial hardship.
Don't quit your job.
Don't move out of the house before consulting your attorney.
Don't transfer or give away assets that are owned jointly.
Don't sign a blank financial statement or any other document without reviewing it with your attorney.

Surround yourself with trusted friends and advisors, and remember this is likely the most important financial negotiation of your life. However, this can also be the most stressful time of your life and its important to keep resolution as a goal. Too often we see individuals get distracted by a desire to “win,” and they lose sight of the big picture and spend fortunes arguing about the details.

What to do once your divorce is final?

This last step is crucial, and often overlooked. You are now the financial steward to your new life. If you aren’t comfortable with managing the finances or investments, hire someone who is. If you’ve received part of a spouse’s retirement account, it’s likely in cash and depending on your circumstances, should be invested. Don’t let an advisor sell you something if it’s going to lock up your funds, you don’t understand the investment, or the advisor is receiving a large commission for selling it to you.

When in doubt, always get a second opinion. And when someone uses financial jargon you don’t understand, ask them to explain it until you do understand. The security of your future depends on it, after all.