One of the primary factors considered when someone has made the decision to get a divorce revolves around financial security, which includes the crucial issues of child support, spousal support (alimony), division of property, assets, and debts. Getting a divorce in California is typically expensive and can take many months to resolve, especially if the spouses are unable to reach a mutual agreement on key issues.
During the divorce process, money can be tight, which makes preparing a good budget all the more important as it could help you avoid making any major financial mistakes while your divorce is pending.
Thus, you need to take steps to financially plan for your divorce which should begin with consulting with a California divorce lawyer who can review explain your rights and review your financial situation.
Creating a budget that prepares for your divorce is simply a wise decision and could help you obtain financial security for years to come.
The first step is to identity all the sources of monthly income and debts. Our Los Angeles divorce and family law attorneys are providing a review below.
Itemize Expenses
A good place to start in financially preparing for divorce is to itemize all your expenses, such as:
- Food and eating out,
- Gas and transportation,
- Utility bills,
- Mortgage or rent,
- Credit card expenses,
- Daycare,
- Car loan,
- Cable, internet, phone,
- Heath care expenses,
- Life insurance,
- Entertainment.
Your itemized list should also include other items such as car and home repairs, along with holidays and vacations. Further, there are always unknown expenses for your children.
Gather Financial Records
Another important step in the financial preparation for divorce is to gather all your financial records, which include the follow documents:
- Bank accounts,
You need to collect all the important financial records, such as mortgage documents. - Savings account,
- Pay stubs,
- Child's bank account,
- Childcare documents,
- Car loan documents,
- Credit and debit cards,
- Mortgage documents,
- Wills and trust agreements,
- Retirement account,
- Pension plan,
- Insurance policies,
- Investment accounts,
- State and federal tax returns,
- Social security statements,
- Personal property such as jewelry,
- Prenuptial or postnuptial agreements,
- Records of domestic violence or abuse.
Clearly, you will need to include all other assets and accounts that are in your name only, spouse's name, and accounts that are in both names.
Gathering this type of documentation will help you identify which assets are available to you. This list will also greatly help your divorce attorney get a clear understanding of your financial issues and which assets you can keep after the divorce is final.
It will also help them know what type of documentation they will need to request from your spouse.
Reduce Expenses
Your divorce lawyer can then help you financially prepare for a divorce by prioritizing your finances for present day and the future and help you seek ways to reduce expenses.
Your attorney can also help you seek child support and spousal support (alimony) while the divorce is pending which will help you with expenses. Child support awards are based on your spouse's income. They can help you fight to help you keep the marital home and any business you may be operating.
Further, an attorney can explain the less expensive alternatives to litigation. For example, many divorces are resolved through negotiation, mediation, or collaboration which are far less expensive than a contested divorce trial in California.
Assessment of Your Marital Assets and Liabilities
Now that you have itemized your expenses and gathered all the important financial documents, it's now time to review the marital assets and liabilities. Put simply, marital assets and liabilities are all assets or debts acquired during the length of the marriage.
They can be acquired jointly or separately by one spouse in the marriage. For example, any property you or your spouse purchased, such as a home, during the marriage.
Readers should note that any debts acquired during the marriage by you or your spouse will fall under the umbrella of marital liability.
For instance, in a situation where you or your spouse have large debt that was accumulated during the marriage, that will be an important issue to resolve during the divorce proceedings.
Non-Marital Assets and Debts
Within this category of assets is also non-marital assets, which are any property acquired before you were married. In the state of California, property you owned before getting married to your spouse will most likely remain your property alone, which is commonly called “separate property.”
On the same note, any debt you acquired before the marriage will most likely remain your responsibility to pay back. Some examples of non-marital assets include the following:
- An inheritance,
- Property owned before marriage,
- Property excluded by a prenuptial agreement,
- Gifts from a third party,
Non-martial debts re anything you acquired before the marriage like credit card debt, student loans, car payments, court-ordered judgments, mortgage, or other purchases. After assessing all these factors above, then you will need to determine the total amount of your marital assets and marital liabilities.
Create a Childcare Plan
While planning for divorce, creating a reasonable childcare plan is often challenging because it requires negotiation and financial cooperation with your spouse. In spite of this difficult challenge, you must start considering this and begin drafting a possible plan now by making a list of the most important issues.
Some of the most crucial financial issues you will need to consider related to your kids in a divorce include the following:
- Child custody,
- Child support,
- Child visitation,
- Insurance expenses,
- Medical expenses,
- Which parent will claim dependent children on tax return?
You will also need to start thinking about future expenses related to your children, such as starting a savings account and their college expenses. You should also gather your children's birth certificates and Social Security numbers.
These are all important financial issues that fall under the umbrella of getting a divorce and you will need to create a plan that is in the best interest of your family.
Every divorce is unique and this list is meant to provide you with some ideas on how to get started. Preparing a draft now will help you and it will provide your divorce lawyer with important information so they can help you financially prepare to end your marriage.
Changing Information on Documents and Accounts
Financial planning for a divorce in California also includes the modification of important documents and certain accounts. Put simply, you will no longer want your spouse's name on certain documents that can impact your future financial situation or overall well-being.
Thus, it would be wise to begin changing information on the items listed below before you file for a divorce:
- Bank accounts,
- Savings accounts,
- Credit card accounts,
- Auto loans,
- Life insurance beneficiary,
- 401(k) beneficiary,
- Healthcare policy,
- Wills and trust,
- Power of attorney.
If you have joint bank or savings accounts, you will need to start opening up new accounts at another financial institution with your name only. Also, you obviously don't want your direct deposit to go into a joint account.
Likewise, you should also open new credit cards accounts in your name only and it would be wise to get a copy of your credit report and make sure to monitor it regularly to ensure there is no false information.
Further, if you both still live in the marital home, you should go down to your local post office an open a P.O. Box in order to prevent your spouse from seeing related letters coming through the normal mail.
If you have very personal irreplaceable items that are sentimental or expensive property, you should consider getting a safety deposit box at the bank to protect them from a potentially vindictive spouse.
As noted above, if you have a will, then you probably don't want your ex-spouse to inherit your assets. You will need to change the beneficiaries.
Contact the Divorce Lawyers of Furman & Zavatsky for Help
The divorce process in California related to your finances can often feel overwhelming. However, education and proper preparation will allow you to make wise decisions that should substantially reduce the stress.
Of course getting a divorce is going to be a difficult period in your life, but you must prepare for your financial future. Our family law lawyers can help you obtain temporary support orders while the divorce is pending and provide you with financial tips moving forward.
Making a divorce checklist will help you get ready and make the process smoother. It will also help you adequately prepare for your financial future, which will directly impact your children.
Preparing a budget and making an accurate assessment of your lifestyle is a critical part of any successful financial plan in divorce.
Furman & Zavatsky are Los Angeles divorce attorneys serving clients throughout Southern California.
We offer a free case evaluation at (818) 528-3471, or you can fill out the contact form.