The Decision Has Been Made. You've Decided To Divorce. What Should You Do First?

Deciding to get divorced is one of the most painful personal decisions you may ever make. I have seen in my practice that, for most people, there is one pivotal moment when they cross the bridge of uncertainty and commit themselves to a different path and the unknown future which follows a divorce.

Having made the decision, the next thought is, what do I do now?  This article sets out ten steps I have identified as helpful first steps to getting your financial matters in order. If, unfortunately, you are anticipating a contentious legal battle, it is even more crucial to do your homework getting prepared before getting underway. Buy a large three ring binder and get started. While in no particular order of importance, here they are.

Step One:  Gather and organize one year of past statements for EVERY bank account you and your spouse have, individually or jointly, including checking, savings, money markets, stocks and bonds and mutual funds. Make two sets of copies, one for your lawyer and one you can keep in a safe place. Put the statements in a three ring binder for easy reference.

Step Two:  Gather and organize one year of past statements for EVERY retirement account you and your spouse have. Include Individual Retirement Accounts, 401(k) and 403(b) statements from current and all former employers, annuities, Pension Statement of Benefits, an Employee Benefits manual, annual Social Security Statements. Some of these statements are only provided once a year, so find the most recent available.

Step Three: Gather and organize one year of past statements for any accounts held by or for your children such as Uniform Gifts to Minors accounts, 529 college savings accounts, and mutual funds. Are the balances what you expected? Have any unexplained withdrawals been made? Who is the named custodian on the account? Who is the alternate? 

Step Four:  Apply for a credit card in your own name. Many clients have credit cards that are secondary cards of their spouse and not a single card in their own name.

Step Five:  Order your credit report from all the major credit agencies, Experian, Equifax, Transunion and Innovis.  There is a lot to be learned by checking your credit report. Some shocks could be there for unsuspecting spouses. Confirm the number of and balances on all existing credit cards. Are there any credit cards you didn't know about? Has your spouse been charging large or multiple purchases without your knowledge?

Also, know your credit score? This information becomes important when it comes to making decisions during divorce negotiations. For example, will you be able to borrow money to refinance if you want to? Have you established your OWN credit history?

A credit report will detail every loan that you and your spouse have outstanding. Mortgages, home equity loans, lines of credit, secured personal loans, automobile loans, student loans and more. Are you aware of each of the loans? Are the balances listed what you expected? I have had clients shocked to learn that their spouse took out an equity line on the marital home without their knowledge. People think it can't happen, but it does.

Step Six:  Gather and organize one year of past credit card bills for EVERY credit card you and your spouse have. This information will help establish your standard of living during the marriage. It also provides a good summary of your spending which will assist you in preparing your budget and financial statements for your lawyer. It can be quite a shock for people to see all of their credit card statements and the total amount owed. It's natural to want to ignore the ugly truth of your debts, but doing so is a mandatory part of the divorce process as is figuring out who will pay for what in your settlement.

Step Seven:  Open your own checking and savings account in a different bank. This is not intended to sound sinister! In order for a spouse who is receiving alimony or child support to get any type of loan, many banks now  require a record of separate accounts and separate support payments into the spouse's individual account for up to six months.  My clients also like the sense of privacy and control that having their own account gives them.

Step Eight:  Gather and organize all of your insurance policies- life, health, auto, homeowner's, disability, long term health care, umbrella and loss of  business income.  Know the amount of the premiums and confirm they are paid to date? Have any important policies been allowed to lapse or premiums not paid? Confirm the identity of the beneficiary on each life insurance policy? Has it been changed with or without your knowledge? How much is the death benefit? Is it enough to take care of you and your children in the event of an untimely death of the supporting spouse? Do any of the life insurance policies have a cash surrender value? Has your spouse withdrawn that cash with or without your knowledge?

What type, if any, of health insurance does your family have? What options are available to you for health insurance after the divorce? Will you have to buy your own policy or are C.O.B.R.A. benefits available from your spouse's employer?

Are you and your spouse on the same car insurance policy? What about your children? Once you separate, it is recommended that each spouse have their own car insurance policy as you now have different residences. Who is going to insure the children's vehicles?

The first eight steps listed are good practices that will assist you in getting your financial matters in order before beginning the divorce process. These last two steps are recommended for spouses who have serious concerns about their spouse's intentions, finances or business dealings.

Step Nine: Take sole possession of your personal valuables and belongings.
Get your own safety deposit box in your new bank. If you have savings bonds, cash, a will, your passport and other personal documents, historical items, and anything else  important to you in your joint safety deposit box, then get the key and move everything into your own box.  Once the items are removed, you should tell your spouse and your attorney that everything is secured, not as a preliminary strike, but for safety purposes and everything remains subject to negotiation.

 Consider whether you should remove for safe keeping anything that's valuable or very important to you out of your house.  This could include heirlooms, jewelry, antiques, collections, baby pictures, home movies and more. Once again, after the items are removed, you should tell your spouse and your attorney that everything is secured, not as a preliminary strike, but for safety purposes and everything remains subject to negotiation.

Step Ten:  Determine and evaluate your status with the Internal Revenue Service. Are you and your spouse current on filing your income tax returns? State and Federal? Are any back taxes, interest or penalties due? Are there any tax liens filed against your home? Are being audited? Get copies of your last five income tax returns and put them in your binder.

By: Joanne S. Nadell, Esq.
Handling divorces since 1984;
Became Collaborative in 2005.
November 18, 2011