Things may not have been good in the marriage for the last several weeks, months or even years. The two of you may have talked about getting a divorce or a legal separation and one of you may have even threatened to leave the marriage. However, in the back of your mind, you never really thought that would occur. Or would it?
Protecting your financial future may not be something you ever had to consider. But now that it is possible your spouse may indeed be serious about going forward, financial worries are natural. You also may be concerned that while your spouse has had time to think about the divorce, there may be actions you need to take now to ensure that if there is a divorce or legal separation, you are protected. Here are five steps you can take to ensure that, regardless of whether a divorce or legal separation is imminent, your financial future is protected.
1. Educate yourself about the finances. The first step to understanding how to protect your share of the financial assets if a petition for dissolution of marriage is filed is to understand the marital financial situation. Locate and make a list of all bank accounts (with account numbers), including all investment and retirement accounts. If there are life insurance policies, make copies of all policies. Identify all credit cards and make a list of balances. Keep copies of the financial documents in a three-ring notebook for future reference. If you do not have access to the documents you may visit a branch of the financial institution where you have accounts to obtain copies of the accounts that are also in your name.
2. Determine how title is held to real property. If the marital residence was purchased by your spouse prior to marriage and title was never changed to both names after the marriage, the residence will likely be the separate property of your spouse. This is true even if the residence was bought in contemplation of the marriage and you both contributed to the mortgage and improvements of the property after marriage. You may be entitled to a share of the value of the residence, but absent title of the property in your name, your share may not be the full value of the equity in the property. Even if purchased after marriage, if you signed a disclaimer deed disavowing any ownership interest, and title is only held in your spouse’s name, you may have unwittingly given your spouse sole ownership of the property. Determine how title is held and, if not held in both of your names, address the need to put title in both names with your spouse.
3. Make a budget. One of the hardest parts of adjusting to a divorce is understanding how much it costs on a monthly basis to maintain your lifestyle. Start keeping track of your spending habits. Make a list of the costs for the household expenses (mortgage, taxes, insurance, HOA fees, pool maintenance, landscaping, pest control), utilities, transportation (car payments, gas, parking), grocery store expenses (food, household supplies), clothing, and miscellaneous expenses (recreation, gym, travel, pet expenses). Although not an exhaustive list, it will give you a general idea of the amount of funds you need on a monthly basis if you and your spouse separate.
4. Pay attention to the tax returns. Many spouses leave the handling of the tax returns to his or her partner, and never look at them before signing. Do not be careless with the returns. Take an active interest in understanding what is included on the tax returns, what assets are identified, and whether any losses are reported. Make an appointment with whoever is preparing the tax returns to discuss with them the returns so you understand what is being reported and the source of the information used to prepare the returns. If your spouse prepares the returns, ask questions, or take to an independent CPA who you can consult with about what is reported on the past returns.
5. Stay vigilant. Once you have access to the financial records, take notice of the spending habits of your spouse, including transfers between accounts, and withdrawals of cash from ATM’s or over the counter in the bank. Keep track of the funds deposited and withdrawn and make note of any unusual or large transactions so you can ask your spouse about them. If you are concerned about what appears to be mishandling or misuse of funds, consider setting up alerts so you are aware of any large withdrawals and can ascertain the basis for the withdrawals.
Many of the steps require cooperation by your spouse to provide the information if you do not have access. Depending on the personality of your spouse and the desire to control information, this may not be as easy as it sounds. However, at a minimum, take the steps that you can. Educate yourself, keep track of your spending habits, take note of the source of funds used for expenses, and stay vigilant in watching for and taking note of all financial information.