How to Financially Prepare for Divorce: 5 Steps
Marriage is supposed to last forever. But sadly, that outcome is rarer than it should be. Roughly half of all marriages end in divorce in the United States. If your marriage is headed toward divorce in Michigan, you should be familiar with the set of steps you need to take to legally get divorced.
But that isn’t the only preparation you should do. You should also take financial steps to ready yourself for the dissolution of your marriage. These five steps aren’t required by law, but they will make your divorce a lot easier and protect your future finances.
1. Track and Record Expenses
Many people only have a modest sense of their exact budget. They know whether they are living within their budget but usually don’t know exactly how much they are saving and spending.
This can’t continue if you plan to get divorced. Once you suspect divorce is in your future, carefully track every expense. Keep both physical and electronic records of those expenditures. This information will help you during negotiations or if your divorce ends up in court.
2. Collect Documents of All Your Assets
Do you know exactly how much you have in your IRA or how many bonds you purchased in your lifetime? Few people do. Often, these types of records are at the bottom of a filing cabinet that hasn’t been opened in decades.
It is time to brush away the dust and determine the value of every asset you own. If possible, determine when you acquired those assets so you can prove whether you owned them before the marriage or not.
3. Produce Three Years of Tax Returns
Just as most people lose financial documents, few people keep tax returns. Thankfully, the IRS is your friend here. You can contact the IRS and request tax returns for past years. You want at least three years’ worth before starting divorce proceedings.
If you make this request after tax season is over, you will get the information reasonably quickly.
4. Avoiding Making Large Financial Decisions
The worst time to purchase a new house is a few months before you get divorced. That is just a major headache that will make your divorce more complicated. You never know how a judge might decide to split that resource.
Try to be as conservative about spending as possible before a divorce and save as much money as possible. At a minimum, you know you will be spending thousands on a divorce lawyer shortly.
5. Don’t Hide Assets
Many people try to hide assets before a divorce. This is never a good idea. Divorce attorneys are extremely talented at finding hidden resources. And if they find even one hidden asset, the court will likely punish you financially during divorce proceedings.
Financial Preparation Will Protect Your Future
Even a cordial divorce is typically expensive, and both parties end up worse off financially than they started. By preparing properly and working with a thorough divorce lawyer, you can minimize the financial harm you suffer.