Finances Count in Divorce Preparation
Along the road, poorly considered emotional decisions can make for difficult, if not disastrous, long-term financial consequences. This very often happens when one spouse is blindsided by the divorce. For example, the stay-at-home mom, who impulsively decides she wants - and then demands -- the family home without calculating the costs of ownership may start down the wrong path. This hastily considered decision - hanging onto the family home -- locks her in a course that leaves her very cash poor for years after the divorce. Her desire to disrupt her children’s lives as little as possible, commendable though it may be, pushes her along a course that may make it harder for them and her in the long run.
Women very often go into divorce at a disadvantage. Women, even educated career women, often defer to their husbands about the management of money - her money and their money. Even when, for example, the wife pays the bills and writes the checks, she may have a glimmer of the marital finances.
The starting place on the divorce preparation road map is FINANCIAL INFORMATION.
If one accepts the premise that the public divorce is only the dissolution of an economic unit, then financial information is the road map. Because without financial information, neither spouse can move forward. Neither spouse can make intelligent decisions. Neither spouse can plan a life after the divorce.
Financial information does not anesthetize the pain of divorce, but its absence - including its deliberate concealment by one spouse from the other—makes divorce much more difficult.
When one spouse announces the decision to end the marriage, both spouses - the leaver and the person left - should gather every piece of financial information relevant to the marriage. This means every piece of information about what each earns, what they own and what they owe, both as a couple and individually. On the asset side, this includes, but is not necessarily limited do, checking and savings accounts, mutual funds and money market accounts; real estate records, including the marital home, second homes and unimproved land; personal property, such as automobiles, furnishings, collections (art, stamp, coin); stocks, bonds, annuities, retirement plans, including pensions and profits sharing; accrued vacation time, medical savings accounts; other valuable personal property, life insurance and season tickets. On the debt side, this includes, but is not necessarily limited to, records of credit cards, vehicle loans, mortgages and home equity loans, promissory loans, student loans and all other debt.
This complete financial profile of the couple’s finances is invaluable because not only does it give both spouses an idea of what he or she owns and owes as an individual and what they as a couple own and owe, but also sheds some light on what life may be like after the divorce. Going into a divorce, few spouses appreciate that both of them will leave divorce poorer. This is of particular concern to women, who often earn less than their husbands and are less likely to have their own retirement income.
Spouses who can pool financial information cooperatively can very often flesh out the beginning of a financial settlement. Even if they hit a roadblock, pooled information makes the intervention of a mediator more likely and easier. However, in actions where one spouse must force the other to reveal information through discovery, the divorce almost always becomes more adversarial.
One of the most common sinkholes on the road to divorce is an allegation of dissipation of assets. After the divorce is announced, one spouse accuses the other of stealing from the marital pie. Complete financial information in the possession of both spouses, the leaver and person left, reduces the temptation of either of them to secret assets or dissipate them. Complete financial information makes it easier to prove misconduct.
Judges take a dim view of dissipation of marital assets. For example, the angry spouse who squanders marital funds in the casinos may find his share of the marital estate negatively credited with the losses.
And when economic misconduct is not a consideration, complete financial information makes the classification of assets much easier. In a divorce, everything a couple owns and owes is classified in one of two categories -- marital or separate. In addition, property acquired after the date of separation normally is the property of the spouse who acquired it.
The classification of assets can become much more complicated because sometime separate property commingles with marital property and becomes jointly owned, because the determination of the DOS (Date of Separation) varies from one jurisdiction to another and because of the appreciation and depreciation of assets.
Good financial information makes classification and often makes questions of commingling easier to answer.
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FOR THOSE CONSIDERING DIVORCE – The decision to divorce is always very difficult and terribly dislocating. It is wise to consider the marriage as a whole against any one single mistake.
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