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The First Step And The Last Step Are The Most Important In Securing Your Financial Future

Divorce is wrought with extreme emotional and financial turbulence. Histories that bound families, friends and home life are disrupted. Standards of living are often changed, not just for spouses but for the children as well.

Before emotional issues get too charged to think and act rationally, the following step should be taken:

  • Obtain credit if it has never been established in your name
  • Obtain current copies of all financial statements (bank records, investments)
  • Get three years of tax return copies
  • Obtain three to five years of bank statements
  • Obtain credit reports
  • Obtain history of physician reports and dates if special medical needs, must be addressed
  • Change title of home to joint tenants in common, rather than Joint Tenants with Rights of Survivorship (JTWROS)
  • Change beneficiary on will

Too often a non-working spouse has credit in their spouses name. Even if a spouse has an income and has no history of obtaining credit, a credit card will be unobtainable. It is therefore imperative that joint household income be used for the application, even if only one name applies for the card, and/or if a second cardholder is requested and immediately cancelled.

During a marriage, often one spouse controls all the financial statements, pays bills, flies statements and helps prepare the tax returns. Once proceedings are contemplated or started, the other party cannot readily obtain copies without total cooperation.

Some spouses try to have the upper hand with finances, taking the attitude that it is better to take all and then give back rather than struggle to get "equitable distribution." Not only is this a poor attitude, but one that is looked unfavorably by judges and can result in costly fees using a forensic accountant.

When assets are divided amongst the parties, in New York State, equitable distribution does not mean that assets are divided equally. Pre-marital assets and inheritance that has never been co-mingled or handled by the non-owning party stays as an asset that is not part of the marital pool. Marital assets, joint assets, assets acquired during a marriage, value increased by one of the parties during the marriage of the other's investments or business, qualified plans (retirement, IRA, pension), real estate, are all considered. When dividing these assets, it is important to seek the counsel of a Certified Financial Planner/Divorce Planner. The value added by these professionals will show the current and future impact of separating the different assets on living standards, cash flow, and future life style changes. The transfer of the assets must include tax impact studies on assets such as homes, businesses, and investment gains/losses that would be attributed when and if the asset is sold. The net must be looked at more than the gross value of the marital assets ... equitable versus equal.

The parties of a divorce must try to remember what brought them together in the first place, so that the transition and impact on the children can be easier. If the husband and wife take the time to be educated about the assets, are open in their discussions, the difficult road to divorce can be less trying. If there is good communication between the spouses, and emotional issues can be put aside, mediation rather than the time and money consuming process of litigation can be successful.

Mediation: Concession, Compromise and Cooperation

Mediation can be therapeutic in talking about feelings, expressing emotions and tailoring a plan that works for the couple.

Benefits of Mediation:

  • Costs less than going through a lengthy divorce trial
  • Tailored to meet family needs rather than dictates by the court
  • Teaches new communication techniques that can be helpful to avoid future difficulties ... you have a road map to follow
  • Opportunity for closure to a relationship
  • Avoids polarization, both sides are working together on "the same side of the table."

It is of utmost importance when using a mediator, that the parties get legal counsel. This can be a "behind the scenes" approach. This is a less costly method than going the litigation route, yet worth the added expense for personal counsel. Remember, a mediator cannot take sides. If both parties agree to a settlement, and it is not equitable by any stretch of the imagination, the mediator cannot advise. In addition, when the agreement is brought before the courts to finalize the divorce, the agreement can be thrown out.

In summary, gathering all financial data and having it reviewed for completeness, determining cost basis, and ultimate distribution must be done with the help of a qualified professional. These decisions, are decisions that will have the greatest effect on the health of your financial future.

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