We all know the scenario: you worked hard for as long as you can remember, and now, finally, you’ve built up a safe financial cushion for your family and your retirement. You feel like you can breathe for the first time in your adult life and maybe begin to relax. Maybe take a vacation; maybe not worry about your kids’ college educations. Then, life takes a turn and you’re going through a divorce. Perhaps you were the one initiating, or, instead, you were blindsided. Either way, this is where you are now, and you want to protect yourself and your assets during this very chaotic time.
1. Start Gathering Financials:
The first step in protecting your wealth it to take stock in what you truly have. While this may seem like an obvious first step, unless someone is buying a home or taking out a business loan, this information is typically not handy and readily available. It’s also not unusual for one spouse to handle the finances, while keeping the other mostly in the dark. Whatever your situation, it’s important to make yourself aware and collect documentation of what exists, how much exists, and where it exists. Start collecting your bank and financial statements, loan balances, and tax returns. If you’re a business owner, you’ll need your P&L statements. Gather plan documents and quarterly statements for retirement accounts.
If you have a signed premarital agreement, find that original. Do some research if you aren’t certain what assets and debts your spouse may have. For example, review bank statements for cryptocurrency transactions and work on locating those immediately. This first step will take some time and can be very overwhelming, but it’s an essential first step. Even in the most amicable of divorces, this information is critical to negotiations and settlements. In the more acrimonious situations, you’ll want this information available immediately for evidence purposes and before your spouse can start hiding money. Regardless of whether your divorce will be civil or less than civil, your attorney will need this information, so you might as well start gathering it all now.
The next step is to review all of that gathered information in detail. Look to see if there are any large transactions or abnormal spending. If there are and you didn’t know about it, you’ll want to make sure your attorney knows so they can decide how to handle it and act if court intervention is necessary. Review your debts, including home equity lines of credit, mortgage loans and credit card loans to make sure your marital debt hasn’t increased without your knowledge. This is also a good time to pull a credit report to check for unusual activity. If there is, let your attorney know immediately. Along those lines, don’t do anything to hide assets or increase debt as that will typically backfire. Not only will it result in an immediate loss of credibility in front of a judge, but it also makes the process more contentious and increases legal fees.
The main goal during this time is to maintain the “status quo” of your finances and spending as much as possible. If any changes are going to be made, such as redirecting your paycheck into an individual bank account or opening a separate bank account, those changes should be communicated.
2. Hire the Necessary Professionals:
Hiring a qualified family law attorney is critical to your protection. Divorce itself is a legal process and requires the help of a legal professional well versed in that area of law. Documents will need to be drafted that memorialize agreements or Court rulings. Orders may need to be submitted to divide certain assets, and if not drafted correctly, could result in unnecessary tax ramifications or penalties. Legally binding contracts may need to be signed, and an experienced attorney will know the nuances to these extensive contracts and make sure the contract is drafted in a way that provides you the most protection. Interpreting a poorly drafted contract or Order after divorce can often be substantially more expensive than hiring an experienced attorney to represent you from the start. Engaging the services of a qualified family law attorney will help you avoid these costly mistakes.
Depending on the size of your estate and type of assets you have, it may be advantageous to bring on experts such as forensic accountants, business evaluators, and/or financial advisors. While this may be an added expense you don’t want to incur or feel is necessary, these professionals are able to efficiently investigate financial information that can have a substantial impact on equitable division and issues of child and spousal support. They’ll be able to concisely determine the value of a business in a way that a judge can easily understand. They can also help calculate income when a spouse is not a simple W-2 wage earner. If you think your spouse has been unethical in their financial dealings or disclosures, they can help find hidden money, debunk fake debts, and serve as a relatively unbiased and credible witness as to those facts. It’s also likely you’ll need to hire an appraiser to value real estate.
While there are websites that have estimated property values, the values on those various sites can differ by tens, if not hundreds of thousands of dollars. The money spent on an appraisal is quickly recouped in legal fees alone by not having to spend valuable time arguing over which website is more credible.
3. Follow Advice:
Finally, it can be easy to lose sight of your goals during a divorce, which is why it’s essential to listen to the professionals you hired to help guide you through the process. Occasionally this means accepting advice you may not want to hear. Divorce is a negotiation and requires give and take on both sides. Sometimes this means giving more and sometimes this means you should stand your ground. There should be an ongoing cost/benefit analysis during the divorce process and engaging in a protracted litigation based on the principle of the matter, and not the law, is a costly mistake A good attorney will encourage you to seek a resolution you can live with, which will mitigate legal fees and give you closure. Ultimately, your attorney is there to help protect you and your assets, and following their advice will accomplish both.