How Should I Manage My Finances for a Divorce?

Photo of a couple signing paperwork

Divorce can be very costly depending on the relationship with your spouse and other factors. Adversarial divorces may be especially costly, as former spouses in this situation are more likely to get into heated legal battles. However, there are steps you can take to prepare your finances before you file for divorce to avoid some common financial pitfalls. 

By preparing your finances, you reduce the risk of complicating your post-divorce financial situation. Consider the following steps before filing:

Prepare Your Financial Paperwork

You should begin preparing your financial paperwork, such as checking account balances, credit card balances, pay stubs, mortgage paperwork and vehicle lease paperwork before filing. Your finances could factor into any future divorce agreement. 

If your former spouse decides to be adversarial by withholding financial records, preparing the documentation beforehand can make things easier on you and your attorney. Depending on the circumstances, the only other way to get financial documentation would be through a court order.

Prepare a Divorce Budget

You should develop a divorce budget that takes existing liabilities and possible future expenses into account. For instance, you could factor future household, childcare, educational, transportation, vehicle, and medical expenses into the budget. This will help you develop a roadmap for staying financially stable after the divorce. 

A budget with financial paperwork included will also make it easier to determine how your finances are split for any potential divorce agreement. It will also make it easier for a judge to determine how to assign alimony or child support payments. 

Avoid Large Purchases and Unnecessary Expenses

Consider avoiding any large purchases. It is also important to avoid unnecessary expenses, as the divorce could be more costly than you first realized. If your divorce turns adversarial, it can add to the costs. 

Large purchases, such as a home or a vehicle, should wait until a divorce agreement is finalized during mediation or by the court. 

Be Cautious of Changes to Wills, Life Insurance Policies and Retirement Accounts

There are risks associated with making changes to insurance plans or retirement accounts. Any potential changes may be decided upon during court proceedings. If you make changes to these accounts after filing for divorce, then you may face legal consequences. Making changes beforehand could result in the court awarding your former spouse.

Also avoid freezing or closing joint accounts held by you and your spouse. This could create an adversarial situation that complicates your case. If major changes are made to accounts after the divorce, then you should monitor your three credit scores with Equifax, TransUnion, and Experian. 

Consider Recent Tax Law Changes

The rules for taxing alimony changed in 2019 due to Trump’s tax law. In the old days, you could deduct alimony if you were the one making payments. Your spouse would have to pay taxes on alimony because it was taxed as income. This is no longer the case. You should consider how the loss of a deduction could affect your finances going forward. 

Call Our San Diego Divorce Lawyer for More Information 

Are you considering a divorce in California? Our San Diego divorce lawyer can help you prepare for the road ahead. You may contact the firm for a consultation by dialing (619)269-8000 or by using our online case review form.