Divorce is a process that can be mentally, emotionally and financially draining. While there’s not always much to be done about the mental and emotional pain, financial disaster can be mitigated with a little planning. The following are several tips by Angela Colley of BusinessInsider.com on how to prepare your money for a divorce.
1. Separate your bank accounts
Many couples preparing for a divorce will leave their joint checking accounts open, not wanting to appear spiteful. However, an irresponsible spouse might not be so considerate and could easily drain your joint account before you realize what has happened.
Establishing separate bank accounts and dealing with whatever uncomfortable conversation that might cause is better than taking the financial risk of inaction. The best advice would be take half the money from any joint account and place it in your own checking account.
2. Protect your credit
If you and your former spouse have joint credit accounts all the hard work you put into building a solid score can evaporate with a few bad financial decisions by your ex. Establishing separate credit and loan accounts is critical.
First things first, order an official copy of your credit report from all three credit reporting agencies: TransUnion, Experian, and Equifax. Review the reports carefully and flag any accounts you share with your spouse.
Though it may be uncomfortable, have a direct conversation with your spouse and decide who wants to keep what and how the accounts ought to be divided.
Actually dividing these debts isn’t so easy. You cannot just call a lender and ask to have your name removed if the obligation is joint. Instead, the debt must usually be repaid or refinanced in the name of only one spouse. If the spouse responsible for the debt isn’t capable of having it refinanced alone then selling the asset or paying off the bill is usually the best move. Signing over control of an asset while leaving your name on the loan is a recipe for disaster and should be avoided at all costs.
3. Check on your insurance coverage
If you’ve shared insurance coverage with your spouse you may now find yourself out in the cold during a divorce. Plan ahead and negotiate a specific time to change the insurance, giving yourself enough time to secure new coverage. Make sure that you have the necessary health, auto and homeowners (or rental) insurance.
4. Last but certainly not least, taxes
According to IRS rules, the year your divorce becomes final is the year your tax status changes to single. Other issues may arise to complicate the already tricky tax situation such as alimony payments or child tax credits.
Though separating money can be tiresome, it’s absolutely necessary to avoid creating larger problems down the line. If you or someone you know is facing the daunting prospect of divorce, you need to contact an experienced Charlotte family law attorney who can properly advise you on the complicated process.
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