Too often people enter the experience of separation and divorce with little to no understanding of their financial circumstances. People often stay in a bad marriage because they’re afraid of finances. When you have some sense of what’s going on, it’s easier to take the next step. Worried your ex will hurt you financially? Here are 6 questions to explore with your attorney. These questions and what they bring up for you and your family will help you develop coping skills to deal with your divorce.
Finances 101: I don’t understand our family finances, will my ex hurt me financially?
Most people have a gut sense of what to do when they begin considering separation. Many safe deposit boxes have been opened to store cash just in case. Sometimes the groceries just don’t cost as much as they usually do. Often an item or two is sold without a spouse’s knowledge. And of course, going back to school or beginning to work again is a usual route for preparing for the future.
But none of that matters if you’ve been blindsided by your spouse or in the dark about how much it costs to run your home. Those beginning weeks and months can seem pretty intimidating to those unaware.
My recommendation is to begin to ask questions early and often.
I was so naive! I knew nothing about my family finances. While I was going through my separation and divorce, I had to quickly learn what to do and how to do it.
I would have this recurring dream of stopping every young person on the street and asking them if they knew how to handle money: Did they understand how to build wealth? Did they understand interest? Compounded interest? Debt? Mortgages and HELOCs? I was a wife who didn’t and those first few weeks and months of my separation were filled with fear.
Fear of money is one of the worst feelings ever. But this I now know: you will learn how to run your home. Focus on learning and you’ll learn how to even manage your money. Over time, you’ll begin to keep a budget, start a new career, and figure it out. I did.
Here are 6 questions to explore with your attorney:
Your attorney is most likely, a family law attorney who has legal training with some idea of divorce-related financial decisions. They’re going to ask for lots of documents: tax returns, bank statements, profit and loss statements. They need to know the cost of running your home. You’ll gather that information from your credit cards and personal habits. But sometimes, you’ll need outside counsel. While interviewing your attorney, ask them:
Will I need to hire a new financial advisor? 2) Do you recommend I get a CDFA? (Certified Divorce Financial Analyst) Make sure you interview a few additional professionals so that when things get frustrating or frightening, you know you’ve selected someone you trust.
If you’re wondering why you may need to add to your team, think of it this way: your attorney is only one piece of your new team. And you will need a new team to help you make your new life.
Your family home: Should I keep my home in lieu of retirement accounts or other cash assets?
The most emotionally charged questions usually have to do with the family home. You’ll want to grasp what it takes to actually run this home… how much it costs to keep it up? (Think roof, walls, paint, property, and that furnace!) A contractor and even a real estate agent can help you consider future costs.
You need to understand how much that retirement account is worth. HR Departments, pension offices, insurance agents and your financial advisors will help you figure out what your portion of the investment comes out to be.
Ask if you’re entitled to things like bonuses, airline miles or even life insurance policies. I advise, asking a lot of questions before jumping to keep your home.
I’m so grateful I didn’t own a home to fight over. But my children still remember the home we had as a family and miss it dearly. I won’t lie, that pulls at my heartstrings. But, owning a home for emotional reasons… the evidence of success, the lifestyle you shared, the memories you made, where your children grew up… and then not being able to afford it is devastating. It may be better, and I only propose this thought, to change everything all at once. That way everyone gets a fresh start with this new chapter of their lives.
Family Business: We have a family business, what do I do now?
The possibility of losing the place where you may have worked at the same time your marriage is falling apart is tough. I truly hope you will get yourself some support in understanding the business. Do you know what the profit and loss statement looks like? How can you find out where all the money is? Do you know how it comes in and how it’s spent? Do you have access to old tax returns and financial records?
A Forensic Accountant will help an attorney who is in over their head. (Most attorneys don’t manage private family businesses.) A Forensic Accountant can help you understand the books. I advise you to not take anything for granted. Business liabilities may be a part of your settlement, you may be bought out, you may set up a way to continue working as a silent partner. There may be back taxes you might owe.
None of these decisions will be easy and may require additional business attorneys to work out. These are important questions to ask your attorney. Do not be concerned with advocating for what you need and hiring as much help as you can to gather the information necessary to help with negotiations.
Stay at home spouse: I stayed home raising our children while she went to work at her own business, what am I entitled to?
Fortunately, family law attorneys understand many of the state laws that provide for maintenance and child support for the stay-at-home spouse. Unfortunately, these figures don’t take into account the lifestyle you once had. Your attorney will most likely negotiate lifestyle, not your accountant. This is where many people start to panic, it’s where lifestyle changes like going back to work can be very upsetting.
Being a single mom or dad with a career or those returning to school while needing to run a home, may feel overwhelming. I also know from experience that it’s doable. Think of it as showing your children how to take responsibility for their lives. You’re showing them it’s never too late to learn new skills, to start over, to make a difference or to give back. They’re watching the spirit with which you strike out on your own. I’m proud of the new careers and the work I’ve done since being divorced. My children are proud of me too.
Hiding Money: What do I do if I suspect they’re hiding money?
For far too many people I know going through a divorce, hiding money is always top of mind. If you suspect your spouse is hiding money (and chances are that they are) it’s important to discuss how you’ll find it. This is where your attorney may suggest hiring a Private Eye to search out recent bank accounts, aliases, unpaid taxes, unexplained assets, etc.
The private eyes I know are competent professionals, former police officers, and people I would have over for dinner, not cartoon characters out of some B movie. With the internet, it’s way too easy to quickly move money around. You’ll need help in tracking down suspicious spending or some unexplained balances in a bank account or credit card statement.
Financial Costs of Divorce: Should I remove money out of our Joint Account?
The thing about financial fraud is that the IRS will be looking into your divorce as well. Your family law attorney may hint at this but in truth, I think the IRS likes to hang around courthouses. Don’t be surprised if a year or two later, you have an audit. I warn you because you may think your ex-made a phone call. (And they may have.) But many people who end up in court are audited. I myself went through two audits – one at the same time as my trial! It’s not fun. The stress is high. To get through it, you need the help of a competent accountant.
I know this conversation might be stirring you up a bit. Finances are not always fun and the fear in divorce is already running high for most people. Worried your ex will hurt you financially? I get it! Even when you understand some of the finances, we worry. It’s our biggest fear, and perhaps the reason you’ve stayed in a less than happy marriage. No one wants to be divorced and broke.
But, I also hold out a lot of hope. I have the hope you can find happiness and that you’ll learn about how you live a comfortable lifestyle knowing how you spend. You’ll learn what things are most important and how you want to show up for your kids. Over time, you’ll figure out how you want to live out the rest of your days. Discussions about money and finances reflect your life. And your life is important. You will not be broke after your divorce if you start to have these difficult conversations and make some adjustments. This I know for sure!
Laura Bonarrigo is a Certified Life Coach and a Certified Divorce Coach. Laura’s a writer, public speaker and the founder of doingDivorce™ School an online coaching program for those ready to shed the pain of divorce. For empowering and practical ways to lose the identity of your past, visit www.doingDivorceSchool.com and laurabonarrigo.com.