Smart Divorce Planning: Get Ready for a Better Divorce

The New Year is an ideal time to set new goals, initiate important change and commit to improving your life.  If you are contemplating divorce or are already in the process this article provides you with important  information to help you through this difficult process.   I remember my divorce as  a very stressful and emotionally charged time where I often felt alone, scared, hurt, angry or sad - all in various degrees,  at various times and sometimes all at once.  It helps to be prepared for the process by getting organized and utilizing available resources.  Smart divorce planning can help facilitate a smoother, more efficient and less costly divorce and a more positive process and outcome.

 Money and finances are the number one cause for divorce in the United States.  If you and your spouse didn’t agree on finances during the marriage, it is highly unlikely that you will agree during the divorce.  With emotions running high, the process of divorce can escalate and compound your financial issues.  To get through this critical segment as smoothly as possible, it is essential that you acquire and organize all your financial information.  If you are like most people, your financial records and statements are scattered, out of date or simply not handy.  Make a list of all that you own and owe, obtain or create a checklist of documents you need (using the resources listed below) and collect and copy the information suggested.  The documents needed will include statements and information on your assets and debts, pensions and life insurance policies as well as tax returns, credit reports, prenuptial agreements and any other pertinent information. Create a separate file for all this information in a safe place and update it regularly.  You and the professionals helping you through your divorce will be glad you did.

 Create a list of all your documents and items that will need to be changed (such as wills, medical directives, beneficiaries of life insurance policies and retirement accounts, joint bank accounts, credit cards, mortgages,  title on automobiles and home(s)).  Some of these items should be changed immediately, others as you proceed through the divorce process and a few must wait until after the divorce is final.  Amidst the turmoil and chaos of a divorce it is easy to forget to make these changes, and this can be a costly oversight. 

A key piece of financial information that is used to demonstrate need, determine alimony and child support and plan for your future life is a budget of your expenses.  Since most families do not track expenses on a regular basis the task of preparing a budget can be daunting.  It doesn’t need to be.  Below is a simple guideline to help you prepare your expense statement.  You will need separate budgets for yourself, your spouse and your minor children.

  • Obtain or create a blank expense budget form (resources listed below).
  • Obtain and review the past year’s bank statements and credit card statements for your spending history and habits.
  • Determine the total amount spent for each category of expense listed on the budget. 
  • Separate out the expenses out for yourself, your spouse and your children. 
  • Divide the annual expense amount by 12 to determine the monthly average expense.
  • If there were any extraordinary or nonrecurring expenses that you will no longer have, make sure that they are not included in your budget.
  • Adjust for any anticipated increases or decreases to any expense category.
  • Add any new expenses.
  • Keep notes of all your assumptions and adjustments.

Tips on preparation:

  • The usual and recurring monthly expenses (such as mortgage, rent, utilities…) are easy to track.
  • Variable and discretionary expenses (such as travel, dining out, recreation and children’s activities…) are difficult to track.  If you have known expenses such as an annual family trip, children’s summer camp or lessons the actual amount can be entered. Where the numbers are less specific, estimate the amount based on lifestyle and habits and be sure to note how you estimated.
  • Account for uses of cash withdrawals from ATMS and bank accounts.
  • Review your budget and make sure it makes sense based on your income and lifestyle.

A budget form and document checklist may be obtained on line at the Institute for Divorce Financial Analysts (IDFA) website  http://institutedfa.com/Public.php?Checklists-and-Worksheets-28 or from your family law attorney or divorce financial planner.

Additional resources and divorce related information are available on line at the District of Columbia Academy of Collaborative Professionals  www.dcacp.org, and International Academy of Collaborative Professionals, www.collaborativepractice.com , as well as the IDFA website.

 

Jane M. Ochsman is a Certified Public Accountant, Certified Financial Planner and Certified Divorce Financial Analyst and is mediation and collaboratively trained.  As a divorced parent she has first-hand experience with the financial difficulties and complexities faced by divorcing families. Jane is the Director of Financial Planning and Litigation Support at May & Barnhard, PC in Bethesda, MD and is Secretary of the District of Columbia Academy of Collaborative Professionals.  She may be reached at jochsman@may-barnhard.com

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