Protecting Your Assets During a Divorce: Tips and Tricks
Divorce is a tough and emotionally draining experience that affects not just your heart and mind but your finances too. According to statistics, almost 40-50% of marriages in the U.S end up in divorce. The process can wreak havoc on your finances for years to come if not managed carefully. Here are a few tips to help protect your assets during a divorce.
1. Assessing Your Liquid Assets
It’s easy to become emotional during a divorce and attach sentimental value to keeping the house or car. Instead, you should focus on assessing the value of joint liquid assets such as savings accounts and investment portfolios. You need to be practical and careful in your decisions. Receiving the house during a divorce proceeding may not be as financially advantageous as it may seem initially. You need to think about the property taxes and upkeep costs. Finding a buyer can also be difficult depending on the current real estate market. Make sure to assess the value of your assets correctly. For example, the value of an investment portfolio of stocks and bonds may fluctuate drastically over time. The value of a vehicle will also depreciate with time. You may want to focus more on assets that are less depreciable depending on how risk averse you are.
2. Consider Taxes When Appraising the Value of Your Assets
Many people going through a divorce appraise their assets incorrectly because they forget to consider the tax implications on investment and retirement accounts. A retirement account is worth less than the stated balance because of the deferred tax payment owed upon withdrawal. If a party chooses early withdrawal, he or she will also be hit with a penalty in addition to taxes. You must consider these implications when assessing the value of assets.
3. Protect Your Credit Rating
Both parties will be held responsible for joint account credit card debt accrued during the marriage. It’s a good idea to pay this debt off and close the accounts as soon as possible. You will also want to obtain a credit report from the three main reporting agencies – Equifax, TransUnion, and Experian. This will let you know the status of each account on your credit report, including if it is a joint or individual account, the current balance, and payment history. If you have joint accounts, you’ll want to pay them off and close the account. If you’ve added your spouse as an authorized user on any individual credit cards, you may want to contact your creditors and have them removed as a user.
4. Look for Hidden Assets
It’s actually quite common for individuals to hide their assets throughout the duration of a marriage. A business owner may add a friend on the payroll in order to hide income. Securities may have been sold without being accounted for. It’s essential to be vigilant and keep an eye out for any such hidden assets. Lying during divorce proceedings is against the law. When someone signs a Financial Affidavit, which is a formal disclosure of finances, he or she is swearing under perjury to disclose any and all information pertaining to income, assets, and expenses.
5. Revise Your Will & Designated Beneficiary
If you don’t want your ex to receive any funds in case of your demise, you’ll need to update your will. Getting divorced doesn’t automatically void your existing will. You may also want to update beneficiary information for any retirement, life insurance, and investment accounts if you don’t want your ex inheriting all of your hard-earned assets. This is an important step that is often overlooked during divorce proceedings.
6. Be Careful When Dating
Never move in with someone you’re dating before your divorce is finalized since this may affect spousal and child support payments. A judge may deem you as having more money available if you are splitting living costs with another person. If you do plan to date, keep it discreet. Dating during divorce proceedings may also fan the fire and cause your spouse to become more emotional and less cooperative.
7. Change All Important Passwords
Change the log-in and password for your online banking account. Your spouse may have access to old passwords and may be logging in to see what you’re up to and keep track of your expenditures to use it against you in court. Some spouses go as far as installing a key logger to monitor their ex’s online activity. Protect yourself by changing your password and installing anti-virus software that will detect spyware.
Divorce can be a traumatic experience, and it’s essential to protect your assets during the process. By being vigilant, thoughtful, and practical, you can emerge from divorce with your finances intact. Assess your assets carefully, consider taxes, protect your credit rating, look for hidden assets, revise your will and designated beneficiary, be careful when dating, and change your passwords are crucial steps that can help protect your hard-earned assets during a divorce proceeding.