Divorces are often difficult emotionally and even sometimes legally. For many people, just the possibility of ending a marriage can feel like your world is turning upside down. It's completely normal to feel overwhelmed, but taking specific steps now can help reduce stress and ensure you have the resources to build a fulfilling life on the other side.
Assemble your team of professionals
If a split is likely, you need to understand your options immediately. Speaking with a divorce lawyer is the best way to learn your rights. They can educate you on state laws that affect how your assets are divided and give you a list of critical "do's and don'ts."
A financial planner is also extremely helpful here. They can help you map out the short- and long-term impact of splitting assets. For example, you might want to keep the family home for the kids. However, if you take the house instead of a portion of your spouse's retirement assets, you could end up "house poor" and unable to afford the maintenance. A professional can outline these trade-offs clearly.
It's critical to assemble a team that includes a lawyer, a financial professional, an accountant, and potentially a mental health professional. Doing this isn't an act of disloyalty. It's about having a clear idea of your roadmap.
One important note: If you share a lawyer, accountant, or financial planner with your spouse, you should retain your own professionals. You need to avoid conflicts of interest and ensure your advisors are solely focused on you.
Keep quiet-ish and manage communication
Your goal isn't to win in the court of public opinion. Your goal is to protect yourself and focus on maintaining a fulfilling life post-divorce. If possible, keep communication honest and open with your spouse to make things less emotional.
If things aren't cordial, don't bad-mouth your spouse on social media. Trashing someone publicly can make legal negotiations much more difficult later. Talk to a therapist or cry on a friend's shoulder instead.
If you have children, this is even more vital. Publicly criticizing the other parent can be traumatic for kids and could hurt your case regarding custody. It could also affect future court decisions on alimony or child support. Take the high road.
Research and gather documentation
You need to know exactly what you own and where it is. Make copies of account information and statements for everything, whether it's held separately or jointly. Pay special attention to assets acquired since you married, such as homes, vehicles, or valuables.
Check Zillow or Realtor.com to get a sense of your home's value, or talk to a real estate agent for a nuanced estimate. You should also conduct a home inventory of items of value, noting when they were acquired.
Gather copies of these documents:
- Automobile titles
- Bank statements
- Check registers
- Credit card statements
- Employee benefits handbooks
- Financial statements
- Investment statements
- Life insurance policies
- Mortgage documents
- Retirement account statements
- Social Security statements
- Tax returns
- Wills
Do not start opening secret accounts or retitling assets to "hide" money. Courts do not look favorably on this.
Make a list of household expenses
You need to know your weekly, monthly, and annual household expenses. This data is useful when a judge or mediator looks at alimony and child support. It also helps you understand what your financial life will look like without your spouse's income.
Get a handle on debt
Splitting debt is often one of the hardest parts of negotiation. You need to determine if any debt is "non-marital debt," which belongs to the spouse who incurred it before the marriage.
Avoid "revenge spending." It might feel good in the moment to run up a credit card, but it will limit your options in the long run. Don't take on new debt unless it's absolutely necessary.
Start saving money
You need access to your own savings. If your spouse moves out and stops paying bills, you'll need to cover them until support orders are entered. If you are the one filing, you'll need money for a retainer.
Start building a reserve now. However, be sure to consult an attorney before moving significant amounts of money or closing joint accounts.
Don't sign financial documents
This is not the time to enter new financial obligations. If your spouse asks you to sign a document, no matter how reasonable it sounds, talk to your attorney first. You want to avoid unintentionally giving up control of jointly-held assets.
Update your estate planning documents
This is often overlooked. If your spouse is named as a beneficiary on your life insurance or IRAs, you may want to update those designations now.
Many people don't realize that beneficiary designations on specific accounts supersede what is written in a will. However, be aware that for workplace retirement plans like a 401(k), federal law requires your spouse to be the beneficiary unless they sign a written waiver. This rule applies even if a divorce is pending. You also need to know that if you live in one of the nine community property states, your spouse may have a right to 50% of assets earned during the marriage.
Make a game plan for taxes
Divorce doesn't erase tax obligations. Splitting assets can have huge tax implications. For example, keeping the house versus keeping retirement funds might look equal now, but the tax bills later could be very different.
Alimony used to be tax-deductible for the payer, but that deduction ended for agreements executed after 2018. Under these newer rules, alimony payments are also no longer considered taxable income for the recipient. Please note that child support has never been tax-deductible for the payer or taxable for the recipient. Experts believe the change to alimony rules may decrease the amount of support courts award since the payer is using after-tax dollars.
Facet is not an attorney and does not provide tax or legal advice. Consult a qualified tax or legal professional regarding your specific situation.
Focus on what's important
If you have children, remember that they aren't getting divorced. You are. Keep their safety and security as your top priority.
It's easy to get caught up in battles over assets out of spite. Try to find calm moments to ask yourself what you really want. Are you fighting for an asset just because your spouse wants it? Being gracious and giving up something that matters more to them might not feel like "winning," but it can put you in a better place to pursue a meaningful life.
The Facet difference
Navigating a divorce is one of the most stressful events in life, and traditional financial advice often adds to the burden with high asset-based fees. At Facet, we do things differently. You'll work with a CFP® professional who works for a flat membership fee. We don't charge a percentage of your assets, which helps minimize conflicts of interest and keeps our focus on what's best for you.
Your planner can help you model different settlement scenarios, understand the tax implications of splitting assets, and build a new roadmap for your independent future. We're here to provide the calm, objective guidance you need to make decisions with confidence.
