Minding your financial health during a divorce is often overlooked and then regretted when it is too late to prevent or repair the damage. Regardless of whether you feel your soon-to-be-ex will treat you fairly financially, you should reinforce that belief with legal and personal action to protect your own interests.
Document Your Assets
Some spouses choose to spend marital assets without approval during a divorce. In order to protect your interest in marital assets, you need to be able to prove what assets exist and the value on those that are liquid. For bank accounts, retirement accounts and other investments, make copies of the most recent statements that reflect the total value of the account and provide copies to your attorney. Take pictures or video of each room in your home to accompany a listing of household assets.
Protect Your Credit
If you have joint credit cards, cancel the accounts and open new accounts in your name only. In many cases, you can be held liable for charges made solely by your spouse on a joint account. As part of the divorce settlement, request the use of marital assets to pay all joint accounts in full or require that each of you transfer your proportionate share of joint credit to personal credit lines. Even if the court legally assigns a joint debt to your spouse, late payments will appear on your credit, lowering your credit score.
If your spouse will remain in the family home and the mortgage loan is in both names, require that your spouse refinance the home into his name only. A divorce decree awarding the house and the financial obligation to your spouse does not remove your obligation from the original note you signed with the mortgage lender, nor does signing a quit-claim deed. If your spouse does not pay the mortgage, the lender has the right to pursue you for collection.
Filing Your Tax Return
If you are separated and you will owe federal taxes if you file jointly with your spouse, it may be in your best interest to file separately, even if you will pay more individually. Unless your spouse has the cash to pay his portion of the tax bill at filing time, you run the risk of being liable for the entire tax bill if your spouse does not pay. If your spouse is self-employed, unemployed, or otherwise has no assets or wages to seize or garnish, the Internal Revenue Service will collect the balance due from the joint filer that has money available for collection or regular pay to garnish. Also, if your spouse owns a business, you can be held liable for mistakes or fraudulent filing on behalf of the business if you agree to a joint return.
References
- Bankrate: Do's and don'ts of getting divorced
- "Divorce & Money: How to Make the Best Financial Decisions During Divorce;" Violet Woodhouse, Dale Fetherling; 2008
