Financial planning for divorce involves gathering comprehensive documentation of all assets, creating a post-divorce budget, and protecting your financial outlook. Key steps include consulting experts like attorneys and financial advisors, identifying joint accounts and debts, assessing tax implications, and updating beneficiary designations. Overall, it is best to focus on long-term stability when planning for your future.
Even if you are certain the marriage is over and divorce is the right option for you, the financial uncertainty of a divorce can cause anxiety. Finances are one reason that some people wonder if it is better to divorce or stay unhappily married. The financial impact depends on many factors but planning ahead and knowing your options can help.
Every divorce is different, but it all starts with good planning. There are some definite do’s and don’ts of handling finances when you are headed towards divorce. You cannot drain bank accounts or hide assets. That said, you definitely want to start thinking about how assets will be divided and planning for life after divorce.
In planning for a divorce, the first step is to determine your current budget and how that might change if you divorce. See what costs you can eliminate or lower. It’s better to plan conservatively and then be able to increase as you need or are able.
Consider the different living situations possible, whether you keep the marital home, purchase a new home, or rent an apartment. Consider whether you can or are willing to move to a different neighborhood. Think about how a divorce will impact childcare needs. Take into consideration any support you might get from friends and family.
Start making a list of all online accounts (financial or not) that you’ll want to change the password to after the divorce. Consider what assets have beneficiaries so you can update those.
Wisconsin is a “community property” state, meaning assets and property acquired by either party prior to or during the marriage are considered marital property and divided equitably between both parties. This is true of nearly all forms of property, including retirement accounts, vehicles, real estate, and debt. This is true regardless of either party’s personal income or whether one party was a stay-at-home spouse.
There are a couple of exceptions to community property, including inheritances to one party or assets named in a prenup. Student loans also most often stay with the individual that received the education.
To prepare for property division, create a list of all your assets and liabilities. This includes the house and any other property, retirement accounts, vehicles, and debts. It can also include valuable jewelry, art, or collectibles. Determine the value of large assets, which may include bringing in an appraiser.
Consider what matters most to you, and how all these assets might be divided equitably. Sometimes one party wants to keep the marital home, and if that’s the largest portion of the estate, that may mean giving up most other assets in order for it to be equitable or fair. Other times, neither party can afford to keep the marital home, so it is sold and the proceeds are divided.
Who “wins” and “loses” in a divorce is often subjective. Many people think they’ve “lost” because they viewed some of their assets as entirely their own and they had to give up half in the divorce.
In terms of finances, costs increase for both parties, because things like housing are a shared expense when married. Increased costs or a decreased standard of living seems like a loss for both parties. Statistically, it’s more likely to negatively impact women, though measures like spousal support and child support aim to lessen that hardship.
Many people talk about improved mental health, less stress, and personal growth after their divorce. Those are personal wins.
Getting divorced is a personal decision. Some couples go to therapy or weather a particularly stressful season in life (through an illness, the newborn years, or other challenges) and come out happier for it. In other relationships, it’s clear that the couple has simply become incompatible.
Stress can contribute to mental health challenges, being sick more often, and long term negative health outcomes. Both divorce and living in an unhappy environment can cause stress. Divorce at least has a specific timeframe, whereas living together unhappily could last forever.
The uncertainty of divorce and child custody can negatively impact children, especially if things are contentious. Yet living in an unhealthy home environment while the parents are married also leads to negative consequences for the kids.
Even if you are scared of the uncertainty, divorce leads to a new chapter that you can define for yourself. It gives you an opportunity to find greater happiness.
The laws do not treat men and women differently, yet the impact of divorce can follow gendered trends based on what is statistically more likely based on other factors. Statistically, more women than men receive spousal support due to the fact that more women than men are stay at home parents.
The same goes for child support. But it isn’t that the laws favor the mother. Whoever was the stay at home parent is more likely to receive spousal support, and whoever has more child placement is more likely to receive child support.
Some people are willing to make too many concessions in an effort to show good faith or to avoid uncomfortable disagreements. Getting the divorce over quickly may allow you to move on quicker and begin the new chapter of your life, but it can have steep financial consequences if you compromise too much.
On the other hand, some people want to fight tooth and nail, sometimes increasing their legal fees by an amount that is more than the asset they are arguing over is worth. They sometimes believe they’ll feel better by “winning” more.
A divorce takes months to resolve, and it can be an emotional rollercoaster even if you are the one who initiated the divorce or if you’ve seen this coming for a long time.
Attorneys can look at your case objectively instead of through the emotional lens of someone going through it. They can talk with you about what you are reasonably entitled to and what goals are attainable. Some people want far more than a court will award, but some underestimate what they are entitled to. Attorneys help ease the mental burden of managing the process of divorce.
Depending on your source, the average divorce can cost over $11,000, between $10,000-$20,000, or above $8,500. These estimates encompass a wide range of options though. Costs are higher if couples require a lengthy, litigious trial or have complicated assets to divide, like a business. Costs are lower if both parties are amicable.
You can use marital assets to pay for an attorney. Joint bank accounts can be used, even if you are a stay at home spouse and are not currently contributing income to those accounts.
Some attorneys offer payment plans to help you budget for that expense over time. Law firms generally accept credit cards too. Many people also receive help from family members or friends. Divorce is a difficult situation, but loved ones want to see you in a better life situation and will often help you get there.
Try to use a flat fee attorney who will give you the full price upfront. Attorneys who work on retainers may sound like it’s one fee, but they are billing against that retainer hourly and will require you to increase the retainer once it runs out.
Divergent Family Law is a true flat fee firm. We will tell you the price upfront and we do not bill hourly or use retainers. We also offer payment plans in most situations.
You can utilize an attorney with a “limited scope” agreement instead of full representation. This works if you only need documents reviewed and you think you have a fair agreement already determined.
While it is possible for a divorcing couple to file for divorce without an attorney (pro se) to save on attorney fees, that may be more expensive long term. When people compromise too much for the sake of avoiding using an attorney, they can miss out on assets and support that they should be entitled to.
Avoiding a trial is best to keep attorney costs down, but if your ex is being unfair a trial may be the only way to get your fair share in the final agreement. Your attorney should be able to discuss with you what to reasonably expect and whether or not a trial is in your best interest.
