It is easy to make a mistake in your divorce case. There are many opportunities to do so and their potential impact can be dramatic. When it comes to your finances, a divorce has the ability to either set you up for success in your post-divorce years or set you back through a combination of bad circumstances, bad decision making and poor planning.
In order to prepare for your divorce and to begin to develop a game plan for achieving whatever results that you desire, it is best to think about what course you want to take with your divorce very early. It is easy to think about your children early and often in your divorce because they will be the primary focus of your divorce. However, finances tend to take a backseat in this regard.
That is rightfully so. I don’t think many of you parents out there who are reading this would place their finances above their children in terms of overall importance. Still, you will need to meet the challenges that your finances pose head on or risk the consequences of avoiding those problems.
Fortunately for you, there are a series of tips that I have picked up on in my years practicing family law. None of these tips are difficult to implement- they just take acting intentionally. And putting forth some effort. If you can get yourself in a groove of following these tips early on you will be more likely to follow them later in your case when you are more tired, more stressed out and more willing to do whatever it takes to just finish the divorce.
Know what you own (and what you owe) before agreeing to divide up your community property
The law in Texas presumes that all property that came into being during the course of your marriage Is jointly owned by you and your spouse. This is referred to as community property. Community property is subject to division in a divorce- either by the judge in a trial or by you and your spouse in settlement negotiations.
When it comes to dividing up both debts and property, it is crucial that you know what you have and what you owe. It is also extremely important that you be aware of what your spouse believes you all owe and own. Finally, values need to be assigned to each asset or debt. So much of the negotiation process when it comes to a divorce is moving things around in order to make sure everyone has a fair outcome when it comes to dividing your community estate.
Simply putting together a list of property and how much you think the property is worth will not be sufficient. You should figure out when each piece of property was purchased, the price paid for that item (if it is valuable or unique) as well as whether you believe the item is community or separate property. Doing all of this legwork will force you to learn what is at stake in your divorce so you are negotiating with a full picture in mind.
If you are of a certain age, you may have financial instruments like 401(k)s, business interests, real estate and other more complicated and sophisticated financial assets. You may need to bring in an appraiser or Certified Public Accountant (CPA) to provide a valuation of these items. The dollar value of your estate tends to skyrocket when these entities become involved. This is all the more reason for you to know what your reality is.
Make sure that your support is backed up by an insurance policy
If you are going to be paid spousal maintenance or child support as a result of your divorce, you need to think long and hard about negotiating for a life insurance policy to be a part of the deal. Suppose that you are to receive spousal maintenance or child support and your ex-spouse passes away suddenly. Beyond the shock and sadness associated with their passing, you will be put into a situation where you may be unable to pay bills or meet other commitments due to the sudden loss in income.
In order to prevent this from becoming a problem you should negotiate to have included in terms of your final decree of divorce a provision that mandates your ex-spouse to purchase a life insurance policy to protect you from this sort of scenario. The life insurance policy (a term policy) pays out a certain sum of money upon the death of the insured person. You would be named as the beneficiary under the life insurance policy. The lump sum of money could then be invested in order to make up for the loss of monthly child support or spousal maintenance.
Don’t expect unrealistic events to occur in conjunction with your divorce
A divorce is a tricky process whereby you are taking one household and creating two by dividing the home in half. This is just as difficult as it sounds. Many spouses are in a tough position where they no longer wish to be married but at the same time are not in a position to live on their own and support themselves- at least not yet.
The fact is that for most families a divorce means tightening the metaphorical belts and getting ready to see how far a dollar can be stretched. On top of the math tha we just discussed a moment ago, there are temporary costs that cut into a budget that you have to worry about in a divorce. Attorney’s fees as well as things like temporary spousal support are considerations for many people going through divorce. While these costs will not always be a factor they may be for a certain period of time. If you are living paycheck to paycheck then this may be a problem very quickly for you and your family.
With all of that said, do not think that you will be able to escape this potential problem. If you know that money is already tight around your home, you should take active measures to prevent the financial problems from becoming a permanent problem for you and your family.
First, you need to develop a household budget. Every dollar that comes into your home in the form of income needs to be tracked. Once you can wrap your arms around all the money that is coming in, you will not have as much money go out of your home without your knowledge. Many times, families going through divorce will feel like they have received a raise due to their doing a better job of keeping tabs on the money being spent. It takes effort to budget, but as I mentioned a moment ago you will not be able to achieve a successful result in your divorce case without being intentional with your decision making. Do not drift aimlessly from point to point in a divorce. Have a plan and stick to it.
If you know that budgeting is going to be difficult for you, you can contact your attorney at the beginning of your case and let them know what sort of money constraints you have. Your attorney likely has payment plans available and you should take advantage of one, if so. An attorney can be a great resource for you (an essential one in many cases) if you are able to pay that lawyer to do work for you. If you have an unpaid attorney it is basically the same thing as not having an attorney at all.
Avoid this problem by speaking frankly with your attorney about how to handle this problem it comes up in your case. Your attorney will likely be able to work with you on this if you let him or her know about the state of your finances before signing up with their office. Our office has a team of folks who work with clients on their billing to make sure that the work is being done for the client and that the attorney’s office is getting paid for services that were rendered.
Don’t be shortsighted when it comes to your divorce
So many people cannot see the forest for the trees when it comes to a divorce. This means that you may not be able to appreciate the larger situation due to your being overwhelmed by the smaller situations that confront you on a daily basis. So much of a divorce is new to you that it is understandable that you may be bogged down in a particular area. However, you need to stay on track and keep your eye on the longer-term implications of your divorce, as well.
I’m not trying to tell you that dividing up your community property or negotiated for child support are not important parts of your divorce. However, what I am telling you is that you need to aware of the long-term financial consequences of divorce. Remember that the years that you receive child support will be outnumbered (hopefully by far) by the years in your post-divorce life that you do not receive this support.
Another key concept that many people push to the backburner in a divorce is retirement. This is often times seen as a “luxury” concern that most people going through divorce cannot think about right now due to its impact not being felt for decades in the future. I would caution you against this kind of thought. Remember that what you end up receiving in a divorce can be invested almost immediately. This means that you could end up losing out on a great opportunity to invest and grow your nest-egg if you do not focus or place much emphasis on this area of your case.
Make sure that your final decree of divorce spells out the plan for dividing up your spouse’s (or your own) retirement accounts. A qualified domestic relations order (QDRO) is the typical vehicle by which spouses see to it that the division of the retirement plans occur in a divorce. Your attorney should spend a lot of time working on this document so that your ability to get the money you negotiated for does not take longer than it should. There are specific protocols that need to be followed and your attorney should verify with the retirement plan administrator regarding what has to be included.
Don’t let a fear of change keep you from taking your life in a positive direction
As human beings, we do not like change. Don’t let anyone tell you otherwise. We get into a routine and our first inclination is to maintain that routine as much as possible. Variety is the spice of life, until things get a little too peppery. Then we’re back to wanting things just like they were.
Divorce is no different. You want to be able to move on with your life from the marriage that is no longer working for you, but fear is holding you back. Can you make it on your own? Do you have what it takes? Are your children going to be ok? We will ask ourselves questions like this in order to maintain the status quo that we are all comfortable with. However, do not let comfort confuse you for something greater. If you know in your heart of hearts that a divorce is needed in your life then do not let another moment pass you by.
Explore your options in the area of divorce. A good place to start is on websites like ours where you can learn a great deal about the divorce process in Texas before you even meet with an attorney. Once you have done so, I recommend that you contact the Law Office of Bryan Fagan. Our licensed family law attorneys offer free of charge consultations six days a week. These consultations are a great opportunity for you to sit down with an experienced family law attorney to ask questions and receive specific feedback about your life.