When you go through a divorce it is essential that you be able to organize your financial documents, make decisions that are practical and sensical from the perspective of your money and create a plan to improve your financial life for after the divorce. Throw in all of the other important considerations that you will face in a divorce and you have some challenges to overcome in your case.
Thankfully, you do not have to begin this process with no guidance. The attorneys with the Law Office of Bryan Fagan would like to assist you as you begin to learn more about divorce from a financial perspective. In today’s blog post we will introduce a series of mini blogs about different topics that are likely to be very important in your divorce from a financial perspective. It is difficult for many people to imagine coming out of your divorce with a secure financial present and future. However, it is possible, and I hope to show you how to do it over the next few days.
Collect information and documents then create a budget for yourself and your family
Starting as early as you can, it would be a smart move for you to begin collecting documents that relate to your family’s finances. Your attorney will be asking you to do so anyways, so you may as well start doing it before your case is filed. For starters, information regarding your assets as the debts of your family should be compiled. If you have assets that were acquired prior to your marriage, then you should find the documents that prove that they are separate property. Receipts, title documents, bills of sales, etc. can all be very helpful when it comes to having to prove the separate property nature of a piece of property.
Next, while you may not have paper copies of checks and/or check stubs from your employer, whatever tax documents you have that can be used to verify your income and the source(s) of that income will be helpful as well. A lot of times in a divorce household bills and other financial responsibilities will be shifted around so that each spouse pays an equitable amount of the bills for a family. Next, if you can compile your household expenses that will be helpful to your attorney as well. Rent/mortgage payments, clothes, food, daycare, etc. are what I am talking about.
Get organized once you have collected all the paperwork
Once you have a list of your assets you will need to provide an estimated value to each one. Sometimes this is easy, as in the case of a retirement or bank account. The value of that account is plain as day- simply look at your most recent statement from the bank or investment house. Most assets like this will be community property- at least in part. It is rare that in any marriage there will be bank accounts or retirement savings that are completely your separate property.
Either way, you, your attorney and your attorney’s staff will need to sit down together and figure out the percentages of each debt and asset that are community property and separate property. This is important, because soon you will be making settlement offers to your spouse as to how to divide these assets and debts. The more informed and organized that you are the more likely you will be to present strong arguments to your spouse on this subject.
Your needs may change after your divorce. By this I mean that what you used to be able to depend upon for income may no longer be your reality since your household is shrinking from two income earners to one (most likely). You may even be in a situation where you have not worked in years and will now find yourself in a position where a job is something that you need to find. Regardless, you should get an idea of what you will need to earn to pay your bills. Finally, you can look at what your likely budget will be. Finding a place to live, getting utilities, etc. set up would be something else you should do.
Assets, assets, assets
Real estate, investments, and bank accounts are the major assets that will likely be relevant to your divorce. You can make the process of quantifying and dividing up these assets a lot simpler by organizing a list and including all items owned by you and your spouse. Do you have a life insurance policy out in your name? Be sure to include that as well. Your primary residence, any investment property as well as vehicles would all count as assets in your divorce.
Don’t forget about items in your home, as well. We sometimes disregard household items but they also count as assets in a divorce. Antiques have some value to them but most household items will be worth what you could sell them for at a garage sale.
Here is an asset that may be relevant to you but that you may not have even considered yet: your business. Do you own your own business? Does your spouse own a share of that business? What line of work are you in? What sort of inventory, equipment or real estate is owned by the business currently? You will likely have to hire an accountant to determine what the value of your business is.
Your spouse will likely need to be bought out of her share of the business’ value or else she can remain on as an employee (which I would not recommend). It is better to take her equity position in the business, put a value to it and then make an offer to buy her out of that equity position. That will allow you to remain on in your role for your business and not have your ex-spouse involved in the daily operations.
Debts, debts, debts
On the other side of the accounting ledger we will have to consider your debts in a Texas divorce. Debts are a funny thing because most all of us have them, but they are rarely considered in the same breath as your assets. Most people think about dividing up a bank account but few people consider who is going to pay a credit card bill or how much of a home equity line of credit will be your responsibility versus your spouse’s.
You need to list out your debts just like you listed out your assets. This is an important part of your divorce. It is sort of the vegetables part of your diet versus the red meat represented by your assets. Not as much fun but still very important. What counts as a debt for your divorce?
Loans are the big ticket items for most divorces. Do you have a car payment? If so, find the documentation showing how much you owe the lender, what has already been paid, the interest rate on the loan and how much longer you have to pay on the note. Did you take out student loans for school? Often times you will have a handful of lenders and their individual balances are quite small. You could consider refinancing them to get lower interest rates but I would speak to your attorney first before pursuing this option.
Personal loans and business loans fall under the same umbrella as far as I’m concerned. I will hear from clients often that they have X amount of personal loans outstanding and Y amount of business loans outstanding. The deal is that no lender is going to lend money to your business. You as an individual person aside from your business are going to be held responsible for paying that loan back. No lender looks to a small business as being responsible for a loan.
Next up, start to pull information on your home loan. The mortgage is hopefully going to be your largest debt. More than anything else, your home is an important poker chip in the grand-scheme of your divorce. In the grand scheme of things your home can be sold outright in your divorce or kept by you and your spouse. The spouse who is not awarded the home would receive an equity pay out representing their share of the value of the home over and above the mortgage amount. This is a huge asset and debt, therefore.
Budget, budget, budget
Hopefully you and your spouse have been operating on a budget already. Unfortunately, since most divorces have a strong money component to them and budgets tend to eliminate many concerns about money, you likely have not been. With that said, sit down and create a budget for yourself. Do not put yourself in your post-divorce shoes. Take yourself as you are right now and create a budget.
The budget removes any uncertainty and guessing out of what amount of money you need to pay bills and other costs associated with your daily life and your divorce. You should not put yourself in a position where you are guessing what you can and what you cannot afford in conjunction with your life during a divorce. That is not smart at all since you have more people relying you for payment during a divorce than probably ever before in your life.
Suppose that you are going to be on the hook for child support in addition to having to pay attorney’s fees. What happens if you run out of money and cannot afford to pay child support because you are paying your attorney a monthly payment amount? Do you take on an additional credit card and push the costs back for another few months? Eventually this kind of disorganized spending will catch up with you.
Do you have any additional sources of income that you have not yet tried to take advantage of? Could you get some overtime from work that has also been available to you but never been necessary? What about finding a second job to start to increase your income for a short period of time. If you don’t have any children and are just concerned with your own wellbeing then this would be a no-brainer. Do not use the divorce as an excuse to fall deep(er) into debt.
That is a little bit of perspective from me on the income side of the equation. Have you begun to consider the “outgo” (spending) part of things? Where can you trim costs? Do you subscribe to ten different movie/television streaming services that you never use anymore? What other optional costs can you cut during your divorce to save money? You do not have to live in fear of not having enough money at the end of the month if you budget, trim costs where you can and increase your income when reasonable to do so.
The other thing that you can think about pursuing is temporary spousal support. Texas judges are not crazy about awarding spousal maintenance after the divorce. If you have not been married for at least ten years then this is likely not even an option for you. However, if you need a temporary boost while start to find work then temporary spousal support may be an option for you. I would recommend that you speak to your attorney about this at the beginning of your case and to pursue it from the get-go.
Post divorce budgeting: tomorrow’s blog post topic
We will pick up in tomorrow’s blog post right where we left off today. Your post-divorce budget is important to come up with and I will talk to you more about that tomorrow.
In the meantime, if you have any questions about the content of today’s blog post please do not hesitate to contact the Law Office of Bryan Fagan. Our licensed family law attorneys offer free of charge consultations six days a week here in our office. These consultations are a great opportunity for you to ask questions and receive specific feedback about your circumstances and case. Thank you for your time and consideration and we look forward to the opportunity to serve you and your family.