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How To Protect Your Assets In A Divorce

Mardi Winder Adams March 2023

Divorce and Transitions: Mardi Winder-Adams

The division of assets (and debts) during the divorce process can be tricky.

Every country and jurisdiction has specific laws around the division of assets (and debts) during the divorce process. These vary significantly from community property law, where almost everything is considered jointly owned by the couple, to common law, where all assets and liabilities are assessed to determine if they were jointly acquired by the couple or are owned by one individual. 

Before filing for divorce, get your financial ducks in a row.”

Regardless of the specifics of the divorce and how assets and liabilities (debts) are divided in the courts, there is still the need to plan to stay afloat financially until temporary orders or the divorce is completed.  

Before filing for divorce, get your financial ducks in a row. This may take some time. Consulting with a divorce attorney is critical before making any changes to accounts or making large purchases. 

Know Your Assets and Debts In A Divorce:

Do not expect your bank or credit card company to take sides or break the rules”

Make a list of all bank accounts, savings accounts, investments, credit cards, crypto or NFT assets, or other financial documents. These should include your separate accounts and any and all joint holdings. In addition, it is helpful to make copies of income tax returns, titles, deeds, or information on loans and mortgages. 

While your spouse will be asked to provide this information as part of the divorce, it is easier to access information before accounts are closed, or you are locked out of an account. Locking a spouse out of an account is not uncommon. Many times, one spouse is the primary on the account and the other spouse the signer. In most cases, the signer on the account has no ownership of the asset and no control over what the account owner chooses to do. 

Do not expect your bank or credit card company to take sides or break the rules because you are going through a separation or divorce. While this may seem cruel to say, they are required by law to follow specific protocols. These protocols include providing account information only to the account owner on file. 

Open Separate Accounts:

It is a misconception that what is mine is mine during the divorce.”

Opening a separate bank account in your name and also taking out a separate credit card is essential to establish credit and provide you with access to funds in the event of a freeze of the marital account. 

Keep in mind, this money may still be considered part of the marital estate. It is a misconception that what is mine is mine during the divorce. This is true especially regarding income earned or assets acquired when you were married. The specific name on the title, deed, or mortgage is not the most crucial factor when determining assets in a divorce.

Accounts that existed prior to the marriage, provided there was no commingling of funds, are typically considered separate property. But, this is a legal issue that you should discuss with your attorney. Generally, if you continued to deposit income into the separate account when you were married, even if the account existed before the marriage, it is considered marital property.

Do Not Drain Marital Accounts Or Run Up Credit Card Debt:

Draining a marital bank account in the time leading up to the divorce does have consequences for the spouse who engages in this behavior. The “time leading up to” the divorce typically means within a relatively short period before the separation or between the separation and filing for divorce. 

Likewise, avoid making any large purchases on joint credit card accounts. Ideally, get your name off of any joint bank accounts and credit cards to limit your liability if they make a large purchase or rack up credit card charges. 

Know Your Budget:

You will need to complete a budget as part of the divorce”

Most people significantly underestimate how much it will cost them to meet their financial obligations. Take the time to create a detailed listing of all bills, debt, loans, mortgages, credit cards, internet and technology costs, and other payments. In addition, keep track of how much you need for groceries, fuel, vehicle costs, utility bills, rental costs, school expenses for the kids, kids’ clothing, and other types of ongoing expenses. 

You will need to complete a budget as part of the divorce, so this is a practical exercise. This is also a time to consider unnecessary spending that can help reduce your monthly budget. 

Most contested divorces in the USA cost between $15,000 and $30,000, but these legal costs can easily be tripled or more even in the first year of filing. At the very least, you will need a retainer for the attorney, which is typically several thousand dollars. 

Final Thoughts:

Talking to a divorce attorney before doing anything with the finances, particularly the marital accounts, credit cards, or investments, is essential. Unfortunately, making the wrong decisions in handling finances leading up to and during the divorce can result in significant consequences and even long-term tax issues. Know your assets in a divorce, protect yourself.

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Mardi Winder-Adams

About the Author:

Mardi Winder-Adams is an Executive and Leadership Coach, Certified Divorce Transition Coach, and a Credentialed Distinguished Mediator in Texas. She has experienced her own divorce, moved to a new country and started her own business, and worked through the challenges of being a caregiver and managing the loss of a spouse.

Handling life transitions and pivots is her specialty! In her professional role as a divorce coach, Mardi has helped hundreds of women before, during, and after divorce to reduce the emotional and financial costs of the process. She is the founder of Positive Communication Systems, LLC.