How to Plan & Protect Your Finances During Divorce


by Stacey Udell~Getting divorced can be mentally and financially draining. It impacts so many facets of a person’s life: social, familial, spiritual, emotional, financial . . . You can protect your finances if you prepare, educate yourself, and think of the long-term.

Particularly for women that have relied on their husband in financial matters, establish (and then maintain) a solid financial foundation for yourself and your children by having access to funds and credit. You will need money, not just for the normal day to day expenses, but for a qualified lawyer.

Find a reputable mediator or lawyer that you feel comfortable with. Ask friends for recommendations, ask your accountant. While you may not want to spend the money now, in the long run you will be better served by getting good advice early on.
Where you may not have seen a therapist before, you may find it beneficial to see one now. While divorce is painful, you can and will be ok if you maintain a healthy state of mind.

It is recommended to have funds available to you in your own name, entirely separate from joint accounts. Maintain a credit card in your own name, as well; it may be difficult to obtain one later.

If you have not taken an interest in the family finances in the past, do it now, even if you are not contemplating a divorce. Be sure you know where the important documents, files, and passwords are kept because you will need to supply your mediator, attorney, or accountant with financial information so they can get a complete picture of what is owned, owed, and what money comes in and what goes out.

In dividing the assets, a marital balance sheet is often prepared that lists each asset (and liability) and its value. A portion (or all) of each asset is allocated to each spouse. Not every asset is divided 50/50. It depends on the laws in your state.

When a business is owned jointly by the parties, it is often necessary to obtain a business valuation to determine the value of that business. Many CPAs, like myself, prepare business valuations to assist divorcing spouses often. Generally, the value is determined based on the value of the business’ assets, income, or a market comparison. The value of a business is often the largest asset owned by the parties and is most often not represented by the book value on the income tax returns. It is important to get a qualified appraisal.

Think About the Future
While you may want to rush through the divorce process to get on with your “new life,” you should analyze all of the financial implications, including income and tax consequences, before making a final settlement agreement. Put the time in now to make the right decision so you are not stuck with the consequences of a bad decision.

For example, you may want to stay in the marital home that is paid off and worth $500,000. Even without a mortgage, you will still have to pay real estate taxes, maintenance and utility costs for that house. When you sell the home, there may be tax consequences as well. Based on the level of your income, can you realistically afford to stay in that house?

After the divorce is finalized, it is important to remember to update your will, and the beneficiaries of any retirement plans or life insurance policies you may own. If you do not update your policies, your ex-spouse may receive the proceeds of your 401k or life insurance policies.

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About Stacey Udell

Stacey Udell, CPA/ABV/CFF, CVA is a partner in the public accounting firm of Gold Gerstein Group LLC. Ms. Udell specializes in business valuation, forensic accounting, economic damages, and litigation support for a wide range of businesses and professional practices for purposes such as estate and gift tax planning and compliance, divorce, business succession planning, mergers and acquisitions, shareholder litigation, and bankruptcy proceedings.

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