By
Stacy D. Phillips, Attorney
Whether you’re legally separating or filing for divorce
it’s extremely important that you don’t allow
your emotions to get the best of you —it’s important
that you keep a level head and make certain your financial
affairs are in order.
One of the most common mistakes I see many of my clients
make is that they are so preoccupied with their feelings
(and for good reason!) that they can’t step aside
and take stock of their finances. However, what I try to
impress upon my clients is that the financial disasters
they create during and after a marital dissolution could
impact them for years to come.
Here are six of the more important considerations you may
want to think about should you find yourself in the breakup
of a relationship:
Pull
All Your Financial Records
Provide
your attorney with a list of assets and liabilities you
are aware of. Include everything: Not just the house, the
car, and the furniture, but credit card debt, what you owe
the bank, the IRS, and any contracts you’ve entered
into, even those that are easy to overlook like the monthly
agreement to pay the pool man. After making this list, and
after turning it over to your attorney, take action on your
own. What I mean by that is cancel all credit cards and
open new ones in your name only. Before you cancel a credit
card used by your spouse, warn him or her and help that
spouse get new credit cards in his or her name alone. Write
your creditors letters as back up, don’t just make
these arrangements by phone.
You
want everything in writing. There are clear and long-lasting
benefits only documented records can provide. When you confer
with your attorney, insist that your property settlement
agreement calls for the payoff of all debts. Even if your
ex says he or she will pay off the MasterCard balance as
a part of the settlement agreement, don’t agree to
that, for third party creditors can still hold you liable.
If the debt is a joint debt belonging to you and your spouse,
the third party creditor is not obligated to chase only
your spouse for payment regardless of what your divorce
decree states.
If
you have substantial debt and you have equity in your home,
it is generally better to refinance the house than sell,
for instance, and use the proceeds to pay off all debts.
It not only provides you with a clean start, it also affords
you tremendous peace of mind knowing no one can come after
you to collect money. Don’t forget anything like the
phone company and all other utilities, either. I find that
people who move to a condo and leave the house to their
former spouse often forget to have their name taken off
of the telephone or utility bills. If your ex starts calling
Brazil and doesn’t pay the phone bill, guess who’s
still on the hook? And under the new bankruptcy laws, if
you haven’t severed ties appropriately, you may still
be liable for your spouse’s debts in the event he
or she files a Chapter 7 action, too.
Get It In Your Name
Make
certain any stocks and bonds you are awarded are reissued
in your name. This often takes lots of paperwork and tedious
follow through but its well worth it in the long run. Also
make sure you have a new broker (or money manager) or one
that is not also working for your ex. Though some brokers
can be mutual and keep relationships with both parties even
after the divorce, I find it’s better to have a broker
(or money manager) who is strictly looking after your interests!
Make Sure the Past
Contract is Completed Before You Sign a New One
If you’re keeping any outside service professionals
on call—the pool man, the housecleaning service, the
gardener—make sure they’re under contract to
you and that they are not owed anything under your old arrangement
with them. If your ex continues to retain the services of
the pool man, for example, and this pool man is still owed
several hundred dollars under your old contract, you too
will be forced to pay it. So, the message is: get a fresh
start.
Get New Advisors and
Change Your Will
Re-do
your will and living trust. Hire a new and an independent
Estate Planning attorney to draft it. This document is one
that is far too often overlooked but could be one of the
most important documents you update or redo. After all,
you wouldn’t want your heirs to suffer, especially
your children from a previous marriage.
Hire a new accountant/business manager to make certain you
are financially sound. You don’t want the same person
who was looking out for your spouse since that person might
not be as objective and also be torn between his allegiance
toward you and your former spouse. You want to assure that
your financial matters are very private and that the person
you choose to look after them is your sole advocate.
