It is a sad fact that divorce is a common occurrence in today’s society. BDO Wealth Advisers pointed out that as the year draws to a close, partners divorce.
While a divorce may seem overwhelming, having a plan and a checklist in place can help you. When contemplating divorce, there are a few essential steps that should be taken to ensure that the financial settlement will be fair and that you will be financially independent once the divorce is finalised.
Lisa Griffiths, associate director of BDO Wealth Advisers advises the following seven steps to prepare for divorce:
1. Establish a team of professional advisers
It is vital that you find your own lawyer and that this person should not be someone who has or will act for your spouse. It is also best to have your own financial planner. “Their role will be critical in analysing the financial data. Once again, your planner should not be a person who will also act for your spouse – there is a clear conflict of interest,” said Griffiths.
2. Gather all of your financial information and documentation
“You need to be fully aware of the complete and complex financial situation facing you. Understand all of your debts — not only what the two of you have jointly, but also individually. To avoid any unforeseen surprises, you need to comprehend the full picture on credit card accounts, home loans, car finance and even other items such as personal loans, business debts and retail accounts. You must be prepared to disclose your full financial status,” noted Griffiths.
Having a full understanding of the finances early in the proceedings makes it much easier to navigate through the divorce negotiations. Griffiths suggested keeping a second copy of these records in a safe place.
3. Establish your own financial identity
When you are planning to divorce, it is important to have an understanding of your financial standing, including your credit record. Griffiths advised conducting a credit report on yourself, as well as opening accounts that are solely in your name.
“This includes cheque, credit cards, savings, retirement plans, and even things like insurance. You should rout all of your deposits and salary payments through this account,” said Griffiths.
4. Make a plan with your bond repayments and/or rental agreements
When it comes to property, it is advised that you consider your options when preparing to divorce. This is especially true if you own or rent the property jointly. Payments will be expected by the bank or landlord regardless of your personal situation, which may reflect badly on your credit profile should any payment be missed.
“Whil you may want to move out and on as soon as you can, doing so may hurt your claim to the property. For those who share the bond or rental payments, you are jointly responsible for this financial commitment. In some cases, the two spouses can come to an arrangement about who keeps the house and what concessions are to be made. However, often the sale of the jointly held home is a cleaner process,” noted Griffiths.
5. Update your will
When there is any life changing development in your life, it is important to update your will. This includes the birth of a child, the death of a loved one, and a divorce. If you have a joint will as a couple, it is important to get a new will drafted in your name. If you already have a will in your own name, adjust it to account for your change in situation, including the divorce settlement agreement.
“You need to discuss and consider various issues such as who would be the executor of the estate or, if you have children, how children from your current marriage may be treated when compared with possible children or stepchildren from a future marriage,” said Griffiths.
6. Child maintenance
If you have any children, child support will be an important issue when it comes to your divorce settlement. “As parents you should (hopefully) be able to amicably come to an agreement that is equitable to the children and that does not affect their accustomed needs. If you won't have primary custody of the children, accept that you will be paying some form of child maintenance,” stated Griffiths.
She added that the amount paid in child support is up to you and your spouse, as well as your financial situation. If you both cannot come to an amicable decision, the court believes that the child’s needs come first, and you will be at the mercy of a court imposed decision based on the information presented by your attorney.
7. Be observant
Unfortunately, when preparing for a divorce it is not unheard of for a spouse to act in an unethical manner. Griffiths cautioned that you should be observant for any signs of unusual expenditure by your spouse, as well as pay attention to any unusual paperwork that may relate to your assets.
“When it comes to financial planning for divorce, following the above advice can save both you and your spouse a lot of financial and emotional pain. It will also make it so much easier to establish your own life after the divorce,” said Griffiths.
Handy tip: You can apply for a credit report from Kudough through Justmoney, here.