Making financial decisions is a major part of the divorce process. Among other things, that means determining distribution of assets and liabilities and determining how each spouse will pay his or her living expenses. It takes time and effort (sometimes a lot of time and effort) to get to the point of actually making those decisions. You can start that process long before you actually need to make the decisions and the sooner you start, the better prepared you will be.
Step 1 – Make a list of your assets and liabilities. Include everything that comes to mind. Examples of assets are real estate, vehicles, investment accounts, bank accounts (credit union, checking, savings, money market, etc.), certificates of deposit, savings bonds, pensions, other retirement accounts (401(k), 403(b), IRAs, etc.), furniture and household goods, antiques, collections, timeshares, cemetery plots and ownership interests in businesses. Examples of liabilities are real estate loans, vehicle loans, student loans, other loans, lines of credit, credit cards, unpaid taxes and other unpaid bills. These are examples, not an exhaustive list of possible assets and liabilities.
Step 2 – Gather information to document, value and understand all the sets and liabilities you have listed. That means copies of bank statements, retirement account statements, loan statements, credit card statements, etc. Yes, that can be a tedious and time-consuming job depending on your record-keeping practices. Even if you keep organized records, you may need to get information from other sources.
Step 3 – Prepare an income and expense statement. This does not need to be an intimidating, complicated task. The idea is simple. Make a list of your income and a list of your monthly expenses. For your income, include the gross monthly amount before any deductions, list all deductions from your income (income taxes, medical insurance premiums, retirement account contributions, etc.) and the monthly net or “take-home” amount. For your monthly expenses, make a list of everything you pay and the amount. You can average expenses that vary or that are not paid monthly. Neither of them need to be precise at this point. You can always make adjustments if needed.
With those three steps, you have established a foundation on which you can build to make the necessary financial decisions for your divorce. And most likely, in completing that process, you will gain a better understanding of your overall financial situation.
If you live or work in the central Pennsylvania area, including Hershey, Carlisle, Harrisburg, Mechanicsburg and surrounding communities and would like to discuss preparing your finances for divorce or any other family law or estate planning or administration issue, please contact me.