During the divorce process, whenever you have someone do something for you, you’re going to pay. There are times when you have no choice to do so. There are times, however, when you do have a choice. Gathering your financial documents is one of them.
A recent article in US News & World Report (“How to Get Your Finances in Order Before a Divorce”) outlines the some of documents you might need.
All divorce courts require a financial affidavit, which outlines your earnings, living expenses, assets and liabilities. However, states have different definitions of what mandatory disclosures include. To get an idea of what you’ll need, Freedman (who is also a CDFA) outlines some of Florida’s requirements:
• Federal/state/gift/intangible personal property tax returns from the last three years
• Forms W-2, 1099 and K-1 from the past year
• Three months of recent pay stubs
• Specified loan applications, deeds and lease agreements
• Bank account statements, including checking, savings and credit cards
• Retirement plans
• Life insurance
It goes on to say:
If you have children, calculate the costs of their food, shelter and clothing; most discretionary expenses are irrelevant. “Child support doesn’t pay for things like private school, or karate, or dance,” says Len Nassi, a certified financial planner and CDFA in Hollywood, Fla.
In addition, there are some commonly overlooked assets. “A lot of times with collectibles, one party might look at them as things they just like to collect and love, but it can turn out they have a [significant] dollar value,” Freedman says. Experts say it’s also worth hiring an appraiser if you have valuable possessions, like jewelry or art. Big-ticket items, such as houses, cars and vacation homes, must also be assessed for their current value.
Check your credit report. Gerri Detweiler, director of consumer education at Credit.com, says it’s crucial to look at your credit report before a divorce trial. Review your credit history to make sure your spouse hasn’t missed payments on any joint accounts, opened any credit cards in your name or engaged in other behaviors that may have damaged your credit. (It’s also just a good habit to vet your credit report for errors every so often.)
After either party has filed for divorce, begin separating your finances, starting by closing joint accounts. “As long as those joint accounts are open, you’re both 100 percent responsible for any debt incurred by either person,” Detweiler says. If you can’t afford to pay off debt on a joint account, create a payment plan with your spouse, so you have a timeline of when you will be able to close the account.
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