Divorce is definitely one of those times where you have to face the truth and take control of your financial situation, like it or not. It’s a daunting task for anyone, but if you haven’t been the one controlling your finances before, it can seem especially challenging. But there are people and services that can help you every step of the way, and Catherine Shanahan and Karen Chellew from My Divorce Solution have made it their mission. They bring their legal and financial perspective to guide you through your divorce process, all while securing your worth and protecting your wealth, one day at a time. If the thought of diving deep into your finances – especially when you don’t have easy access to them – makes you feel uncomfortable, then it’s crucial that you find support that helps you to be the best advocate for your money!
UNDERSTANDING YOUR ASSETS
One of the biggest fears – particularly for women – is where to even start when it comes to finding the financial documents you need. Where are they? What are they? What do they mean? It’s so common to not even know where to start, which just makes the entire process even more overwhelming.
When you are not involved with your finances, it can really affect your confidence level when navigating the divorce process, because you aren’t armed with all the information you need to make informed decisions. Plus, you may think there is money or assets because of the lifestyle you lived while married, but you may be surprised to find out it’s not what you thought it was. For the purpose of both knowing and understanding what you will be able to afford post-divorce, as well as what you should be entitled to in your settlement, you just have to buckle down and do it. In Jessica’s first marriage, she let her first husband deal with all the finances. She signed what he told her to sign and didn’t really question much. But several years after her divorce, when it came time for her to purchase her first apartment on her own, she learned there was a lien against her that was associated with something she and her husband had invested in during their marriage. It’s not that she hadn’t been told about it when the investment was made, but the truth is, Jessica really didn’t understand the ramifications and just went along with what her husband wanted at the time. And then she found out it was going to block her from being able to buy her own home! Fortunately, they were able to work it out, and she did proceed to buy the apartment. And in her second marriage, Jessica made sure she knew how to access their financials and played a very active role in managing the money.
Being prepared is key, and oftentimes this is a lesson people learn too late. Think about it, in the beginning, the honeymoon phase, it doesn’t seem like something you need to worry about, right? Things are so great, why rock the boat and bring up something so serious and unsexy as how to access the bank accounts – some people may even think bringing this up seems like you’re insinuating that you don’t think things will last. And maybe your partner says not to worry, that they’ll take care of you and they’ll be here forever, and then what? This is an area where you have to set the boundaries around what you expect in terms of knowledge and access to your financial situation, it should be non-negotiable. What if your spouse has a lien against child support from a prior marriage? That’s going to come off on the closing sheet when you’re about to close on the marital home. And who wants to be blind-sided right before you’re ready to settle into a new space? It’s a must to make sure you are not considered for things that you do not have any correlation with. Asking for access to you and your partner’s assets should never be a problem – it’s yours, too!
WHAT IS A FORENSIC ACCOUNTANT AND DO YOU NEED ONE?
Since so many people getting divorced don’t have an idea of the true picture of their finances, they may bring in a forensic accountant to ensure nothing is hidden from one spouse or the other. A forensic accountant assesses the dissipation of assets or calculations of who spent what, where, and when. But they do not teach you the ins and outs of what documents you need or how to use the information that you have. This is why it’s important to speak to financial professionals like Catherine and Karen from My Divorce Solution because they’re here to help guide you through collecting that data, supporting the documentation, teaching, and helping you understand all these components, while also giving you other ways to sort your information out. They say that a lot of times people will hire forensic accountants when they aren’t really needed at all. Catherine admits she has conversations with clients and wonders, what do you really need a forensic accountant for? She claims that there is a very small number of people who actually need them because some people mistakenly think they need a forensic accountant just to locate things that can easily be found in other ways.
UNDERSTANDING AND MAINTAINING THE COMPONENTS OF YOUR ASSETS
There are so many other variables that come into play that you may not even think about, let alone comprehend. But Catherine and Karen say that divorce is the perfect time to start fresh and begin creating a financial portfolio of your own. Don’t stress about whether or not you think you have “enough” to do that – the whole idea is to set up a plan that will allow you to build your own wealth moving forward. It may sound like a completely different language, and who wouldn’t want to be able to put it aside and let someone else deal with it? But at the end of the day, knowledge is power, and the more you learn, the better off you are.
Now that you’ve done your research, listened to the Divorce, etc… podcast episode with these women, maybe even picked up Personal Finance for Dummies, it’s time to piece it all together. Some of the terms may seem like a foreign language, but if you have guidance from people that can patiently explain things like an annuity and whether you get annuity to guarantee a death or living benefit, or maybe to act as a supplemental income as a married spouse? Documentation is essential in every asset and every debt, including old student loans.
It’s also important to note certain types of purchases that were made in your marriage, particularly large ones. T.H. uses a great example of how her ex-husband wanted TVs in almost every room. She didn’t think they needed that many, but the question during the divorce was whether he bought them or used marital assets? These are things to think about, and Karen emphasizes that identifying the specifics in the divorce documents creates an easier transition when dividing up investment or retirement accounts or any other financial documentation that you have.
What can be tricky is that there’s no rule of thumb across the board when splitting shares or dividing things up by the dollar amount. For every asset, you need to understand every component but for every situation, it’s going to be different. Maybe you want to avoid a tax discrepancy and allow your spouse the tax write-off because you need the cash going forward, or maybe there is a significant difference in income and taking the tax loss isn’t the best way to go. When Karen was younger, her ex filed for bankruptcy. If she had given him credit for whatever debt they had and he went and had it forgiven during the bankruptcy, then Karen would have ended up with the short end of the stick. Life is uncertain and we can never predict exactly what’s going to happen, but that’s exactly why it’s so important to learn everything you can about every aspect of your finances, and become aware of these financial landmines so that you can continue to make the smartest financial decisions for you throughout your divorce process and beyond.