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From The Experts

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Divorce can be a tumultuous time and if not managed properly, can be one of the most financially devastating life events. The process can be emotional and intense and the financial decisions you make during this time might be some of the most important economic decisions of your life. It is imperative to understand your complete financial situation. Knowledge and preparation will be crucial to your creating a sound financial agreement.

Generally there are four issues at the core of a divorce:

  • Division of marital or community property
  • Division of debt
  • Child custody and parenting plan if there are any minor children from the marriage
  • Amount of child and/or spousal support if applicable

Three of the four core issues are financially based. That is why it is crucial to assess your current situation. Gather all of your financial data if you are contemplating separation or divorce. The question though for many is "where do I begin."

Take a comprehensive inventory of your assets. Itemize everything you own - real estate, bank accounts, investments, retirement plans (such as IRAs, 401K/403B, profit sharing, company pension), annuities, life insurance policies and collectibles. Determine the value of each.

Also construct a complete list of your liabilities. This would include mortgage, home equity line of credit, automobile and student loans, credit card debt and promissory notes. Establish the balance owed on each.

Identify the ownership of everything you own and owe. Is it titled in your name, your spouse's name or held jointly between the two of you? Is the asset/liability marital or separate property? If it was acquired during the marriage and prior to the separation/divorce agreement, whether titled jointly or not, it is considered marital property. There are some exceptions, such as an inheritance. You must know what you have. Otherwise, how will you determine what you are entitled to?

The next step is to review all sources of income. This includes earned wages/commissions, bonuses, royalties, Social Security and pension benefits, rental and investment income, etc. Check your recent tax returns. They contain a wealth of information. The prior 2 to 3 years will provide valuable information.

Now it's time to construct an accurate budget. This can be a challenge for many. Very often people do not realize the cost of their lifestyle. They underestimate or omit expenses. Review all monthly, quarterly, semi-annually and annually recurring financial obligations and expenses. This will help you produce a reasonable, realistic budget.

Only once you have thoroughly gathered all of the above data can you begin to address asset and liability division as well as spousal and child support. You must understand your financial needs versus your wants. Confidently negotiate based on substance and awareness. Your future financial security and success depends on it!


(Ivy Menchel is a Certified Divorce Financial Analyst and her practice focuses on the objectives, needs and goals of clients; always beginning with a thorough understanding of their specific situation; committed to bringing creative options to clients for their financial issues; and a strong belief in advisor collaboration.)

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  • Comment Link Alana Sunday, 12 May 2013 08:47 posted by Alana

    Thanks for this great preliminary post on getting a clear picture of your finances. I think that most times, married people have their financial lines blurred since they don't expect to be divorced in the future. Extricating yourself from this 'mess' in preparation for divorce is a daunting task, and might even need professional intervention.