Divorce & Your Finances
Divorcing couples that have commingled finances, bank accounts, and other intangible assets are faced with difficult decisions to make. Equitable division of joint property is always tenuous, and often the most expensive and drawn-out issue in contested divorces. Courts encourage parties to resolve issues collaboratively and with limited judicial interference if possible. Some couples are in such a rush to separate, they fail to consider financial repercussions. Closing joint accounts, lowering your available credit, or taking out new credit because you no longer have access to previous resources can lower your credit score, affect your ability to obtain a mortgage or personal loan, or worse. Our lawyers at Bubley & Bubley, P.A. understand that divorce is a delicate subject, but it should be broached considering all possible issues at hand.
Grappling with Finances
In Florida, couples seeking divorce are required to file a financial affidavit with the courts. A financial affidavit is one of the most crucial items the parties will file with the court. It itemizes all monthly income, expenses, and assets and liabilities. This includes gifts, personal property like furniture, jewelry and unique items. It also entails a list of intangible property, like details regarding IRA, 401K accounts, bank accounts, credit card accounts, loans, mortgages, life insurance accounts and other assets and liabilities. The more specific you can be, the easier it is for the court to determine alimony and child support awards and ensure that all property is distributed fairly. Also be sure to review your ex-spouse’s financial affidavit for discrepancies. If you think your ex-spouse is hiding income or not reporting income, forensic accounting is possible to identify this.
Divorced parents also may want to contemplate the division of child expenses. Will both parents continue to fund joint savings accounts, health spending accounts or 529 college plans for their shared children? Who will bear the cost of providing health and dental insurance to children? What happens when the child turns 18? If the children continue to attend private or parochial school, will both parents contribute to tuition? These items should be settled in the parenting plan or marital settlement agreement prior to the final divorce hearing.
Determining Debt Owed and Property/Asset Division
The courts will evaluate joint or sole debt based on the contract, loan agreement or account statement applicable, and how property is titled. For example, if a divorced couple has two joint checking accounts and one joint credit card account, they are required to contact each bank or investment broker and either close the account entirely, splitting remaining balances or amount owed in principal and interest, or one party can assign all rights and interest in the interest-bearing, savings or checking account to the other party. In addition, if both parties have individual IRA or 401K accounts with their respective employers, they may both choose to keep their individual retirement accounts in play, or they may be required to file a QDRO, or qualified domestic relations order, to divide funds held in the pension.
Because the parties may be closing multiple bank accounts, lines of credit or losing equity due to division or sale of property, their credit may suffer significantly. Married couples who owned a business together and are now seeking divorce also want to discuss business implications sooner than later, as they may have to wind up the business or sell assets. Some things you can do to prevent a hit to your credit is to open an individual credit card account and make on-time payments, and be conservative about your spending habits or financing large purchases while your divorce hearing is pending. Also compile financial documents, paystubs, bills, invoices and any prenuptial or postnuptial agreements you have regarding equitable division of jointly owned property.
Schedule a Consultation
If you are preparing to divorce in Florida and need guidance, contact our Tampa divorce attorneys at Bubley & Bubley, P.A. for assistance. We focus on family law including equitable division of property. If you are curious about how divorce can affect your finances or how you can mitigate damage, we can advise you. Schedule a consultation today.