According to the American Psychological Association, approximately half of all marriages entered into in the United States end in divorce. While there are undoubtedly many downsides to getting divorced, the economic impact of splitting from your spouse should not be overlooked. Many people incorrectly believe that if they were to get divorced they would walk away from the marriage with half of what they have now. In many instances this is not the case, but even if it were, would you be able to live on half of what you have now? A marriage often affords economic support to a couple, and when that couple divorces each spouse will need to be able to cope with the realities of their new financial situation. The following are a list of tips and proactive steps that you can take to help protect your money during a divorce. Some of these steps can even be taken before divorce papers are even filed. However, it is important to keep in mind that the tips listed below are only general suggestions and may not be applicable or appropriate given your financial situation. Be sure to consult with an experienced divorce and family law attorney with any legal questions about your specific circumstances.
Tips For Protecting Your Money
- Assess Your Marital Assets and Debts: In many ways knowledge is power during a divorce. If you believe that a divorce is in your future, begin making a comprehensive list of all of your marital assets and debts. Review old bank statements and inventory your safe deposit boxes so that you know what you have and what you owe. This is important knowledge to have in case your soon to be ex-spouse attempts to move or hide assets.
- Do Not Move or Attempt to Hide Assets: While it may be tempting to make large cash withdrawals or to hide assets in anticipation of getting divorced, don’t do it! If the court finds out that you are hiding money you could find yourself is a world of legal trouble.
- Consider How You Will Support Yourself After Getting a Divorce: Realize that your financial situation may change after getting divorced and plan accordingly. Consider how you will support yourself after getting divorced and if you will need to find a job start the job hunt now. Prepare a budget of your anticipated expenses.
- Acquaint yourself with the “QDRO”: QDRO stands for Qualified Domestic Relations Order, and is a the document that courts use to divide qualified retirements plans. Understanding the basics of the QDRO will take a lot of the mystery out of the divorce process.
- Be Sure to Take Taxes Into Consideration: When dividing assets during a divorce it is important to take tax implications into consideration. For example, it is important to keep in mind that cashing out a retirement fund early is generally accompanied by a hefty fine and that benefits received from a 401(k) are taxable.
- Understand the Difference Between Roth IRAs vs. Traditional IRAs: It is important to note that with a Roth IRA taxes were paid at the time of contribution while in a traditional IRA taxes are collected when distributions are made.
Need Legal Advice?
If the tips listed above seem complicated and overwhelming, do not fret, a competent divorce and family law attorney can guide you through the divorce process and ensure that your money is protected to the fullest extent permitted by law. If you live in Michigan and would like to discuss your legal options with an experienced divorce lawyer contact the Law Offices of Michael A. Robbins today at (248) 646-7980.