Whatever the case may be, divorce may seem like the only option to continue forward in a way that is best for both parties in the marriage, and for the family. When considering divorce, it is important to think about how you will fare in life without the assistance of your partner, and the new responsibilities you will likely have in order to live a stable lifestyle. In the very beginnings of your separation and divorce, there are actions you can take that can help you get off to an orderly and steady life as a divorcee.
8 ways in which you can financially plan for your divorce
The Press-Enterprise published an article meant to help those who are in the middle of a divorce, and for those who may not be divorcing currently, but want to be prepared in case one should occur. It goes over the financial concerns that a divorcee may have when uncoupled from their partner, and how to best plan and prepare for being on their own so that their financial shock and losses are minimal.
Something to mention before we begin the ways in which you can prepare for the financial disruption a divorce can bring is that South Carolina is an equitable distribution state. This doesn't mean that everything will be split in half equally (50/50), but that assets and debts are split fairly between the two parties. In order to justly determined how the property, assets, and debts will be split, the court will look at several aspects of the marriage such as: the length of the marriage, age and health (physical and mental) of each spouse, income of each party, retirement benefits of each spouse, nonmarital property of each spouse, and so on.
The tips mentioned in the Press-Enterprise article include:
- Managing debt. The first action discussed is taking stock of one's credit and debt. Planning for a future newly on your own, you need to make sure that you can handle the amount of debt you may owe. If you owe a lot on your credit cards or in loans in your name, your credit score may have suffered. Your credit score is what determines whether you can buy a house or rent an apartment. Poor payment history can take up to seven years to be removed from your credit report, and bankruptcy can stay on your report for a decade. The best solution for dealing with this debt and eventually improving your credit score is to try and pay off that debt before the divorce is finalized. You can also come to an agreement with your spouse about how to pay off the debt between the two of you, which can be settled during mediation.
- Check on investment accounts. Are there stocks you have that are losing value that you can sell? Will you have to pay tax on capital gains? Is the stock market going up, but the value of your equity investment is going down? These are the things you need to look at when you get your quarterly investment statement. The statement is there to help you understand where your investments are located and whether they're serving you or costing you money instead.
- Save for retirement. We've likely heard about how important it is to save for your retirement, and if you have been depending on your spouse to do the majority of the saving for that eventuality, you may very well find yourself looking at zero retirement savings or a very small amount. It is important to begin with your own retirement savings account, as when you are older and ready to retire, you will need enough money to support the standard of living that you require.
- Understand your survivor benefits. Survivor benefits is the money paid to a spouse and dependents in the event of the death (or divorce, in this case) of the pension account holder. It is important to understand these benefits as set out in your or your spouse's pension: “If the option selected results in a reduced spousal benefit at the death of your spouse, your financial future will be impacted.”
- Be aware of insurance limits. You may be paying for insurance, but it is critical that you ensure that this insurance is enough to cover all of your assets. This includes life, long-term care, and disability. Also make sure to check your policies on your property and casualty insurance. If you wish to minimize your premium, you may change your policy to carry low liability coverage. Regarding auto insurance, South Carolina requires you have at least the minimum amount for personal injury, property damage, and uninsured motorist coverage.
- Review tax returns. It is always a good idea to review your tax documents, whether you prepare them yourself or not. If you have a tax preparer, you are still required to sign the document before it is sent in to the IRS. Give those documents a good review; go over it with your tax preparer if you are unsure about what exactly you are looking at.
- Learn to negotiate. Now that you are going to be on your own, you will have to fight for your place in the world if you haven't been fighting already. It's not uncommon that one spouse takes over the responsibilities of negotiating certain financial situations in the marriage or for the family. If you are not confident in your abilities to negotiate (for a raise, a better paying income, buying a house or car, etc), then you can check out the many resources available online or in books.
- Lease vehicles instead of buying. Financing a car tends to have higher monthly payments than leasing a car. With a lease, you will likely have policies that last for a couple years before you have to return it and lease a new car. And who doesn't want a new car every couple of years? Be aware that if you terminate your lease agreement before it is up, however, you will suffer financial ramifications.
As you can see, there are several ways that you can financially prepare for a divorce. Instead of just hoping that you will get a fair deal during the divorce itself, you can arm yourself with knowledge and experience on how to handle your finances, and best save and earn your own money. It is important that you do not hide any assets in an attempt to keep more for yourself, as that is illegal and you will get caught.
What are prenuptial and postnuptial agreements and how can they help me?
Finally, one of the best ways you can prepare yourself for a divorce is taking steps directly before or after you are married. While it may be unfathomable at the time to consider such an inevitability, in 2020, the CDC reported 1,676,911 marriages and 630,505 divorces. As we can see, divorces are quite common, and it is only common sense to prepare for one.
A prenuptial agreement happens before you are married. You and your spouse decide on how your finances, assets and debts will be split in the case of a divorce. It also covers alimony and inheritance rights. A postnuptial agreement is the same type of agreement, only written up after the marriage has already happened.
Divorce is a complicated subject, especially when it comes to finances. While South Carolina is an equitable distribution state, it is important that you prepare yourself for the probable financial hardships you may face after the two of you are divorced.
To ensure that you understand all that is owed to you, and all that you can do to make sure that your standard of living is upheld as much as possible, you should make an appointment with a Holland Law LLC family law attorney. We can not only help you to create a solid and fair prenuptial/postnuptial agreement, but help you mediate an agreeable outcome with your divorce. We will fight until you get what is fairly and justly yours. To schedule an appointment, call us at 803-219-2630 or use our contact page. Our firm has offices located in Fort Mill and Rock Hill. We also proudly serve the people of York, Chester, and Lancaster Counties.