201411.19
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Preparing Financially for Divorce

“Keeping your head while all about are losing theirs” is a quote from Rudyard Kipling that might apply to divorce. A marriage that is dissolving is stressful enough but instead of seeking retribution or revenge, keep your head and your focus on what has to be done to get through the process smoothly. One way to achieve is this is by making sure your finances and financial documents in order. By taking the necessary steps to organize your financial records, you will have substantially eased stress, as you will ensure that you keep what is rightfully yours.

The Cost of a Florida Divorce

Divorces can be expensive, especially if you and your spouse cannot agree on a fair distribution of property, child custody, support issues, and time sharing. Filing fees in Florida are around $400, though indigent or low income individuals can request to receive a waiver.

Attorneys typically charge by the hour after securing a retainer. Even if you and your estranged spouse are at odds over these issues, many of these can be resolved through mediation or collaborative divorce to shorten the process and result in less cost. By doing much of the work yourself and compromising on property distribution, time sharing and other issues, you can save thousands of dollars.

Prepare yourself for the divorce, though, by following these recommendations regarding your financial records:

The Importance of Keeping Financial Records

By keeping financial records, you can protect yourself from fabricated allegations about your finances and income sources, and provide evidence of what is marital versus separate property, along with your overall debt obligations. It would be prudent to get copies of the following documents:

Bank and brokerage account statements
Mortgage or home equity statements
Personal net worth statement
Insurance policies
Tax returns for past 5 years
Annuity and pension plans
Property deeds
Will and trusts
Vehicle titles and registrations
Evidence of overseas accounts
Stock and bond certificates
Debt obligations or statements
Deferred compensation
Employment perks
Knowing what you and your spouse have is vital when the marital property is divided. Although Florida is an equitable distribution state which typically divides marital assets and debts evenly, there are circumstances where a court can order unequal distribution meaning one party is awarded the majority of the marital assets (and/or debts).

Inventorying Your Personal Property

Since Florida is an equitable distribution state, it is to your benefit that you and your spouse agree on what personal property to divide. Inventorying your personal property can help you to decide what you wish to retain, while preparing for any disagreements over more valuable property.

There are items of lesser value such as kitchen equipment, dishes, pots and pans and other related items whose possession can be easily decided upon though some of these might have been handed down from a parent or grandparent and are not marital property. Some furniture, though, if antique or high-end, along with collections can be quite valuable. Collections can include baseball cards, sports memorabilia, antique guns, stamps, coins and first edition or autographed books. Some valuable sporting goods might be your high priced bicycles, skis, golf clubs and recreational water craft. Diamond rings, bracelets, and watches purchased during the marriage are marital property. One spouse may have purchased expensive designer clothing that may have high resale value. Prepare a list of these items and photograph them so you have a record in case something mysteriously disappears. Do not forget that some valuable property may be kept elsewhere such as in storage or at your spouse’s office.

You might want to categorize your personal property and indicate where it is located. This might be kitchen items or those found in the garage or storage. Others include various collections, clothing, jewelry, sporting goods, and memorabilia. Assign a value to the more expensive items, or have a professional appraiser do it for you (along with documentation), or else the court may simply assign a much lesser value to it. Lastly, include whether the item is marital or separate property.

Establishing Your Own Accounts in Your Name

An important aspect of life after divorce is establishing credit in your own name. A less than stellar credit could impact your ability to obtain loans at reasonable interest rates. Consider doing the following to establish credit in your own name:

Any joint accounts should be closed immediately. Keep a record of the disbursed funds. If you have a joint credit card account, have your name removed. Keep in mind; a joint credit card does have to be paid off first before you can have it closed.
Get a free credit report from each of the three major credit reporting agencies—Experian, Equifax and Transunion. Many reports include errors so carefully review them and ask your attorney how to get them corrected.
Obtain a credit card or at least a prepaid card since use of it is reported to the credit card agencies. If you obtain a regular one, use it wisely and pay off the balance, if possible, with timely and consistent payments.
If you buy a car with a loan and the interest rate is high, keep current on the monthly payments, and you can usually reduce the monthly rate after one year.
Sorting Out Mortgage/Rent Payments (if you have purchased or leased a home together)

Once you separate, there is the issue of what to do about mortgage or rent payments. If you are both on the lease or mortgage, you are equally responsible for the loan or lease. Should your residence be foreclosed and sold, you may be liable for any deficiency judgment, or that amount still unpaid following the foreclosure sale. If you abandon or are evicted from your apartment, you both remain liable for the unpaid rent for the duration of the lease term.

If you have minor children, the parent with physical custody typically receives the house. However this parent must be capable of making the mortgage or rent payments, tax and insurance payments, and other expenses. If you do not want your name on a lease, see if the landlord will redo the lease to remove your name.

If your home is to be sold and the equity divided, be aware of any tax implications including capital gains. If you buy out your spouse, remain in the home and later sell it to a third party, capital gains will apply, as will the deductible amount so long as you stay there for at least 2 years. Talk to your attorney about other IRS exceptions and tax consequences.

Child Support

Both parents have a legal duty to support their children. Like most states, Florida has written guidelines with a formula calculated to set the amount of support the noncustodial parent will be obligated to pay. The formula takes into account the income of both parents, daycare expenses, health insurance premiums for the parties and child, the amount of parenting time each parent has, etc. If your circumstances require that increased (or decreased) support, then the court may depart from the guidelines. This may include cases for those who have children with special needs, like extraordinary medical expenses, for instance. In other cases, a noncustodial parent who is incapacitated by injury or illness may demonstrate that a lower amount, or that now child support should be paid at all.

Other provisions of a child support order may require a parent to do the following:

Having the children included on a particular parent’s health plan.
Paying half of any medical expense that is uninsured.
Paying for child care.
Incurring transportation expenses for child visitation.
Other daily activities such as music lessons, sports fees, and memberships in community organizations
Paying for education, including college tuition and/or expenses
Claim the child as a deduction for tax purposes
Parents cannot waive their child’s right to child support. Also, child support payments are not tax deductible by the payor.

Before you divorce or separate, or shortly after the process commences, consult with a divorce attorney to prepare for the process.