As a divorce attorney, I have seen it all. I have seen doctors, lawyers, engineers and other professionals who earn a great living but, as a result of a separation or divorce, end up with no cash flow. I always cringe when I have to tell my clients that yes, they have to split their retirement accounts with their former spouse, and yes, they have to sell the house because neither spouse can afford the mortgage on their own. Some of the divorce issues can be avoided and are preventable if the spouses take certain measures during the marriage, long before anyone utters the word “divorce.” Below are some tips to keep in mind so that if a divorce happens, you and your spouse are financially prepared for it.
1. Make sure your spouse stays in the workforce or maintains the skills necessary to be employable
Many people happily allow their spouse to fulfil their dream of being a stay at home mom or dad. When they separate, the working spouse is then ordered to pay child support and spousal support to the stay at home parent. Meanwhile, the stay at home parent can’t afford to live on the support alone and needs to get a job. However, this proves to be challenging because no one will hire a candidate who has not worked for over ten years. This situation not only affects each spouse’s cash flow but also their relationship post separation. The spouse paying spousal support is resentful for having to support someone you no longer live with, and the person receiving support is frustrated because he or she is unable to be self-sufficient. Separation and divorce will not have such a devastating effect on the family and children if there is enough income to support two households. Thus, each spouse should ensure to keep in touch with their professional network and maintain marketable skills to prevent this type of problem in a divorce
2. Keep your separate property separate.
Many people come into a marriage with their separate property and they also receive gifts and inheritances during the marriage. These assets are the separate property of the spouse and they should be kept separate from community income and assets. For instance, if you receive $100,000.00 in inheritance, please open a separate account under your own name, deposit your inheritance into that account, and do not use the funds to pay for community expenses. Similarly, if you have a rental property which you owned prior to the marriage, open a bank account to be used exclusively for the rental income and expenses related to that property. This is important because in a divorce, if you can show that you have kept your separate property, including its expenses and accumulations, you can keep the separate property after the divorce and do not have to account for the community “share”. On the other hand, if the separate asset was used for community expenses or vice versa, you will need a forensic accountant to do “tracing” to see where the money went. You will save substantial fees and costs in a divorce if you simply keep your separate property and income separate.
3. Be knowledgeable about marital assets, debts, income and expenses.
There are some spouses that just do not want to deal with paying bills and taxes or do not know what goes in and out of the joint checking account. I generally deal with all of the household expenses but my husband sometime checks our accounts and we discuss our current and future financial situation. The advantage in knowing the extent of your assets, income and expenses is that if you have to go through a divorce, you will know not only what assets there are to be divided but you will know whether your case is worth fighting in court for.
Some spouses come to me with zero knowledge about how much their husband or wife earns, whether they have retirement plans or whether they own other real properties. Not being informed on the extent of community assets and debts will make your divorce very expensive. Your lawyer will have to conduct discovery to find out about the nature and extent of community assets and debts. If you already know how much money is in dispute in your case, you can make an informed decision about how much money you are willing to spend to divide the money. It makes little financial sense to spend $50,000.00 on litigation expenses when the amount of community assets is worth less than that.
4. Get a postnuptial agreement if either party has concerns about a potential divorce.
A postnuptial agreement is a contract between spouses regarding their obligations and property rights in the event of a divorce. I know the idea of getting your spouse to agree to a postnuptial agreement is as exciting as getting a root canal but I have seen it help couples get back on track with their marriage. In a postnuptial agreement, spouses can set limit on spousal support and property division and negotiate other financial provisions that will apply in the event of a divorce or separation. Sometimes such an agreement is a wakeup call for the spouses because it can spell out each and every term for their (anticipated) divorce.
5. Consult an attorney when you and your spouse plan to purchase, transfer or engage in any real property transaction that affects the title of your home.
A lot of divorce cases involve disputes over real property and the manner in which the property’s title is held. I can write a chapter on the issues involving real properties in a divorce but my simple advice is to consult a family law attorney if the title to your home will be changed in any way, shape or form. It doesn’t matter if it is only to refinance a mortgage and it doesn’t matter if one person’s name will be put back on title after the loan cleared. Trust me, it does matter. Unfortunately, it is generally too late to fix the property’s title and the host of problems resulted from the title change by the time the couple is in divorce court.
We are Torrance’s premier family law lawyer and we can help you with your legal questions. Please direct all inquiries to our office at (310) 212-7109.
Disclaimer: Regal Law Office, APC and their attorney do not assume any responsibility for the accuracy or timeliness of any information provided herein. The information contained herein is for informational purposes only and is not legal advice or a substitute for legal counsel. Online readers should not act upon this information without seeking professional legal help specific to their case.