Divorce is a difficult, emotional event and separating your lives requires some work. As you determine the logistics of your new life without one another, you must also figure out how to divide your assets, liabilities, and income. Sorting out your finances will be a big part of your marital settlement agreement. This can often be a painful and difficult process, but it’s important to make sure as you go through it that your marital settlement agreement is fair and properly constructed.
Avoiding common mistakes and focusing on the “must-dos” can help keep you on the right track, no matter how stressful it can be to figure out all these details.
Do Complete Discovery Before Creating Your MaritalSettlement Agreement
Discovery is a key component in any divorce. Even those with the best of intentions who don’t mean to leave anything out can overlook key financial assets and liabilities. Discovery provides an opportunity to develop the specifics of your financial situation and so you can determine how they’ll be divided. Common items that you can expect to see during discovery will include:
- Bank, investment and retirement account statements
- Deed to any properties
- Mortgage paperwork
- Insurance documents
- Income tax returns (interest and dividends identify assets)
- Credit card statements (and rewards points to be divided)
- Country Club bonds
- Health Savings Plan statements
- Complete list of valuable personal property such as sports memorabilia collections, art collections, and gun collections and their appraisals
- Real estate appraisals
You’ll see actual bank, investment, and retirement account statements. You will see the deed to your home, the mortgage papers, insurance documents, and a complete list of any and all marital items. Having this complete picture of your assets will allow you to create a divorce agreement that covers every possible aspect, leaving no stone unturned.
Don’t Simply Settle
Divorce is difficult and emotional. Many people simply want to get it over with and move on with their lives, but not giving this part of the divorce the attention it deserves can result in an incomplete, unfair, or unenforceable settlement. Taking the time to go through your estate with a fine tooth comb ensures both you and your spouse are receiving a final agreement that doesn’t require any additional decision making down the road.
Do Seek Advice From an Independent Financial Advisor
Sorting out your finances during a divorce and planning your new financial life can be very difficult. Don’t do it alone. Seek out the advice of a qualified, independent fiduciary financial advisor as early in the process as possible, even before you begin your divorce. This person can help you learn what is possible and help you develop your goals in your new life. He or she can talk to you about the assets, debts, and income you will be dividing in the divorce.
Ideally, this person will be a fee-for-service (hourly) advisor with fiduciary duty to keep your best interests in mind. Although they can help you with things like life insurance, 529 plans, and the like, usually these financial advisors will not be selling anything. This gives them the independence to give you real advice. You can take that advice, and your goals, to your attorney so they can make it happen for you.
Do Explore and Understand All Related Tax Implications
Taxes are unavoidable. However, you can create a divorce agreement in New Jersey that takes tax implications into consideration. Issues such as who claims children on tax returns each year should be decided before anything is signed. In addition, understand the new laws relating to alimony and tax deductions. Make sure you understand the long-term tax implications of early withdrawal or cash out of retirement plans. There are many assets that are taxable when eventually sold that must be discussed and decided upon before signing your divorce agreement. Otherwise you could wind up with some post-divorce tax surprises.
Don’t Ignore the Power of Compromise
Part of any contract is negotiation and a marital settlement agreement is no different. Both parties should be able and willing to compromise throughout the process of creating the marital settlement agreement. Failing to compromise with your spouse to make the agreement fair and equitable to both parties will inevitably land you both in court down the road.
Whether issues revolve around alimony, child support, dividing your assets and liabilities, or who gets to keep what personal property, if compromise is ignored, it is likely you and your soon-to-be ex-spouse will find yourselves battling for a new agreement down the road in front of a judge. This only ends in spending more money and wasting more time. A little compromise in the right places can be money in the bank for you, and a lot less stress for you and your family.
Do Be Respectful of One Another
At one time, you and your spouse loved each other. You loved each other enough to get married and build a life together. Make sure to remember to respect each other during this process. As tough as it can be, maintaining an amicable relationship during this process will help avoid making a difficult time even harder. A scorched-earth policy during a divorce will only increase the amount of time and money spent on the divorce, as well as cause more stress.
There’s a lot that goes into getting a divorce. Despite it being an extremely emotional time, it’s critical to make sure your marital settlement agreement covers every possible aspect of your finances. Once the document is signed it’s considered binding and is not renegotiated when the divorce takes place, so take care to avoid potential pitfalls.
If you’re in the process of considering a divorce, contact the attorneys at Keith Family Law. Our attorneys will help you prevent mistakes and protect your interests when creating your divorce agreement.