We are still on Step 2 of Preparing for a Divorce.  Step 2 is "make an accounting of the family finances."  We've discussed determining what you own.  This step requires you to determine what you owe.

You will need to make a determination of all of the debts of the marriage without respect to the name in which it was incurred.The Judgment of Divorce will need to address who is responsible for the debt whether it is in your name, your spouse's name, or joint names.

I recommend that each of my clients obtain a copy of their credit report.  This allows you to make sure that you know of all of the debt that is in your name.  It is not unusual for a spouse to have incurred debt in the other spouse's name without their knowledge.  If that has happened, you need to know it before the divorce is final, not after.

There are many ways to obtain a copy of your credit report.  You can request a free copy once per year at www.annualcreditreport.com. 

Once you see what all debt exists, obtain copies of the statements on these accounts to determine the balances.  You may also need the statements if your spouse has made large or inappropriate purchases on the cards.

If you cannot find credit card statements on each of the accounts, contact the credit card company directly and request they send them to you.  You may want to check their websites as you might be able to make the request online.  I normally want my clients to get a minimum of 12 months worth. Check with your lawyer to see what he recommends.

We are on Step 2 in our series regarding preparing for divorce.  Step 2 involves making an accounting of the family finances.  This includes determining what you own.

For some, that may be easy.  If you have a good handle on the family finances, then you are a step ahead.  If not, then it is time to do your homework.

Many of the assets of the marriage will be obvious - the home in which you reside, financial accounts, vehicles, recreational vehicles, etc.  Others may not be so obvious - these include things like artwork, bearer bonds, a spouses deferred compensation, proceeds from a pending lawsuit, etc.

Then there is the possibility that your spouse is hiding assets (this is more likely if they are the ones initiating the divorce or if divorce has been discussed previously).

Review all possible assets.  Attempt to gather documentation regardign each one including present value, where possible.  Especially look for any recent appraisals of real estate.

If your lawyer is charging you hourly, then any of this information that you are

Your lawyer will need documentation showing your income (if you work outside the home) and the income of your spouse. This is important for a number of reasons, but primarily for child and spousal support.

If your spouse is a salaried employee then your job is easy. Obtain a copy of the most recent pay stub and the most recent Income Tax Return. If you do not have access to either of these, you can obtain a copy of the Income Tax Return by requesting it from the IRS.

Complete Form 4506, Request for Copy of Tax Return and mail it to the IRS address in the instructions along with a $39 fee for each tax year requested. Copies are generally available for returns filed in the current and past 6 years. You can download the form at www.irs.gov.

If your spouse is self employed, then the job of determining their income becomes much more difficult. This is why discretion about your divorce plans is important. You may want to discreetly question your spouse (or if he has one, his business partner or his partner’s spouse) about income. You can attempt to get copies of bank account statements and financial statements of the business. 

Another good way to prove income and assets of a self employed spouse is to obtain a copy of a loan application or net worth statement that they may have submitted to a bank or other lending institution for a loan.

Sometimes it is difficult to prove the actual income of a self employed spouse. At this point, gather the information you can. In the case of a self employed spouse, your lawyer will likely have to help you by using the discovery process to obtain and analyze additional information.

The next step in preparing for divorce is to make two budgets (one that shows the situation in the house before the divorce filing, and one that is your estimated budget for after the divorce).

Most folks don't like to prepare one monthly budget, so I know I'm asking a lot to suggest that it is helpful two prepare two of them.  There is a method to the madness though.  It is important to know what it costs to run your household currently.  Equally important is to have an understanding of what your costs of living will be after the divorce. Let’s take each in turn.

A. Know your current monthly budget

Knowing the monthly budget is important for the following:

1. In an alimony case, it is critical to show the standard of living and the financial need.
2. It is helpful in assessing specific needs of the children that may not be covered in basic child support (e.g. particular medical needs or private school expenses).
3. It will help you in planning your post-divorce budget.
4. If your spouse is self employed and under reporting his income, showing that monthly expenses exceed what they claim they make can show they are attempting to hide their true income.
5. A judge may utilize this information to determine temporary support while the case is pending.
6. You should know this stuff in order to properly manage your finances whether you are getting a divorce or not!

B.  Make an estimated budget of post-divorce expenses.

This is important for your personal planning and will likley influence your objectives in the divorce negotiations. You need to know what you will need financially in order to evaluate your settlement options or what you will ask the judge for in a trial.

This will undoubtedly take some estimating on your part. But, that is why it is called an estimated budget. It will be a work in progress. The point is to give some forethought to what your living expenses will be as you start the new chapter in your life.

C.  How to make your monthly budgets.

If you already maintain your checking account records on a software program like Quicken then the process is easy. You can simply print out a monthly budget report. If you don’t then you will need to sit down and look through your check register and/or your spouse’s check register for the past three months. This will reveal the expenses you may monthly and quarterly (divide the quarterly expenses by three and enter them in the budget as a monthly expense).

You will then want to think about any annual or semi-annual expenses you may have such as for life insurance, homeowner’s insurance, etc. and convert those to a monthly figure and enter it on the budgets also.

In setting out your budget, try to be as realistic as possible. You should be conservative in your budget (meaning don’t understate the expenses and end up stating a budget that doesn’t realistically meet your needs) without grossly overstating the budget (which a judge would frown on should the case go to court). It is admittedly a fine line. The best advice is to base it on as real numbers as possible.

Continuing our series on practical steps to take when it becomes obvious that divorce is imminent, we are now on to step 3.  Step 3 is simple, but important.

Step 3 is to make photocopies of all of the pertinent financial documents.

The fifth step in our series on preparing for divorce: Document and Safeguard Personal Property.

Inventory and photograph your household furniture, art, jewelry and other items of value. Inventory and photograph the contents of any safe deposit box or family safe your family may own. Also, photocopy any important documents in the safe or safe deposit box (if you did not already do so when collecting the financial records).

It is unfortunate, but often these documents and property will “disappear” once the divorce process starts so get your proof in place now. 

Additionally, you may want to consider safeguarding any items of particular value (either monetary or sentimental) which are small in size. I am referring primarily to things like the jewelry your mother passed down to you, your father’s fountain pen, your high school year book, your childhood photo albums, etc.  Your spouse may not share your desire to divorce with dignity.  Better to safeguard those items that are particularly difficult to replace.

Note that I am not suggesting you empty the house of its contents. That is a sure way to escalate the divorce and guarantee that you will not have a civilized divorce. Things like dvd players, camcorders and laptops can be replaced. Just document those on your inventory and photograph them for proof in the event it is ever needed.

We continue with our series on steps to take when divorce is imminent.  We are on to Step 7 which is Assess the Financial Accounts.

If you’ve completed the prior steps in this series, then you already know what accounts exist and what the balances are. You need to make a decision about what to do with them. 

It is an unfortunate reality that one of the first things that some spouses do when they learn/decide a divorce is imminent is to raid the accounts. This is typically done after receiving particularly bad advice from an adversarial lawyer or a well meaning, but poorly informed friend.

In a perfect world neither party would touch the financial accounts except to pay normal household bills until after the divorce is over. However, if this was a perfect world, you would not be reading this blog, and I would be in another line of work because divorce lawyers would be unnecessary.

That being said I do not recommend that you clean out the accounts. Doing so immediately escalates the conflict and stress of divorce.   It also will not be well received by the divorce judge. 

So, you don’t want to clean out the accounts, but you want to be protected from your spouse cleaning them out.  If you have a reasonable fear that your spouse will raid the accounts, the only reasonable solution that I know is to remove one half of the funds from the accounts and put them in a new account in your own name.  Do not hide, dispose, or waste the money.  Document carefully where every penny is spent because you will likely need to make an accounting of it later in negotiations or at trial.  Additionally, you should not do this for the regular checking account out of which the household expenses are paid unless there is a substantial balance in the account over and above the amount needed for paying the current month’s bills.  You do not want to take action that would cause checks to bounce.

I don’t make this as a blanket suggestion.  If the money can be kept there and neither party remove it, that is preferred.  Another option for certain types of accounts is to put a freeze on the account.  Obviously that is only practical for accounts that are not regularly needed to pay bills and regular expenses.

Before you decide how to handle your financial accounts, consult with your lawyer.  If they are suggesting you go take all of the money out without a good reason, I would seriously reevaluate the whether that lawyer shares your desire for a civilized divorce.

We pick up with Step 8 in our series on practical steps to take when a divorce is imminent.  Step 8 is Assess how to handle the credit accounts.

If a divorce is imminent you do not want to be liable on any accounts on which your spouse has charging privileges.  It is not unheard of for an angry spouse, upon learning of a divorce, to go on a shopping spree.  Likewise, some lawyers may advise their clients to take out cash advances on joint cards to provide a cushion while the divorce is pending or to charge a large amount in lawyer’s fees on to joint cards.

You will want to consider canceling such joint accounts or at least reducing the spending limits.  If they are an authorized user on charge cards in your name, see what steps the credit card companies require to remove them as an authorized user. 

Also consider home equity lines of credit. You may need to consider whether you should close it or restrict access pending the resolution of the divorce. 

Whatever you do, do not neglect thinking seriously about how to handle this issue, and discuss it with your lawyer before making a final decision

We continue our series on practical steps to take when you are about to face divorce.  We are now to step 9 which is simple, but important:

Avoid additional debt or major purchases

This suggestion goes hand in hand with assessing how to handle the credit accounts, but deserves its own separate mention.  If a divorce is going to happen, you want to be conservative with the finances.  It is not time to be putting in a pool, buying a new car, or buying new furniture on credit.  You want to simplify the financial situation not make it more complex. 

When the divorce occurs, one of the primary things that has to happen is for the divorce court to allocate who will be responsible for what debts.  Generally speaking, the less complex the debt situation, the easier task that will be.

I should note again, all of this is general information.  Your own specific situation may cause you to need to vary from it.  For example, there are times when you may have to get an automobile and it would be better to do it before the divorce because you won't have sufficient credit on your own after the divorce.  So, obviously you will want to get specific advice from your own lawyer - which is why Step 1 was find a wise guide (an experienced, competent divorce law specialist)!

We are nearing the end of our series on practical steps to take when you are facing an imminent divorce.  We have reached Step 10 - Stay Put (until further notice).

One of the most common questions I am asked by my clients is whether they can move out of the house.  In most cases my answer to them is to stay put.  It is not the answer most of my clients want.

I know that things are stressful.  I know that they will likely get worse before they get better. Unfortunately, there are several reasons to avoid leaving. The most important ones are the following:

1.       It could jeopardize your custody claim.  If you end up in a custody dispute, then if you leave the house and the children remain there with your spouse you will almost guarantee that you will not receive primary custody.  If the case becomes contested, it could drag out for many months (even a year or two).   If your spouse has had primary physical custody that entire time and you’ve had alternate weekend visitation, then unless your spouse has made major mistakes in the interim, they will likely maintain primary custody.

2.       It could affect your property interests.  You’ve moved out.  Your spouse pays the mortgage the entire time the case is pending.  Some judges may factor that in when making the property division.

3.       You will lose leverage in the negotiations. This is big.  You want the divorce.  Your spouse doesn’t.  You decide you have to get out of the house.  You move to an apartment and are paying your rent and the home mortgage.  Now under the Pre-trial Status Quo Order you may be required to keep paying it as long as the case is pending.  You have just given your spouse a major incentive to drag out the litigation.  I see it happen all the time.  Eventually you decide to settle for much worse terms because you can’t keep paying for two households.  Do not make this mistake.

Moving out of the house can have dramatic effects on the case.  Do not do it without discussing it with your lawyer and giving it a great deal of thought.  You should know, also, that some judges will consider a motion for temporary possession of the residence pending the trial.  This varies dramatically from county to county (and sometimes even from judge to judge) so you will want to discuss it with your lawyer.

It goes without saying that if domestic violence is an issue, then all of this is moot.  You will need to take whatever steps you must to protect yourself.  Just make sure you let your lawyer know what is going on.  In the case of domestic violence, your lawyer may actually be able to have your spouse removed from the house.

This post continues are series on practical steps to take when a divorce is imminent.  We are now on Step 11: Keep a diary/calendar

It is important to documents all of the major events that occur until the divorce is final.  Your lawyer will likely want your help in reconstructing a chronology (a list in order by date) of the major events that led to the filing of the divorce.  Additionally, you should begin keeping careful records of new events and incidents as they occur.  Simply note the date, what happened and any witnesses that may have observed it.  In the unfortunate event that your case drags on, events will begin running together and your memory may fail you.  Don't rely on it. 

Instead, keep an ongoing diary.  Then provide this to your lawyer periodically so he is aware of any significant facts in your case. 

I should note that you really should discuss this recommendation with your lawyer before implementing it.  Some lawyers may not want you to have an ongoing record like this because it could be obtained by the other lawyer during the discovery phase of the trial (something that could have a negative effect on your case).  Or, they may want you to take certain steps to attempt to protect it from begin discoverable by the opposing lawyer.  These are technical legal issues beyond the scope of this blog.  Suffice it to say that you need to talk this over with your lawyer first.