There are no stupid questions
I am thinking about getting divorced. What should I be doing to prepare?
It is hard to predict how your spouse will react to the news, and it is important to have a clear picture of your finances at the beginning of the process. You should assemble as much financial data as you can including mortgage statements, retirement account statements, bank statements, credit card statements, auto loan statements. Make copies of the last two years tax returns and pull your credit reports. All of these items should be kept outside of the home, for instance, at your office, or with a trusted friend or relative. Since 75% of the divorce process for couples without children is regarding finances, collecting this information will give you a jump start on preparing for the process.
What does the mediation process look like and how is it different from litigation or collaborative law?
When you work with a skilled mediator you are in control of the divorce process. Your mediator will guide you through the items you need to agree on and will help you draft an agreement that can then be entered into court with or without the help of an attorney. Mediation is great for couples with children since you will need to communicate with your ex-spouse on some level for the rest of your lives. You might as well learn those skills now. Mediation does not work for couples where there is a history of domestic violence or mental illness. Both parties must be able to self advocate.
Collaborative law is another option. You each hire attorneys who will bring in other professionals to work through issues. Examples are financial neutrals, mental health coaches and child specialists. Again, you are in control of the process, and are guided through decisions that need to be agreed on. Collaborative fellows are trained in mediation and are interested in guiding couples to the best possible outcome.
Litigation is what most people think of when they think about divorce. For some couples, it may be the only option if they can’t agree. Decisions are made by the attorneys and by the court. It is also a very public process. Court records are publicly available which is how we know so much about celebrity divorces.
Your goals of getting through the process as quickly and inexpensively as possible do not align with the way attorneys are paid. There are plenty of very good family law attorneys, but you can’t control the type of attorney your spouse will hire. The process can get expensive, long, and exhausting very quickly. There are plenty of stories out there of couples spending hundreds of thousands of dollars fighting over items that are worth a fraction of that amount.
Attorneys are very good with the law, but they do not tend to be financial experts. If you have a complicated financial picture, you will probably need to rely on a financial professional to help sort out the issues and challenges.
Why should I hire a Certified Divorce Financial Analyst?
If you are interested in making the divorce process less painful and less expensive, this may be a good option. Our clients hire us to give them an idea of what they can expect from the split. We take into account marital vs. non-marital assets. We will look at alternatives to splitting retirement accounts via QDRO. We understand the short and long term tax ramifications of splitting stock options.
One of the tasks you will have is to complete a financial affidavit for the court. We will assist you in filling this out. It will serve as a starting point for what your new financial life will include.
We also specialize in helping the financially challenged spouse gain the education and confidence needed to move forward in an empowering way. Frequently, the finances were handled exclusively by one spouse leaving the other without the experience of making banking and investment decisions. It can be daunting to make a budget if you don’t know how much you should put on each line item. We take the time to help with budgeting and give you the confidence you need as you move into your new life.
How long will the divorce process take?
It all depends on you and your spouse as well as the state laws you are subject to. We frequently see people who just want to get it over with as quickly as possible. This can be troublesome if it means skipping some steps like getting all of your and your spouse’s documents together. It is understandable to want to end the painful process, but not if it means you don’t get everything you’re entitled to. Not wanting to fight over things is fine, but don’t agree to a bad deal just to get the whole thing over with. You don’t want to wake up three years from now feeling bad about not taking a little more time to get an equitable deal.
Most couples we work with in Illinois are done within six months to a year when they agree and work diligently on a fair split.
What is a QDRO?
A qualified domestic relations order is a document that is entered as part of the final divorce decree. It sets up an account for the non-employee spouse in a pooled asset, for example a 401k plan or stock options. Normally, the non-employee spouse would not be able to have an account, but this splits the employee’s account or reassigns it to the non-employee spouse. This is usually temporary and most people move the funds immediately.
It is important to talk to a financial professional during this process to make sure you are not accidentally triggering a taxable event. There are some special rules about withdrawing funds during this time that could benefit you.
IRAs are not divided via QDRO since they are already individual accounts. You will need a copy of the divorce decree to get the accounts retitled.
Embark does not write QDROs, but we can refer you to professionals who do.
If you have questions not listed above, please contact us.