Divorce can impact family’s long-term finances

All Things Legal

By Jane Winand
Legal Assistance Attorney

Divorce is an unfortunate reality for many service members and their families.

This process can be emotionally and financially draining, and may impact relationships between the parties on into the future.

Each state has unique rules for family law. The divorce process results in the court making decisions regarding the marital status, the dividing of marital assets and debts, the establishment of alimony or spousal maintenance, and the clarification of parenting matters including child support and visitation.

Organization is the key to successfully maneuver through the divorce process.

Start by organizing all of your important paperwork. Pull a copy of your credit report from annualcreditreport.com. Close any joint accounts not being used. Make sure that you know which accounts are joint and which are individual. This information will be useful later when assets and debts are divided.

Make It Easy

A big challenge for divorcing couples is making the necessary adjustments in their finances during the divorce process. You must protect your credit by making sure that at least minimum payments are made on all bills every month.

Don’t rest easy because the court has assigned a particular debt to the other party to pay. Third-party creditors are not bound by court orders issued in a divorce. Creditors may still go after either party for payment on joint debts.

Work up a budget for your current situation that includes all monthly income and expenditures. Include copies of your recent LES, tax return, and current bank statements, credit card statements, and monthly bills for use in verifying the numbers included in your budget.

Finally, for future planning, create a post-divorce budget that reflects your best estimate of an equitable division of marital debt and assets. Although the court is not required to accept your proposed division of assets and liabilities, a post-divorce budget will give you the chance to see how such a division of the marital estate will affect you financially.

You may wish to consolidate credit cards or pay off small debts before filing. The divorce process will go more smoothly with less assets and liabilities to divide. You may find the counseling and classes on financial management offered by Army Community Service to be of help.

Normally, all assets or debts acquired during the marriage are considered marital and can be divided during the divorce. Make a comprehensive list of all of your assets and debts. The list does not have to include every towel and dish. However, if you would be upset if a particular item was awarded to the other party, you should include it in your list.

List the value of each asset, the amount of debt owed, and the date when the asset was acquired or the debt incurred. There are many tools available to assist you in valuing your property.

Remember, property is valued at the time of the divorce, so the value is not the amount that you paid for your furniture or car. Value is the amount that someone would pay you for it now.

When valuing vehicles, you may look at the Kelley Blue Book online at kbb.com for private-party sales. For real estate, a recent appraisal is best, but if you cannot afford an appraisal, zillow.com is a good resource to determine a starting-point value.

Remember to print any values you acquire and keep copies with the list. You will be able to use this information during negotiations.

Make sure to keep copies of all statements from retirement accounts, 401K accounts, Thrift Savings Plans, IRAs and other investments. Do not cash out these accounts before the court has divided them or before you have talked to a tax professional.

Cashing out may seem like a good idea, but you may incur penalties and taxes that far outweigh the benefit of having the cash on hand. If these assets are divided in the divorce, there are mechanisms for transferring them without tax consequences.

After the petition or complaint is filed, most states require that the parties exchange financial disclosures. Usually there are specific documents the parties are required to exchange with one another and the court. It is a good idea to gather this paperwork prior to filing because it will expedite the process.

Negotiate Conflicts

The court will use these documents to divide marital debts and assets to determine eligibility for and the amount of alimony or spousal maintenance, and to determine child support.

Overall, recognize that the process is smoother and quicker when divorcing parties are able to work together to resolve their disagreements.

Some states require that the parties attend mediation before they will schedule a contested divorce hearing. Arm yourself with information and take precautions to protect your children and your finances. Attempt to mediate and reach agreement on the important things. Compromise on the little things. If you do, your divorce will be over quicker and you will be able to start your new life with less stress.

Unfortunately, not every couple can negotiate a settlement. If you are unable to reach an agreement on the major issues, it is generally a good idea to hire an attorney to represent you in court, especially if the contested issues involve the children or expensive assets such as a home.

The Fort Meade Legal Assistance Division can provide you with a list of practicing family law attorneys in this area, or, if necessary, can put you in touch with Legal Assistance Offices in other states.

Even if you and your spouse can negotiate on many issues, it may not be wise to agree to everything just to get the divorce concluded sooner. You could be settling on issues that have long-term effects.

If something does not seem right, do not sign anything without obtaining counsel from an attorney. Legal Assistance attorneys cannot represent you in court, but we can review documents with you, and if necessary, refer you to a civilian attorney who can represent you.

The Legal Assistance Office may only counsel one party in the divorce. The other party must speak with a different Legal Assistance Office or a civilian attorney.

For more information, call the Legal Assistance Office at 301-677-9536.

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