If you're preparing to file for divorce, or if your spouse has just dropped the bomb on you that he or she is filing, the first thing you should do is get a handle on the availability, liquidity and titling of all of your accounts. In other words, get your financial ducks in a row to clearly understand where you are financially before proceedings begin.
Here are some things to make sure you get nailed down:
- Your current bank and credit card statements.
- Update yourself on any current loans or mortgages you might have.
- Income tax returns. Going back five years is a safe bet. And make sure you include property tax returns.
- Business financial statements, if you own one either jointly with your spouse or yourself. Get the facts on its net worth, assets, liabilities and cash flow.
- Your current income information, including pay stubs, and remember to include one-time or quarterly income sources like rental or lease agreements on property you own, dividends, even lottery winnings since the filing of your last tax return.
- Stocks, bonds and mutual funds.
- Investigate getting a "quadro." A "quadro," sometimes known as a QDRO, is a qualified domestic relations order, which splits a retirement plan or pension plan by recognizing marital interest and ownership. Basically it creates your right to receive a portion of your ex-spouse's retirement plan. Your spouse's 401(k), for example, might be the largest asset in your marriage. But oftentimes in divorces, that 401(k) is overlooked when you're dividing up assets, especially if you're a decade or more away from retirement. It's just not top of mind. A quadro grants a person the right to a portion of his or her spouse's retirement benefits, and it's important because federal law states that retirement benefits can only be divided between ex-spouses if there is a quadro. Your divorce decree isn't enough. Your divorce attorney can handle this for you, but if you're representing yourself, you can notify the court without an attorney and contact the plan itself for details on what sorts of information should be included in the quadro. The information necessary for a quadro varies from plan to plan.
Talking to a Financial Advisor is critical when you're making these types of decisions. At Harbor West, we specialize in helping people navigate the financial aspects of divorce. We're here to help.
This information is provided for general purposes and is subject to change without notice. Every effort has been made to compile this material from reliable sources; however, no warranty can be made as to its accuracy or completeness. Before acting on any of the information, please consult your Financial Advisor for individual financial advice based on your personal circumstances.