Financial Preparation for a Legal Separation Or Divorce
Many potential clients who I meet with during the Free Consultation* that we offer, ask me this question: “How should I prepare for a possible Legal Separation or Divorce?” Of course, every case is somewhat different depending on the facts, but there are some basic things that anyone contemplating a Legal Separation or Divorce, should consider, even if you are not the spouse who wants to take legal action. Keep in mind, that a Legal Separation is different from a Dissolution of Marriage (“Divorce”), in that when a Legal Separation is entered by the Court, the parties remain “married” and the law prohibits either party from marrying another. Absent an agreement by the parties to the contrary, either party in a Legal Separation case, may request that the Court “convert” the Decree of Legal Separation into a Decree of Dissolution of Marriage, after six (6) months has passed from the time the Decree of Legal Separation was entered. In both types of proceedings, the law in Colorado is governed by the Uniform Dissolution of Marriage Act, under Title 14 of the Colorado Revised Statutes. Therefore, the preparation and understanding of the process, under both legal proceedings, is the same.
Because Colorado law requires the parties who are participating in a Legal Separation or Divorce action, to exchange “Mandatory” financial disclosures, it is good idea to be prepared, particularly when one spouse has been dependent on the other, to pay bills and that spouse has relied on the other spouse for economic support (such as a stay at home mother). The exchange of financial disclosures is governed by Rule 16.2 of the Colorado Rules of Civil Procedure, and the parties will be required to produce and exchange some of the following documents:
- Paystubs or wage earnings statements for the preceding
- State & Federal Tax returns for the preceding 3 years;
- 90 days of banking records and statements from all accounts;
- Mortgage, loan, credit card and other statements of debt;
- Proof or “valuations” of cars, trucks, motorcycles, boats, etc.;
- All retirement, IRA, Mutual Fund, 401(k), pension, Defined Benefit plans, and any other investment accounts;
- Other documents;
It is my suggestion that these documents be gathered and placed in separate file folders, so that they can be easily organized and copied when the time comes for their production. For a spouse who has not seen or paid any attention to the family finances, the gathering of these financial records can be an eye opening experience. Having knowledge of these financial records is a must. Often times, one party or the other will not have a clear understanding of how the family finances have been handled or the assets and debts that exist at the time a legal proceeding such as a divorce, is initiated. Under the rules, these records must be updated and disclosed to the other party and kept current at all times.
Another recommendation for anyone going through a divorce or considering either a Legal Separation or a Dissolution of Marriage, is to schedule an appointment with a Certified Public Accountant (CPA). There are many tax considerations that must be taken into account during these kinds of cases and it is always best to obtain expert financial advice from a CPA. Going into a Legal Separation or Divorce action, with the advice from a CPA, is a tremendous way to enhance your knowledge of the impact that the division of assets and debts will have on you when the case is either finally settled or determined by a judge.
When there has been a marriage of considerable length, such as a marriage of over 20 plus years, and one party has not been an income producer, such as a “Stay at Home Mother,” the collection of financial documents and gaining knowledge of the family finances, will allow that spouse to better deal with financial plans for the future. Here are some of my suggestions for gathering financial data or records in a typical situation where one of the parties has not been working and has been dependent on the other spouse for financial support:
- Create a projected “Budget” of your income and expenses to show what the finances will be like when the marriage ends and both spouses are living apart. In any projected “Budget” you should know what kind of necessities or living expenses will be required for you to live on your own;
- If you believe that going back to school or obtaining a degree or specialized training is necessary, obtain a projected cost estimate of how much college or a vocational school will be;
- Obtain several estimates on your own housing expense, such as the rent and utilities that you will be expected to pay once you are on your own;
- If you are currently on your spouse’s health insurance coverage, obtain several estimates of the costs associated with health insurance, to include the availability of COBRA coverage;
- If school or part time work will be necessary, and children will have to placed into before or after school care or work related daycare, obtain several estimates of that expense so that this cost can be calculated into the Child Support Worksheet;
The majority of men and woman who have been served with divorce papers, will tell you that the end of their marriage is an, “Earth Shattering Experience.” The emotional and financial toll on spouses, children and extended family and friends, can not be underestimated. To prepare yourself for this kind of legal proceeding, you should become intimately familiar with the financial aspects of your marriage, before, not after legal proceedings begin. Carefully read all of the banking, savings and checking account statements, retirement and investment accounts and tax returns, credit card statements, loan and mortgage statements, and obtain an understanding of what you own with your spouse, and what you owe with your spouse. The full production and comprehension of these important documents, will be invaluable to you and will help your lawyer understand the finances of your particular case. If you can reduce all of the assets and debts, to an excel spreadsheet, that will also be an invaluable tool. In this way, you and your attorney can have a full understanding of the issues in your case from a financial standpoint. More importantly, when clients do their homework, it will allow your lawyer to be better prepared to give your important advice about your future, and possibly, the future of your children. This is why a well qualified Family Law or Domestic Relations Attorney is suggested in helping you through this legal process.
Call Gordon N. Shayne at 719-442-6649 for a
FREE CONSULTATION* today!
*for those individuals interested in retaining legal counsel and who have the financial means to hire an attorney