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Getting Started On Ending It – Organizing Yourself Financially Prior To Divorce

Alex Chan,RHU,CHS,CFP,CPCA,EPC,CFSB,CLU profile photo

Alex Chan,RHU,CHS,CFP,CPCA,EPC,CFSB,CLU

Certified Financial Planner & Chartered Life Underwriter
Belvedere Financial Solutions Limited
Cell : 604.649.3829
Langley Office : 604.513.1177
Vancouver Office : 604.689.8289

As a wealth management professional in the great city of Los Angeles, I have sat next to countless divorcing spouses facing significant financial challenges during an overwhelmingly emotional time. Emotional turmoil clouds decision-making, so my aim here is to provide guidance on some of the prep-work you can do before you get to the tougher stages of your dissolution – the filing, the negotiations and of course the ultimate settlement.



The financial goals of your divorce should be simple: Unwinding your partnership with as little cost, complexity, and collateral damage as possible. If we break down the financial aspects of separation to their core, we find that the first logical step is organization. Organizing your thoughts and your documentation is most critical as you embark on this journey.

What kind of divorce do you want?

If you find yourself contemplating divorce, it’s important to know there are several paths you can take these days. For starters, there are three primary types of divorce proceedings:

  1. Mediation - this only works if you and your spouse are mostly in agreement on all major issues
  2. Collaboration -spouses work with their attorneys to negotiate a settlement out of court
  3. Litigation - hire your attorney, serve your spouse divorce papers and then it’s a contentious race to the courthouse

While mediation may seem like the most economical choice, if you make a mistake, it could cost you more in the long-run in terms of support and/or possibly not getting your proper share of the assets. Furthermore, if your Mediation attempts fail (the separate parties cannot come to an amicable agreement), you must start the process over in Collaboration or Litigation, while the money spent on the mediation process will become a sunk cost.

“If you feel like there is any chance you can figure this out outside of court, go the collaborative route. You’ll walk away with so much more money, and probably not hating each other,” advises Lauren Greutman, Financial Coach, Best Selling Author, and creator of one of the largest financial resource networks for women. “Only if it’s possible of course. If your ex is particularly manipulative or abusive, you will be forced to take the more expensive route. Every motion, every letter your attorney writes costs money.” When you have an idea for what kind of divorce you think you’ll be facing, you can prepare yourself mentally and financially for what’s to come.

Know how much money you need to run your (new) household and where that money is coming from

If you don’t have a written budget, create one now. Start by tracking your expenses, either by hand or with software like mint.com or QuickBooks. You want to have a good understanding of what it costs to run your household so that you’ll be able to effectively communicate this to your spouse and your attorney during negotiations.

Develop a post-separation budget that is realistic and can be adjusted as life evolves. It’s not a bad time to look at your credit report, as you may need to apply for a home loan on your own or apply for new credit separate from your spouse.

Make sure you have access to cash and open a bank account that is in your name only. Once you inform your spouse of your desire to separate, it is best to start spending money from an account apart from your spouse so that your spending can be more easily tracked. If your soon-to-be-ex begins spending money as if the world is ending next week, your attorneys can work to ensure that those expenses are deducted from their side of the balance sheet and not something that you are ultimately responsible for.

Inventory your assets and debt – gather all documentation

Before heading into any kind of separation or divorce discussion, gathering up all documentation detailing your assets, debts, compensation, and tax filing history is extremely important. If your plan is to rely on your spouse to generate this documentation after you’ve filed for a separation or divorce, you could be in for a long and arduous game of “hide and seek” (often referred to as “Discovery” in the legal world) that can have some serious financial consequences.

Discovery is the formal process of organizing and exchanging information between the divorcing spouses and their legal teams. Many people going through a divorce either don’t have access to some of the pertinent documents or for one reason or another, their spouse is not offering them up in a timely manner. Maybe your spouse alone has the login details to some of your accounts – resetting the password may mean an email sent to their email address that you cannot access. It may be easiest to secure a login for yourself to these accounts before you notify your spouse of your intent to formally separate. Any documentation you can secure before filing for a divorce or separation will assist you and your legal team during the negotiations.*

“[Gathering all the documentation] must happen before any paperwork is filed, because once you file for a divorce or a separation, your accounts may be frozen and you likely won’t be able to take out new loans unless they are agreed upon, you will not be able to move assets around very easily, and it can even be difficult just to buy or sell a car,” counsels Greutman. A divorcee herself with four children, she has been down this road before and shares her success stories through several books she has written, and her podcast (which can be found at www.laurengreutman.com).

“After figuring out as much as you can about your assets and debts, you need to know what you are legally and financially responsible for, and make sure your attorney drafts a legal separation agreement right away so that both you and your ex are playing by the same set of rules. This way you at least have temporary parenting and financial plans so the divorce process won’t break you – especially if you are the lesser-earning spouse.”

Moving forward with a separation or divorce is certainly not something to rush into, but it’s sure a lot easier with an organized strategic game plan. A supportive network of family, friends, legal and financial professionals is also critical. You’ll need a team in place to help you make decisions, minimize the potential financial damage of this process, and put yourself in the best possible position to start over.

*If you’re interested in a phenomenal checklist of documents to gather prior to separating, please feel free to contact me at knelson@coastalbridgeadvisors.com for access.

By Kimberly R. Nelson, Contributor

© 2022 Forbes Media LLC. All Rights Reserved

This Forbes article was legally licensed through AdvisorStream.

Alex Chan,RHU,CHS,CFP,CPCA,EPC,CFSB,CLU profile photo

Alex Chan,RHU,CHS,CFP,CPCA,EPC,CFSB,CLU

Certified Financial Planner & Chartered Life Underwriter
Belvedere Financial Solutions Limited
Cell : 604.649.3829
Langley Office : 604.513.1177
Vancouver Office : 604.689.8289