Post-Covid-19 pandemic many people are staring down the face of an impending divorce or separation. January is known as divorce month but divorce season has dramatically changed. It is important to know how to protect your finances to make the process as painless as possible.
Divorce is hard. It uproots your life, your routine, your family, and your finances. But divorce doesn’t have to be financially devastating. If you plan, you can come out post-divorce successfully.
Unless you live in the west, where at times divorce terms are laid down before the marriage is solemnized, no one plans for it.
Nonetheless, cases of divorce are fast-rising even in Kenya and developing countries, where marriage is considered a sacred alliance for life. While it might be an emotionally harrowing time, it’s important not to lose sight of the bigger picture.
You need to protect yourself, your kids, and your future, and that means getting your finances in order. If divorce is looming, here are ways to protect yourself financially.
Staying Clean: Keeping your finances and books in order while being married can help you understand your monetary situation better as well as limit the damage in case there is a marital discord by keeping money out of the arguments.
Identify your assets: Before you can proceed with anything else, you need to know how much money you have and where it is. Next, clarify what’s in your name and what belongs to your spouse, including any mortgages, bank accounts, investments, and other assets.
Understand your cash flow: Once you have decided to go for divorce, start preparing your household budget based on monthly income and expenses, including on child care and debt servicing. Knowing your expenses will help you start the process of reaching an amicable separation and clear your mind on what is the claim you want to make on your spouse for alimony and which assets you’ll be able to maintain.
Separate your debt: If you have joint credit card accounts, you are still responsible for any debts that your spouse accrues on a card. If you have the money to pay off joint accounts, do so and then close the account. If you can’t pay them off, consider dividing up the debt and transferring to separately held credit cards.
Always cancel joint credit accounts once you pay them off: After a divorce, ensure that you change the beneficiary of your life insurance or retirement accounts. If you have children, you may want to consider setting up a trust as the recipient of the funds until they are old enough to receive them legally and mature enough to handle finances.
Maintain control of assets: If you can’t agree as a couple, a court will split most of your assets down the middle. There are exceptions for pre-marital assets and inheritances, however. Regardless of how you think the court will split your assets, don’t let your ex-partner have complete control over your financial or other assets.
Even if your ex-partner handled all of the finances during your marriage, you need to stay informed to protect yourself. Don’t let someone you trust take advantage of you or drain your resources during a drawn-out divorce process.
Monitor your cash flow: Sit down and determine your expenses for the month and the year and where your money goes. You need to plan what you’ll need to survive financially on your own, pay your bills, and support your children.
Make a list of the income you’ll have after the divorce and then a list of expenses, including necessary and discretionary expenses. You will feel much more in control once you have a financial plan for life after divorce.
Figure out what is most important to you: Should think about what is most important to you financially. Do you want college funds for the kids? Or would you rather stay in the home you owned together? Do you need a cushion so you can go back to school?
Consider ranking your wants and needs and focus on getting the things you want the most. Almost no one will get everything in a divorce unless your spouse feels exceptionally generous, so set your priorities and stick to them.
Build a team: It’s important to have a trusted financial adviser in your corner, especially if your spouse was typically the one to handle the money. Find someone that you not only trust, but who is able to explain things to you in a way that you understand.
Even if you’re well-versed in finance, it’s still important have an experienced family law attorney and a financial adviser on your team. Divorce is mired in emotion, so you’ll want non-biased parties to be able to speak on your behalf and ensure that you’re properly protected.
Secure children’s future: things become more complicated if the couple has children. For, in such a case, the priority of the settlement is to protect their interests. Irrespective of who gets the custody of children, both would ideally want to arrange for their welfare.
Spouses can agree to a lumpsum payment or a staggered payment to the person who will get the custody of the child, either at different stages of his / her educational life or a monthly amount with an incremental increase to factor in the rising cost of living.
To secure the children’s future, investments can be made in their name, and any / both parents can be the guardian. These will be transferred to the children after they attain adulthood.
Documentation: After arriving at an understanding on how to share assets, liabilities and parental responsibilities, put everything in black and white. You will have to inform the court about the settlement while applying for divorce. You will have to prepare a separation agreement, which will serve as the framework for the divorce settlement.
It should tackle all important issues related to separation such as alimony, child custody and splitting of assets and debts. Ensure that it is drafted and worded in such a manner that it gives both partners fair and equal rights.
All said, marriages are based on trust and mutual understanding, communicate your fears and concerns to your spouse to avoid any misunderstanding at a later stage.