This was originally published on Monday, November 16, 2015, in the Pacific Daily News. Click here to subscribe to the PDN.
Q: I am currently going through a divorce. My wife and I shared accounts, life insurance, health insurance, and debts. We also have two children. I feel that after my divorce my finances will not be in the best shape. Do you have some advice to help me limit the affects of my divorce?
I am sorry to hear about your divorce. Divorces, no matter how long you have been married, are never easy. Rarely do both spouses agree completely to the terms of a divorce. Divorces are emotional and when it comes to finances the emotions will run higher.
One of the largest changes you may be facing is income. You will be downsizing from two incomes to one. If you remembered how difficult it was consolidating your finances when you got married, separating them will be harder. Each spouse will now have to unravel his or her finances and decide what is theirs. After years of being together that can be very difficult to do.
Lawyer and court fees can be very expensive. Try to come to an agreement to consider mediation over litigation.
By using mediation, you save money, you and your spouse are in control of how to split the assets and childcare can be negotiated without a judge. Mediators help you negotiate a reasonable settlement. By going through litigation, a judge will decide the outcome, it costs more, and if there are kids involved it can become very hurtful to hear why your marriage has failed.
Gather all of your financial and legal documents. It is vital that you know where you stand financially. These papers will make the process a bit smoother when your lawyers meet to settle who gets what. Collect income taxes, bank statements, investment accounts, home and auto loans, insurance policies, credit card statements, income statements, retirement accounts, and deeds and titles to property.
Request a copy of your credit report from all three credit bureaus. Know what your credit score is going into the divorce. Confirm that there are no mistakes or accounts that have been paid off but still remain.
You may want to request that your attorney close or freeze your joint accounts, credit cards, or lines of credit to prevent a spouse from withdrawing assets. You may want to open a new, individual account that only you have access if you did not have one previously.
Once the divorce is final, wait a couple of months and recheck your score. You may have to pay for it but at least you will know if the divorce has upset your score and what you can do to fix it.
Talk to your attorney about when to change your beneficiary on your legal and financial papers. Start changing your beneficiaries of your wills, living wills, powers of attorney, life insurance policies, retirement plans, stocks and so on. Get them notarized so that all previous editions are null and void.
You may also want to consider switching financial advisers, especially if your spouse will continue to work with them. By keeping your adviser separate, you can rest assured that he/she is working for you and has your best interest in mind.
Michael Camacho is president and chief executive officer of Personal Finance Center. He has more than 20 years of experience in retail banking and at financial institutions in Guam and Hawaii. If there is a topic you’d like Michael to cover, please email him email@example.com and read past columns at the Money Matters blog at moneymattersguam.wordpress.com.