This is a difficult post
I have a family member who is contemplating getting a divorce. Things have not been going well for a long time and yesterday was the first time she has gone so far as to say it might be better for everyone if they split. I was asked what I recommended from a financial perspective.
First a little background: she has no idea on their finances. She is given an allowance, and that account is the only control she has over money in the household. Their holdings are quite extensive, with stock portfolios, real estate, and I have no idea what else. She signed a prenuptial agreement that will not allow her to touch anything that was his before the marriage (she had nothing at the time). The wild card will be the husband—will he be forthcoming and truthful about their finances or will he hide assets and try to stack the deck against her financially? Knowing him as well as I do I can see him going in either direction.
Here are the following things I suggested. I made it clear I was not trying to circumvent any of the divorce laws, but trying to insure she did what she needed to in order to protect herself. I would appreciate suggestions, critique, or pointers on anything you think I missed. My wife was adamant this family member go to a divorce attorney before she made any announcement, so that will be taken care of as well. We’re trying to get her up to speed on her own situation before she even gets to that point.
1. Liquidity
I suggested she begin accumulating cash as she could in order to have some money to live on in case the husband freezes or denies her access to the other accounts. Apply for a credit card in her name—she’ll be able to get a higher credit line now. Use a post office box if she has to for a mailing address. Consider notifying credit card companies to freeze existing joint accounts.
This will all be declared in the divorce agreement, but I’m more worried about her having funds for her and her child the first couple of months after the split.
2. Net Worth
She needs to understand what the couple’s net worth is. Now. The husband will be out of town for a couple of weeks on business. I suggested she learn all she can about the family’s financial situation and calculate their net worth. She will need to identify which assets were his before the marriage and which ones were obtained after they were married. I also recommended she make copies of a couple months’ worth of statements (bank, brokerage, loans, etc.) in case he claims amounts are different. Copy at least the three previous years’ tax returns and supporting documents.
My wife dryly said “This sounds like something out of The Firm.” But if she has no idea what their financial position is, it will be easier to hide things from her. I also suggested she have a credit report run in order to match up what she finds in the files with what is reported to credit bureaus, and to run a credit report several times during the split but before the divorce is final. When she feels ready to actually ask for the divorce, make a note of the balances in all the accounts as of that day. Make a videotape of the contents in the house to keep with all of the paperwork copies.
3. Prenuptial agreement
Read it, and keep re-reading it until she understands it fully. There are certain assets she can not touch. But what about the ones he owned before the marriage that have since been sold? My guess is if those proceeds went into a commingled fund or asset then they are no longer protected by the prenup (unless it spells things out different). The divorce attorney and the prenup will have a clearer take on that so I'm not too concerned there--simply that she understand the agreement.
Also, he is active with a particular group and has spent hundreds of thousands of dollars with them. I recommended she copy all expenditures she could find in relation to this group just to have some protection on where proceeds have been spent. (This is to protect her from him saying that all the proceeds went to enrich the family, when that has clearly not been the case)
4. Financial plan
Realistically look at what the financial landscape will look like post-split. Recognize what expenses and income will be and see if there is a gap. Update her will immediately after the split and do what she has to insure guardianship.
These were the things that immediately sprung to mind. I know some of them look drastic, like copying all the statements, but (knowing more about the situation than I care to) I think that is the best approach to protect herself. There will be a lot of other issues later to deal with--changing asset ownership names, loans, etc., but with knowledge of their position at the split should help her at that point.
If you’ve made it this far, thanks. Again, if you have any suggestions please feel free to note them in the comments. We’re not looking for anything to harm either party, but to insure she is protected financially.
First a little background: she has no idea on their finances. She is given an allowance, and that account is the only control she has over money in the household. Their holdings are quite extensive, with stock portfolios, real estate, and I have no idea what else. She signed a prenuptial agreement that will not allow her to touch anything that was his before the marriage (she had nothing at the time). The wild card will be the husband—will he be forthcoming and truthful about their finances or will he hide assets and try to stack the deck against her financially? Knowing him as well as I do I can see him going in either direction.
Here are the following things I suggested. I made it clear I was not trying to circumvent any of the divorce laws, but trying to insure she did what she needed to in order to protect herself. I would appreciate suggestions, critique, or pointers on anything you think I missed. My wife was adamant this family member go to a divorce attorney before she made any announcement, so that will be taken care of as well. We’re trying to get her up to speed on her own situation before she even gets to that point.
1. Liquidity
I suggested she begin accumulating cash as she could in order to have some money to live on in case the husband freezes or denies her access to the other accounts. Apply for a credit card in her name—she’ll be able to get a higher credit line now. Use a post office box if she has to for a mailing address. Consider notifying credit card companies to freeze existing joint accounts.
This will all be declared in the divorce agreement, but I’m more worried about her having funds for her and her child the first couple of months after the split.
2. Net Worth
She needs to understand what the couple’s net worth is. Now. The husband will be out of town for a couple of weeks on business. I suggested she learn all she can about the family’s financial situation and calculate their net worth. She will need to identify which assets were his before the marriage and which ones were obtained after they were married. I also recommended she make copies of a couple months’ worth of statements (bank, brokerage, loans, etc.) in case he claims amounts are different. Copy at least the three previous years’ tax returns and supporting documents.
My wife dryly said “This sounds like something out of The Firm.” But if she has no idea what their financial position is, it will be easier to hide things from her. I also suggested she have a credit report run in order to match up what she finds in the files with what is reported to credit bureaus, and to run a credit report several times during the split but before the divorce is final. When she feels ready to actually ask for the divorce, make a note of the balances in all the accounts as of that day. Make a videotape of the contents in the house to keep with all of the paperwork copies.
3. Prenuptial agreement
Read it, and keep re-reading it until she understands it fully. There are certain assets she can not touch. But what about the ones he owned before the marriage that have since been sold? My guess is if those proceeds went into a commingled fund or asset then they are no longer protected by the prenup (unless it spells things out different). The divorce attorney and the prenup will have a clearer take on that so I'm not too concerned there--simply that she understand the agreement.
Also, he is active with a particular group and has spent hundreds of thousands of dollars with them. I recommended she copy all expenditures she could find in relation to this group just to have some protection on where proceeds have been spent. (This is to protect her from him saying that all the proceeds went to enrich the family, when that has clearly not been the case)
4. Financial plan
Realistically look at what the financial landscape will look like post-split. Recognize what expenses and income will be and see if there is a gap. Update her will immediately after the split and do what she has to insure guardianship.
These were the things that immediately sprung to mind. I know some of them look drastic, like copying all the statements, but (knowing more about the situation than I care to) I think that is the best approach to protect herself. There will be a lot of other issues later to deal with--changing asset ownership names, loans, etc., but with knowledge of their position at the split should help her at that point.
If you’ve made it this far, thanks. Again, if you have any suggestions please feel free to note them in the comments. We’re not looking for anything to harm either party, but to insure she is protected financially.
posted by Dwight at
9:31 AM
7 Comments:
One item I see I missed is life insurance--finding out what is in place, who the beneficiaries are, etc. and making copies of the contracts.
By
Dwight, at 9:57 AM
Ah, passwords. Change every password she has.
Something about putting pen to paper focuses on what needs to be done...
By
Dwight, at 10:11 AM
I think it would be wise to have a comprehensive list given to her. I'm sure that was your intention to start with. That way she can be sure to have as much covered as possible without missing something. Checklists are great!
As for the details, I think you nailed most of them. Other practical concerns might be finding a job/shelter. And then basic education on finances in general so that she isn't always running to you or to someone else for advice. Also, to protect her from doing something that isn't wise. A common place to put all these forms/files would be nice. New passwords is a key add on like you said.
It's going to be tough for her to focus on these new bits of information if she's uncomfortable with it to start with. Wish her luck!
By
Splat, at 11:20 AM
While the husband is out of town, she needs to contact an attorney, a legal hotline, even some law schools have clinics with practicing attorneys if money is a concern. If she wants to keep this out of the realm of her husband finding out, she needs to make sure that she is not using traceable funds to pay for these services. Otherwise, the husband will then be put on notice. Although she may not be entitled to those assets the husband had at the outset of the marriage, she may be entitled to the appreciation in any of those assets. Just pondering on my end but a legal professional should be retained ASAP to cross all T's and dot all I's. When children are involved, their best interest needs to be protected.
By
Anonymous, at 2:39 PM
I agree, it's lawyer time. She needs some real legal advice.
By
Anonymous, at 3:18 PM
What a horrible situation.
By
Anonymous, at 5:16 PM
Even before they got married they should have talked about the finances she needs to start standing up for herself, she needs to start becoming independant so when she gets married again she'll have her own accounts and know more about the important financial subjects that she needs to know about if he has control of the finances you bet she proably won't get as much as she should. I believe the marriage problems stemmed from him being in control too much. I hope she learns from this next time around.
By
Anonymous, at 5:01 PM
Post a Comment
<< Home