Insight

Learning about Your Finances in Divorce

Finances in Divorce
Kathleen Ann Hogan

Kathleen Ann Hogan

April 17, 2017 03:03 PM

The decision to end a marriage is rarely easy, and the process itself is often filled with questions and uncertainty. However, one benefit noted by many clients has to do with the experience of collecting and weighing the data that goes into the financial statement for the case. You should expect to collect a variety of detailed financial records. You should also expect to compile detailed information about the family’s monthly expenses. While this task is time-consuming, it should not be viewed as an unnecessary burden; it is an important part of your financial planning process.

The experience is likely to be an eye-opener for the individuals who have not been responsible for managing family finances during the marriage. Even spouses who have handled the finances often finish the process with a greater understanding of the financial picture than when the process began. Among other things, this experience may cause you to rethink your priorities regarding spending decisions and other lifestyle choices.

It is sometimes useful to think of the various financial elements of the case (the house, retirement accounts, savings accounts, credit card debt, etc.) as a series of interrelated pieces. There may be many ways to fit those pieces together into a resolution of the case. However, the decisions made regarding any one of those elements may impact the options available as to the other elements. In addition, certain choices may be a better fit for your financial future than others. It is important to have a knowledgeable lawyer who can guide you in this process.

A simple example is illustrative: if your car needs four new tires, you can deal with that in a number of ways—some sensible, some not sensible, but all impacting other elements of your finances. You could use your savings to buy the tires. Your car is safe and reliable, and you do not have monthly payments associated with the tires, but you also no longer have savings for emergencies. You could use a credit card, preserving your savings for emergencies, but you will have a new monthly payment, and the real cost is not just the price of the tires but also the finance charges you will be paying. You could replace only two of the tires, preserving some savings and avoiding debt, but perhaps making the car less dependable and leaving in place the problem that your car still has two bad tires. You could also spend your savings on lottery tickets in hopes of winning the big jackpot or make countless other less practical choices.

Just as the car owner in the example will need to make financial plans and decisions, you will be faced with opportunities to make financial plans and decisions in your domestic relations case. The process is not like a surgical procedure where the doctor performs the surgery and awakens the patient when it is completed. In a domestic relations proceeding, the client and lawyer need to work together to plan for and get through the various financial aspects of the process. The client needs to be not only awake but actively participating in the decisions. That active participation can best come about when the client understands not only the goals of the process but the interrelated aspects of the financial components.

For the client who has not had a plan for their financial future in place, the dissolution proceeding provides the opportunity to create such a plan. For the client who had a financial plan in place that depended upon the involvement of a breadwinner spouse and/or the volume of assets that had been accumulated jointly, the plan will have to be modified to fit the post-divorce separate needs of both parties. Even if the marriage was marked by overspending or other poor financial decisions, your post-divorce life will be yours to shape in a financially responsible way.

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Kathleen “Kathy” Hogan is a founding member of McGuane and Hogan, P.C. She limits her practice to family law and focuses on complex financial and custody issues at trial and on appeal, as well as prenuptial and marital agreements. She also regularly volunteers as a mentor to newer lawyers for family law matters. Learn more at http://www.mcguanehogan.com/.

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