How Should I Prepare My Finances for Divorce?

Divorce. It’s a topic no one likes to talk about. But that doesn’t change the fact that it is reality for hundreds of thousands of Americans each year. In fact, the U.S. reported over 600,000 divorces in 2020 alone.

When divorce is on the table, especially for high net-worth individuals, finances can get complicated and contentious. To make the process clearer and easier on you, you can engage the services of a forensic accountant.

A forensic accountant is a professional trained to look into the finances of business, organizations, and individuals. Forensic accountants use a combination of accounting, auditing, and investigative techniques in their work. Their abilities span a wide range— everything from tracing funds and establishing damages to actually testifying in court. They are also typically trained in civil, criminal, and family law (divorce) procedures and protocol.

A forensic accountant is definitely someone you want on your side if you’re heading into divorce proceedings.

Divorce Finances Preparation Tips

Along with the trusted guidance of a forensic accountant, here are a few things you can do to prepare your finances for divorce proceedings.

Gather Documentation on Assets

This may seem like an obvious place to start, but the importance of documentation cannot be overstated. This includes bank statements (from both individual and joint accounts with your spouse) and additional documentation related to the assets you hold. Common assets held individually or by couples include:

  • Property (including homes, vehicles, etc.)
  • Investments
  • Bank accounts (joint and separate)
  • Patents
  • Retirement investments/savings
  • Life insurance policies
  • Jewelry, art, and antiques
  • Inheritances

At this step, it is also crucial to know who exactly owns each asset and which assets are in which spouse’s name.

Assess Debts

Getting a full picture of your finances doesn’t just include your assets. A forensic accountant will tell you that you must also examine and document your debts. These can include:

  • Credit cards
  • Lines of credit
  • Student and personal loans
  • Mortgages

Providing documentation of these debts (including those incurred by your spouse) is vital in divorce proceedings. After all, these expenditures impact your reported gross income, and can affect future payments like child and spousal support.

Keep Records of Spending and Expenses

It is important to present an accurate portrayal of your expenditures to the court and/or mediator, so that divorce settlement money can be properly calculated. If you’re heading into a divorce, you’ll want to keep track of the money you spend and how you’re spending it.

Be careful not to withdraw large sums (especially from any joint accounts) without documenting where they are going, as this could arouse suspicion end up benefiting your spouse financially in the long run. An accurate record ensures that no accusations or confusion could arise based on your spending.

Engage the Services of a Forensic Accountant

Unfortunately, during divorce, some individuals may seek to conceal assets in order to impact the divorce settlement money amount. A forensic accountant can make sure that no funds or assets are unfairly hidden from you. Forensic accountants investigate and bring key information to light, to make sure that the settlement awarded is fair and well calculated.

 

Ellrich, Neal, Smith & Stohlman, P.A. have been providing top-tier forensic accounting services to their clients since 1988. Contact us here for the best in forensic accounting.