Pre-Filing Divorce Financial Planning

One common question clients ask is: am I better off to file first for the divorce?

The truth is, the law does not care which spouse files first. There is no inherent advantage or disadvantage to being the petitioner (or plaintiff) or the respondent (or defendant).

Knowing that a divorce is going to be filed and, even better, knowing precisely when it will be filed and served, imparts a huge advantage though. It facilitates pre-filing planning and action, of a time-sensitive variety.

For example, it can dramatically affect a dependent spouse’s ability to weather the divorce storm, stay the course and emerge a survivor … and better.

By the same token, it can dramatically affect some well-off spouses’ ability to execute a plan of what may be described as self-impoverishment, in their effort to minimize what they will have to pay out in child and spousal support as well as what property will be equitably distributed between the spouses.

In that vein, what follow are a few warnings to keep in mind if a divorce may be heading your way:

  1. Joint accounts. Either spouse has the power to clean out joint accounts at any time. That doesn’t mean they ultimately get to keep everything that was in them without sharing with the other spouse. But awaiting ultimate justice can be tough on a needy spouse. By the same token, striking while the iron is hot and proactively accessing an equitable share of joint accounts can turn out to be a lifesaver for a needy spouse.

  2. Joint debt (versus marital debt). Depending on a couple’s circumstances, it may be prudent to close or freeze joint debt accounts. Depending upon a spouse’s circumstances, it may be prudent for them to have credit card accounts in their sole name. It is usually prudent to keep an eye on the balances of any joint credit or debt accounts. Debt is a complex area because a spouse’s rights and obligations as to a creditor may be inconsistent with their rights and obligations as to the other spouse. The legal information provided in the cited article is not entirely correct under Florida law.

  3. The Marital Home. Since it is generally not feasible or desirable for both spouses to remain in the marital home, the couple must decide whether one spouse should remain in it or whether it should be sold. This decision is complicated these days by whether what the couple owes on the home exceeds its current fair market value … and whether they are even able to afford their mortgage under current circumstances.

  4. Buying a New Home. For spouses who are named on the marital home and mortgage, this can be problematic under the best of circumstances if the home is not sold or refinanced and the nonresident spouse released. If the marital home is under water or the couple is otherwise behind on the mortgage, renting is likely going to be the only option.

  5. Managing Money. This is probably an essential survival skill, especially in these times. A spouse who has relied on their partner to handle this function will need to take over this function, fast. Failing to do so may jeopardize their future, even if they obtain an excellent property and support settlement or court award of property and support.

Read more in this Investopedia article syndicated in the San Francisco Chronicle: The Financial Risks Of Leaving Your Spouse.