6 Financial Steps to Preparing for Divorce in 2017

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Are you planning to divorce in 2017?

Take a look at our recommendations for 6 Financial Steps to Preparing for Divorce in 2017.

1. Keep an eye on the mail-box.

Every financial document that hits your mailbox in the month of January is worth your time. You should gather Bank and Brokerage account statements showing year end balances and the year end spending summary sent out by most Credit Card companies. You may also start to see tax documents being sent.

If you aren’t sure whether the document is pertinent to your Divorce in 2017, keep a copy anyway just in case. Financial knowledge will equal power for your Divorce in 2017. The more you can get now the more prepared you will be to advocate for yourself and obtain the most financially advantageous settlement possible in the new year.

2. Make copies of all financial files in your home.

This includes 5 years of tax returns, Brokerage and Bank account statements, business ownership documents such as partnership agreements and wills and trusts. Again, if you have any reason to believe the financial document will be important to your Divorce in 2017; you should keep a copy. It is always better to be over-prepared.

3. Educate yourself about your divorce options.

We believe most couples can resolve their differences outside of court. Make an appointment with a Wellspring Divorce Advisors advisor who will educate you about the process options available for your Divorce in 2017. Staying away from the court system will save emotional and economic resources and should result in a more advantageous financial settlement.

4. Consult with a lawyer or two or three or four.

Your Wellspring Divorce Advisors professional can refer you to many high quality divorce lawyers in your community. Concentrate your search on attorneys who specialize in Family Law. You wouldn’t go to your primary care physician for a tonsillectomy so don’t go to your real estate attorney for your divorce.

5. Develop a budget for your Divorce in 2017.

Divorce is hard on the checkbook. You will have expenses of two households, expenses to set up that second household such as furniture and furnishings. If you already have a family budget you can use this as a guide to start your individual divorce budget. If you don’t have one, begin by looking at the bank and credit card statements you gathered in steps 1 and 2.

First get a feel for the recurring expenses like mortgage and utilities then make estimates of discretionary expenses like dining out and entertainment after averaging a couple of months’ worth of real data gathered from the statements.Finding a way to maintain some level of a similar lifestyle during the divorce proceedings is not easy for most but this is a time for you to be comfortable, not feeling destitute.

Wellspring Divorce Advisors is experienced in creating budgets and available to assist clients in developing a budget for their Divorce.

6. Open a credit card in your individual name.

If you do not yet have a credit card in your name alone we suggest you apply for one immediately. It is common for one party to lose access to cash after filing for divorce. If you do not have cash you cannot pay the professional help you need to protect yourself in the divorce process.

Try Capital One for a good starting point. They usually provide good rewards such as airline or cash back on their cards as well as good size credit limits. Aim for $20,000 of total credit card limits. Be careful not to spend too freely on the cards and try to stick to just using them for professional fees if possible.

Real World Financial Infidelity – Skimming

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What is skimming?

Skimming from marital bank accounts is the process of slowly transferring marital assets from joint accounts to a secret account in the name of one person. This version of financial infidelity may be considered outright theft and often requires the assistance of an unrelated third party.

Here’s an example of financial infidelity:

Years ago we had a client come to us after becoming suspicious of his wife’s spending habits. He knew something was fishy but wasn’t sure why. His wife spent very large amounts of money at retail establishments like department and grocery stores on her debit card. He became suspicious when he realized she never seemed to have large bags of new clothing and was purchasing groceries only for a family of three.

We completed a cash flow analysis from bank statements and prepared a list of possible avenues for financial infidelity. Principal among them were the large and abnormally frequent trips to grocery stores and Nordstrom.

Here’s what we found:

During our analysis we asked the client whether his wife typically carried around large amounts of cash. We were concerned she could be taking cash out every time she used her debit card at the grocery store. Many grocery stores will allow for $200 of cash to be withdrawn at the cash register on top of a bill for $18.99 in groceries. The total bill then looks like $218.99 was spent at the grocery store on a bank statement. It actually makes a lot of sense for stores to allow these cash back transactions because it helps reduce employees access to large sums of cash and reduces internal costs for accounting and balancing cash deposits.

We also wondered if the spouse could be taking advantage of cash refunds when returning purchased items to department stores. Many stores will give you the option to receive cash or a credit to your card if a debit card was used to make the original purchase. There is typically a limit to the amount of cash refunds they will provide but a small refund here and there can ad up quickly.

Where did the money go?

Once we raised these concerns the client was able to find tens of thousands of dollars of cash withdrawals made through these two methods by comparing receipts he acquired to bank statements. The only remaining question was…Where did the money go? It turned out the cash was being sent to her mother in a different state via US Mail and deposited into an account in the mother’s name. This was a smart move by the wife because the statements would never be sent to her and any interest earned on the account would be on her mother’s tax ID.

This type of scheme is not all that uncommon. A recent Harris Poll done on behalf of the National Endowment for Financial Education saw 26% of respondents admitting to hiding bank accounts or cash from their spouse.

Fortunately for our client there are ways to sniff out financial infidelity.

 

Financial Infidelity: How do I catch my spouse?

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How do I catch financial infidelity?

1. Ask for online access to credit and bank accounts.

Download full statements for a representative period of time. We suggest at least six months. If online access is not available, get statements from the mail. Make copies for yourself, preferably electronic copies by scanning.

2. Review transactions and note:

  • large cash withdrawals and the location of ATM usage, you may be able to pinpoint the destination of the cash withdrawals if in close proximity to strip club as an example
  • large debt or credit transactions
    1. Location of restaurant, bar and hotel expenses. Large restaurant or bar bills could indicate your spouse was not alone.
    2. Large retail store expenses, say Tiffany’s, might be indication of gifts being purchased for someone else or spending addiction. If you suspect a spending addiction look around the house for clothing with tags still on it either in bags or even hanging in the closet.

3. Get your credit report.

It is possible for your spouse to open credit cards on your credit without your knowledge or consent. Go to CreditKarma.com or www.annualcreditreport.com to get a free copy of your report and look for any accounts you are not familiar with. If you find more credit cards than you were previously aware of this could be indication of large balances and growing indebtedness.

4. Compare your family expenses to net incomes and estimate what you should have in savings.

This may be the quickest way to confirm there are large amounts of missing money or unnecessary indebtedness. If your family’s net income after taxes is $10,000 per month and your expenses are $7,000 per month there should be $36,000 of available savings in a given year. If there is no money in savings or investments, you have reason to be suspicious.

 

Can anyone help me?

If all of these steps fail to return the answers you seek consider hiring a Certified Divorce Financial Analyst at Wellspring Divorce Advisors to analyze the family financial picture and uncover financial infidelity. We will help ensure no stone is left unturned and tell you if there is something to worry about you can move on with peace of mind.

Worried? Here are 20 Questions to Uncover Financial Infidelity

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What questions should you ask if you are worried about financial infidelity?

If you’re worried your spouse is being financially unfaithful,  here are 20 questions we ask a client who suspects their spouse of financial infidelity. They are all meant to uncover underlying causes or avenues for financial infidelity. You should ask yourself these questions before accusing your spouse of wrongdoing.

  1. Do you have separate bank accounts?
  2. Is your name on the family bank accounts?
  3. Is your name on the mortgage?
  4. Do you have a relationship with the family financial advisor?
  5. Do you know how much your spouse earns and how they get paid?
  6. Who gets the mail and pays the bills?
  7. Are there credit cards you know nothing about?
  8. Are your family bank and investment account balances lower than you would expect?
  9. Are there unopened boxes or clothing hanging in the closet with tags still on it?
  10. Is money an emotional conversation in your marriage?
  11. Does your spouse gamble?
  12. Does your spouse day trade a stock portfolio?
  13. Are there abnormally large expenditures charged to debit cards at department or grocery stores?
  14. Do you suspect your spouse of having an emotional or physical affair?
  15. Are you on an allowance?
  16. Does your spouse do business with family members?
  17. Do you suspect your spouse of misusing prescription or other drugs?
  18. Have you ever wondered where your spouse got the money to buy a big ticket item?
  19. Does your spouse own their own business?
  20. Is it possible your spouse has been planning for divorce for a long time?

 

Call Wellspring Divorce Advisors for professional financial help if these questions heighten your sense of concern. Click here for an overview of financial infidelity in a previous post.

Protecting Your Assets: What is Financial Infidelity?

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Protecting yourself.

What is Financial Infidelity?

Financial Infidelity is the misuse, mismanagement or misappropriation of marital assets and incomes during a marriage. Financial Infidelity can stem from many causes including:

  • shame from a job loss
  • extra-marital affairs
  • addiction
  • poor communication
  • downright fraud.

What are the signs?

Clients have come to us suspecting their spouse of buying gifts or lavish trips for the mistress, frequenting strip clubs and major gambling losses. We have also had clients learn of their spouse’s transgressions only when they saw the poor condition of their family finances during divorce proceedings.

Regardless of the reason for the suspicion or the reason for the financial infidelity it can wreck marriages and the long term financial security of the victim. A recent Harris poll showed 42% of poll respondents have committed some form of financial deception. 39% hid a purchase, bank account, cash or a document of some type like a bill or credit card statement. 16% admitted to a lie about the amount of debt they had or the amount of money they earned. 25% of couples experiencing financial infidelity in the poll ultimately separated or divorced while 25% said it had no effect on their relationship.

Take care of yourself.

You owe it to yourself and your children to be diligent and engaged in the finances of your marriage if only to fight for what is left in a divorce. Read on for a detailed overview.

  •  Click here for a list of 20 questions we ask clients who suspect their spouse of financial infidelity.
  •  Click here for suggestions of first steps to take if you are concerned about financial infidelity.
  • Click here for some real world examples of financial infidelity from our practice.