The Dangers of Kicking the Can…

Erica Swensson

Recently, I sat in a conference room to settle a divorce that started 10 years ago. It wasn’t a complicated estate—a few businesses, a couple of commercial buildings, and no minor children. I was the 4th attorney for my client; and my client’s wife was on her 3rd attorney.

The question de jour

“How did we get here?”

My answer—bad accounting, poorly managed expectations, and lack of certainty.

The tendency of litigants and attorneys while moving through the dissolution process is to put off a variety of issues until the time of trial—attorneys’ fees, sanctions, reallocation of expenses… the rationale being that it will all shake out with the final numbers at the end.

On the one hand, this approach can avoid tedious negotiations without the benefit of knowing the final the big picture—a potential fee waster. However, the problem comes when too many items are left unattended—they become too unwieldy to track and difficult to present at trial. More often than not, these items slip through the cracks.

During the pendency of your divorce, there is value in memorializing and formalizing certain agreements. The payment of household expenses, who is responsible, and what happens if they do not comply. It can also help you to understand what you should expect at the time of a final agreement.

Back to my conference room of the long, drawn dissolution. Had the parties had clear, definitive financial agreements with respect to the payment of expenses and accounting of business income, they would not have been left with the sticky (and expensive) task of trying to re-write 10 years of banking history. A few simple agreements from the outset may have made the difference in this case.

Talk to your attorney about your financial expectations and goals from the outset. Don’t be afraid of asking questions and exploring what types of agreements may benefit you and your final outcome.

Considering Divorce? Put Your Financial House in Order

Stacy D. Phillips

While you may have come to the conclusion that your marriage is over, we recommend that you take the following steps before “crossing the Rubicon” and sharing this news with your spouse. Knowledge is power and your first order of business should be to put your financial house in order.

Know Your Financial Picture. In too many instances, we have met with clients who are unaware of their complete financial situation. Be knowledgeable about both your and your spouse’s finances. Summarize income from all sources. Identify assets and liabilities (in your name, your spouse’s name, and jointly held), including when and how these assets were acquired. List your family’s insurance coverage (medical, dental, property, auto, and life). Once armed with this information, you will be able to obtain a clearer understanding of your entitlement under the law.

Understand Your Monthly Expenses. Be able to articulate how much you realistically spend on a monthly basis both on basic needs and discretionary items. This fluency with regard to your expenses will enable you to better understand your needs on both a temporary and permanent basis.

Obtain Financial Records. Before you even utter the word “divorce” to your spouse, look for bank statements, canceled checks, tax returns, life insurance policies, credit card statements, closing records/binders, loan documents, etc.; make copies of those records; and keep them in a safe place.

Open Your Own Bank Account. It is important to have funds in your own name in case of an emergency and in the event that your spouse attempts to reduce your access to money and credit cards after your announcement. This will also enable you to hire an attorney when you are ready.

Build Your Credit. If you don’t have credit cards in your name, apply for them so that you can build up good credit. Use the cards and pay the entire balance each month. By doing this, not only will you establish your own credit, but it will enable you to document your expenses.