You need to “get organized for divorce” and “figure out what you want” before you go anywhere with your divorce.
This is Step #5 in the process of your divorce strategy education – and one of the more important things for you to do. I note this section is broken down and covered in three lessons in the Best Divorce Basics course that comes with your free My Best Divorce membership.
Anyway- back to it. If you lack purpose, your divorce will take more time, cost more money, and result in more “burned bridges” in your family, business/career, and social networks.
Sound like fun? I think not. You owe it to yourself, your friends, your family, and your bank accounts to “get organized” and figure out what it is that “you want” before you move any further along the divorce process.
The details of how to do this are covered below. This will take some time- but it is all worth it.
Define Non-Financial Goals
If you are getting divorced for the right reasons, then money is not the only reason you are leaving your marriage.
For many people, part, or all of the reason they are really pursuing divorce is to have a better life after their divorce. They want to live the Best Life possible, a life they deserve, and they know they’ll never have such a life if they stay in their marriage. They might not know what their Best Life will be like, but they know they want it, and that to get it they need out of their marriage.
If you delay defining your non-financial goals until after the divorce you will lack any real “purpose” and as a result risk a financial settlement that has you fighting an uphill battle to make your life better.
Even if your financial settlement is outstanding, if you do not define your post-divorce personal goals now you will risk falling into depression after the divorce is over, which makes you more vulnerable to entering into another unhealthy relationship that down the road has you planning on getting out of yet another marriage.
Do things the right way. Figure out what “you want” out of life now. Do not wait until after your divorce is over. Do it now, before you even thing about any legal or money issues.
Ensure Your Privacy
There is a time and a place to inform your spouse that you are going to get divorced. But right now is not the time. You want to keep your options open when you are in the initial informational gathering and evaluation stages of divorce planning period because you might ultimately decide you don’t want a divorce.
As explained in the divorce leverage and strategy overview, your Best Divorce Strategy can immensely benefit from you being organized, prepared, and the first to take affirmative action in the divorce process. “Tipping off” your spouse to a pending divorce at this point, before you have gotten organized and refined your goals and legal strategy through meeting with an attorney, is not what you want to have happen.
For this reason, it is important to take a few affirmative steps to secure your privacy as you get organized for divorce and figure out “what you want.” Fortunately, these steps are simple even for those who are not computer experts, and in many cases, rely on free software.
The specifics of ensuring your privacy are covered in depth in the Best Divorce Book.
However, the basic steps to ensuring your privacy are:
Establish a secure email address: Make sure nobody can see your email. It is best to setup a new account and avoid using work email or accounts “you think” are secure.
Change all of your account passwords: Do yourself a favor and change all passwords now. And passwords that cannot be guessed. But make sure that changing this information will not send your spouse an email.
Secure Your Devices: Put a password on your phones, tablets, and computers. Saving information electronically is worthless if your spouse can access and delete everything.
Disable Location Tracking Software: Turn off phone applications like “Find My iPhone,” “Find My Friends,” etc. If you don’t know how this works go to the Apple Store, see the Geek Squad, or pay someone to teach you. You’ll need to learn this after your divorce anyway.
Set Up An Online Storage Account: Get an account with Dropbox.com, Google Drive, or one of the other cloud storage services. You’ll use this to save files, store them securely, and later to transfer easily to your lawyer. Get the free accounts. They give you what you’ll need for your divorce.
Consider An Electronic Notes Program: Free services like OneNote and Evernote allow you to keep your notes secure and accessible from multiple devices. Its absurd to use pen and paper to keep track of everything when these free services keep your notes from being lost or stolen.
What to Gather
Below are the financial records you should gather (try to get three years of everything) as you get organized for divorce:
Tax Returns & Related Documents: Try to get three years of all federal and state tax returns as well as W-2, 1099, and K-1 forms.
Checking, Savings, Investment & Credit Card Account Statements: Try to obtain three years of statements for each checking, savings, investment, and credit card account. If possible, try to get copies of cancelled checks with each checking account statement.
Business Records: If you or your spouse owned or recently sold a business than at a minimum you need three years of tax returns, including K-1 forms, and three years of all records for all financial accounts associated with the business. It is especially important to try and obtain cancelled checks with the bank statements, as the cancelled checks will allow you and your team to determine whether corporate funds were being used for personal purposes. If you have access, you should obtain at least three years of records from the company’s QuickBooks or financial accounting software program. Obtaining a copy of the Quickbooks file will substantially reduce the paperwork you have to gather. If you cannot get this, try to get three years of general ledgers, balance sheets, profit and loss statements, and financial statements for the business. Finally, it is also helpful at this stage to get copies of all available corporate records, including shareholder agreements, buy/sell agreements, articles of organization/incorporation, and major corporate resolutions, and major leases or and contracts. I understand that gathering these business records can seem intimidating, and that the records are voluminous. For now, just try to do the best you can. Understand that most of this information can usually be obtained during the divorce from your spouse, the corporate accountant, or a lender to the business who required most of these documents before extending the company a line of credit.
Other Investment Documents: If you or your spouse are working with a financial advisor you may have received a personal financial plan or other summary of you or your spouse’s income and assets. If something like this was done in the last several years, try to obtain a copy if you can do so without making your spouse suspicious.
Wills & Trusts: Your lawyer will want to see the most current version of any wills trusts which you created or which you or your spouse may have a current or future beneficiary interest.
Financial Statements & Loan Applications: You should try to gather any financial statements and other documents given to lenders for purposes of justifying a loan or line of credit within the last five years. These types of documents are especially critical in cases where you need financial support and you expect your spouse to claim their income is less than it really is.
For Safety Deposit Boxes: Try to find out where all safety deposit boxes are held. If you can get access to the boxes, take pictures of everything that is in them.
Employment Contracts: If you or your spouse has entered into any type of employment contract or consulting agreement over the last five years you need to obtain a copy if it is available to you.
Real Estate: For all real estate currently owned or sold within the last three years you should obtain a copy of the closing documents, the deed, any mortgages and promissory notes, records indicating the current balance owed on the mortgages, and records of major improvements and repairs made to the property. If the property is being rented/leased out, you should get copies of the leases, and of any records related to net rental income. Odds are, if the property is being rented/leased, there has been a company set up to own and lease the property. If this is the case, try to obtain everything mentioned above in the business records category for the rental real estate company.
Automobiles, Jewelry, Collectables & Notable Personal Property: For anything you or your spouse own that you suspect has value that needs to be considered in your divorce you should obtain copies of the records of the purchase price, and any existing appraisals of the items. If there is an outstanding loan related to the property/items (such as an auto loan) get the most recent statement showing what is owed. Also, if the property/items were ever insured, you will need to review the insurance policies to see if you or your spouse ever gave an estimate for the value of the items.
Lawsuits & Judgments: If you or your spouse have been a party to any lawsuits in the last ten years you should gather any records related to final judgments, dismissals, or settlement agreements.
Insurance Records: You need to get copies of all health, life, and disability insurance policies that insure you, your spouse, and any children. Make sure to understand whether any of the policies have a cash value.
Promissory Notes: You need to gather any records of money owed to you and your spouse from other people who owed by you and your spouse to other people.
Phone records: If available, you should get three years of phone records for you and your spouse. These records may not seem important now, but can be helpful to explaining suspicious financial transactions, evidencing affairs, and supporting other issues that might come up in your divorce.
Where to Get Records
To get organized for divorce you need information. As far as where to go to get the information, the first step in the process should be to see which of the items below can be found in the office or home office, file cabinet, or shared computer.
Otherwise, most everything else I suggest that you gather below can be obtained directly from the financial institutions or professionals that would have easy access to the information.
Unfortunately, at this point, you might not be able to get every single item that you need to have a full understanding of the marital finances, as some bank accounts might only be in your spouse’s name, or under the control of people who, when asked for the information, might report back to your spouse.
This is okay. You don’t need everything to get organized for divorce. Just gather what you can at this point and make note of the documents that you believe exist but are not able to obtain.
Down the road your lawyer will be able to send document requests or subpoenas for any other documents needed to understand what represents a sensible financial settlement.
How to Gather Information
The “direct save” approach: First, try to get the information you need to gather (such as financial documents) in the form of a computer file so that you can save it to your online storage program. Most bank statements can be downloaded right from your bank’s website to your online storage account. Further, other documents can be emailed to you and then saved from your secure email account to your online storage account.
The “scan & save” approach: For documents that cannot be provided electronically and are available only in paper form, you should scan the documents into a computer file and then save the file of the scanned documents to your online storage program. If you do not have a scanner, any office services store like Staples or FedEx/Kinkos can scan large quantities of documents into a computer file and then email the file to you. Then, you can save the file to your online storage program. I note that you can use a free service such as www.SendtoDropbox.com to have documents emailed directly from a scanner or email to your secure Dropbox account.
The “snap/video & save” approach: Sometimes there are documents or files that cannot be scanned. These might be delicate documents, or documents that you do not have the ability to remove from their original location to take to a scanner (these might involve documents in your spouse’s private office, as an example). Capturing and storing these documents or files is not all that difficult. Just use your smartphone to take pictures or videos of the documents. Then, save the pictures or videos from your phone directly to your online storage program, OneNote, or Evernote. This is easy, because once the online storage program or notetaking program is installed on your phone there will be an option to do this by tapping the picture or video on your phone. If you are worried your spouse will access your phone, you can delete the picture or video from your phone after it is saved to the online storage program.
Consider a Strategic Meeting
If you are in the dark about your finances it can be harder to get organized for divorce. If this is you, possibly the easiest way to find out the details of the marital finances is to get your spouse to agree to go with you to see a financial planner or insurance agent without any mention that you are contemplating divorce.
When meeting with the financial planner there will need to be a detailed explanation of the details of your finances. Usually, the first thing that happens is you and your spouse will have to provide the planner with detailed information about each others income and assets. Most often, something will be put in writing by you and your spouse or the planner, and your lawyer can obtain this documentation from you or the planner later.
Some people may find this approach deceptive, but I believe you are not deceiving anyone by exercising your right to learn about or protect your finances. Further, meeting with a financial planner or insurance agent might help you and your spouse get on the “same page” about money issues and joint goals. This can be a great way to possibly save the marriage and avoid the divorce altogether (wouldn’t that be something!).
Organize Assets & Liabilities
Once you’ve gathered what you can it is the time to go through the documents that you have gathered to begin determining the assets and liabilities that will need to be dealt with in your divorce. Later, I’ll help you do a few things with this information for purposes of helping you come up with your initial financial settlement goals.
The easiest way to stay organized when identifying the assets and liabilities that will be involved with your divorce is to use a worksheet/spreadsheet to record the different assets and liabilities you find in the information that you gather. You can use the Net Worth Organizer form.
Once you have identified and summarized the assets and liabilities you have found you will be ready to start developing your ideal financial settlement.
Review Bank Statements for Suspicious Transactions
To get organized for divorce you need to be familiar with your finances. At this point you should have reviewed your financial records (and possibly some of your spouse’s records) to the point of being able to get an initial “ballpark” idea of the assets and liabilities that will need to be dealt with in your financial settlement.
This will go a long ways towards helping you and your attorney understand what needs to happen in your divorce. Further, by doing this legwork now, as opposed to after you file for divorce, you will likely be positioned to begin settlement negotiations quicker and spend less on lawyer’s fees.
My Best Divorce members can use the Questionable Transactions Log, which can be downloaded in the free membership library. Whether using our form or your own, you should go through the following steps to make a list of potential evidence of unknown accounts:
Step #1: Review for Outgoing Transfers & Withdrawals: Make sure you can trace each significant outgoing transfer of money to one of your other accounts. If you cannot, you might have identified a transfer to a previously unknown account.
Step #2: Review for Incoming Transfers & Deposits: Make sure you can trace each incoming transfer of funds to the source. Otherwise, you might have discovered a new account or previously unknown source of income to your spouse.
Step #3: Review for Suspicious Charges & Checks: You need to review all of your bank and credit card account statements for charges and checks that appear to evidence marital dollars being spent or directed towards non-marital purposes. If you see a charge or check that appears to have been for a non-marital purpose (including a transfer of money to someone else you never approved) you should record the transaction and bring it up with your lawyer later.
Step #4: Review for “Unexplained Payoffs”: Do an analysis of the source of payments to all credit card, loan, and installment accounts. What you need to look at is whether you can match all of the payments towards these debts with a transfer/check out of one of the marital bank accounts. If you see a bill being paid but none of the accounts you have reflect the payment than there is likely another account you’re not aware of.
All of the above steps usually are handled by a competent divorce lawyer or forensic accountant. That said, we recommend doing this analysis for yourself to get a better sense of your income, assets, liabilities, and net worth.
Membership access aside, in a nutshell, “non-marital” property will typically include property that you owned prior to the marriage and still own today, property received through an exchange of property that you owned prior to the marriage, and property that you received through an inheritance or gift during the marriage. In most jurisdictions, including in Florida where I practice, you will have the burden to prove that an asset is “non-marital.”
This means that unless you prove that an asset is “non-marital” it will be considered a “marital” asset and subject to being equally divided with your spouse in the divorce. For this reason, to get organized for divorce it is important that you gather evidence to build your claims for non-marital property as early as possible.
As part of doing this, you should:
Document Property Owned Before The Marriage that Still Exists: If you own something now that you owned before marriage you should write it down. If it was a bank account try and get documentation of the account value at the time you were married. This can be tricky and require you to subpoena your bank once you have a lawyer.
Document Non-Marital Property Received During the Marriage: If you received something by gift or inheritance during the marriage you should gather any documents available to prove the gift/inheritance.
Document Non-Marital Property Spent on Marital Purposes: If you used non-marital assets to fund the marital lifestyle your lawyer may be able to build a claim for an unequal division of marital property in your favor.
Determine Your Initial Desired Property Settlement
Congratulations! Now that you have went through the exciting and rewarding process of identifying the assets and liabilities subject to your divorce and reviewed your records for evidence of questionable transactions and non-marital claims you are finally at the point to where you are ready to engage in a realistic assessment of your desired financial settlement.
To do this, go back to your list of the property and debts you created earlier. Then, designate whether you or your spouse will keep a particular asset for debt in your desired settlement.
The key here is trying to come up with a desired settlement where you and your spouse leave the marriage with a nearly equal “marital net worth” (amount of marital assets minus marital liabilities).
This can take some time, and will need to be revised later when you meet with your divorce lawyer. Also keep in mind that sometimes these settlements are complicated and require real estate to be sold or payments to be made over time.
Don’t let any potential complexity get in the way. The sooner you do this the sooner you can visualize your divorce settlement. The sooner you can visualize your divorce settlement the sooner you will start gaining the positive forward momentum needed to get through this process successfully.
Create a Current Budget
One of most important things for you to do to get organized for divorce is to work up to determining your “after divorce” budget. By this I mean determining what your income and expenses need to be after the divorce to allow you to live the life you want to live. Taking the time to create an after divorce budget will allow you to determine whether it is realistic or prudent to take on some of the assets and liabilities in you proposed property settlement.
Further, your “after divorce” budget will allow you to understand whether or not you will need to seek any ongoing financial support from your spouse.
The first step towards developing your “after divorce” budget is creating a current budget based on the current total marital income and expenses. Having an understanding of the current marital income and expenses is paramount in creating a realistic “after divorce” budget.
You need to know how much your current lifestyle “costs” to get organized for divorce and plan out your “after divorce” lifestyle. Oftentimes, your current lifestyle “costs” much more than you think.
Thankfully, preparing your current marital budget is not difficult. We suggest using the complementary Budget Organizer spreadsheet. Otherwise, there are many other free online budget creation tools that you can download and use for this purpose.
As you go about creating the current budget, do not delay the process out of wanting to get exact figures for every single line item. Down the road there is going to be plenty of opportunity to fine tune your current and “after divorce” budget.
Your current monthly surplus/deficit is a good “reality check” as to your marital finances:
“If there is a surplus, it will probably be easier for you and your spouse to dissolve your marriage without much financial disruption. However, if there is a monthly deficit, there is probably going to be more need for you and your spouse to reduce your expenses after the divorce.”
Create an “After Divorce” Budget & Determine Potential Support Needs
At this point you should have developed both your initial proposal for dividing the marital assets and liabilities and your current marital budget. Now that you have done this, as you get organized for divorce it is time to develop an approximate “after divorce” budget for both you and your spouse.
Going through this process for both you and your spouse allows you to simultaneously do several things. First, you will be etching out the financial details of the better life you plan on having after the divorce. Second, you will be evaluating the extent that you or your spouse might need alimony/spousal support. Finally, you will be laying the framework for developing your Best Divorce strategy by understanding what might be your spouse’s economic realities after the divorce.
Creating the “after divorce” budget for you and your spouse is the same process as creating your current budget. However, this budget will involve estimating future expenses. These will need to be based on expenses of your initial desired property settlement (determined above). It will also need to factor in both anticipated any changes in employment and living conditions after the divorce.
When creating your “after divorce” budget you will also be determining whether you will need to receive financial support/alimony from your spouse, or if you have the ability to pay any spousal support/alimony to your spouse. If your “after divorce” budget shows a monthly deficit, meaning your expenses exceed your income, you may be in the position of needing financial support from your spouse.
Make sure to take note of how much money you think you need in support from your spouse. You will need to discuss whether such an amount is realistic as you interview lawyers. If you think you will require financial support/alimony, you should carefully examine the “after divorce” budget you created for your spouse to determine if they have any real ability to pay you support after paying their own expenses.
Likewise, if your spouse’s “after divorce” budget shows a deficit, you need to realize that you might end up being responsible for paying them spousal support if your own budget shows a surplus. Make this an issue to discuss when you interview lawyers.
Consider Adjustments to Your Proposed Property Settlement
Now that you have developed your initial “after divorce” budget you need to reassess your initial proposed property settlement. Take the time to think about whether you are going to have sufficient income to pay for the assets and liabilities you want to keep after the divorce.
This is especially the case with real estate. Does it really make sense to stay in the marital home after the divorce if doing so will put you in a “cash crunch?”
Sometimes, it might make sense to offer certain “expensive to maintain” assets you’d rather not think about being responsible for after the divorce to your spouse as a part of what they might find a more attractive settlement package. In other cases, it might make more sense to insist upon certain assets being sold as part of the divorce to leave you with more cash, or cash flow.
Get Organized for Divorce: Summarize
The final and crucial component to get organized for divorce is to summarize in several pages the details of what you want, what you need to learn, and your marital history. The purpose of creating this summary is three-fold.
First, you will be much more organized by having your goals and questions summarized in one document that you can continue to refer to as you go through your divorce. Second, this summary will be extremely useful as an outline to use when interviewing attorneys (more on this in Step #6: Hiring & Working with Your Divorce Lawyer). Finally, the summary you create will go a long way towards allowing your lawyer to quickly develop an initial understanding of your divorce goals and an opinion of whether your goals are realistic.
We suggest using the complementary Divorce Organizer form available in the here. The Divorce Organizer gives you the framework for concisely framing your goals for the divorce, listing your open questions/concerns, and detailing the basic information that you will need to have at “your fingertips” as you interview attorneys and move through your divorce. Also, by keeping this document stored electronically, you can continue to update it as you move through the divorce process.
Regardless of whether you use my Divorce Organizer or another method of organization, you need to prepare a summary of the following information:
Why do you want a divorce?
What do you want your life after the divorce to include?
What do you want out of the divorce, including:
What is your preferred property settlement?
Will you or your spouse have any type of support claim?
What are your outstanding questions that you need to ask the attorneys you interview?
What potential “negotiation leverage” exists?
A summary of your marital history (your lawyer will likely want this).
Congratulations if you actually took the time to read through all of the information above! Reading and acting upon the steps outlined above takes some time. But doing so will substantially increase your odds of having your divorce resolved on favorable and fair terms at the earliest possible opportunity.