Facing Divorce? Financial Steps to Help You Get Started

Facing the prospect of divorce can be overwhelming. Along with the emotional impact, there are legal and financial decisions to make, unfamiliar processes to navigate and information that needs to be gathered.

You don't have to understand everything immediately. Breaking the process into manageable steps can help you begin building a clearer picture of your situation and what may come next.

Understand the Divorce Laws in Your State

Divorce is largely governed by state law, which means where you live can affect how property is divided and how financial support is determined.

Some states follow community property rules, while others use equitable distribution. Those approaches can produce different outcomes when marital assets are divided.

Rules surrounding spousal support, sometimes called alimony or maintenance, can also vary considerably by state. Factors such as the length of the marriage, each spouse's income and other circumstances may affect whether support is awarded, how much is paid and how long it continues.

Child support is generally more formula-driven, although specific calculations and requirements can still vary.

Understanding the basic rules in your state can give you a better foundation for evaluating your options.

Build Your Divorce Team

Once you understand the basic framework, consider the professionals you'll need to help navigate the process. 

Your legal team may depend on whether you pursue mediation, collaborative divorce, or litigation. Financial expertise can also be valuable when evaluating the potential impact of different decisions.

Legal and financial professionals serve different roles, and assembling a team that can address both sides of the process can help you make more informed decisions.

Start Gathering Financial Information

Knowledge can be particularly important during a divorce, especially if you haven't traditionally managed the household finances.

Begin gathering documents and information related to anything you own or owe. This may include:

• Bank accounts
• Investment accounts
• Retirement accounts
• Your home and other real estate
• Business interests
• Loans
• Credit cards and other debts
• Other assets or financial obligations

Statements arriving by mail or email can help you begin assembling a more complete picture of your household finances.
Don't focus exclusively on assets. Understanding outstanding debts is also an important part of determining your overall financial position.

Review Your Credit

Reviewing your credit reports can help identify accounts, loans, or credit cards associated with your name.

This can be particularly useful if your spouse traditionally managed the finances or if you're uncertain about all of the household's outstanding obligations.

The goal is to understand both sides of the balance sheet: what you own and what you owe.

Understand Your Income and Spending

Knowing what comes into the household and where the money goes each month can provide another important piece of the financial picture.

Review your income sources and begin tracking regular expenses such as housing, utilities, food and other recurring costs. Many banking and financial apps automatically categorize transactions, which can make this process easier.

Understanding your current cash flow can also provide a starting point for considering what your expenses and financial needs might look like after the divorce.

Take the Process One Step at a Time

You don't need to solve every financial question at the beginning of a divorce.

Start by understanding the rules that apply where you live, assembling the appropriate professional team and gathering information about your assets, debts, income and spending.

Taking those initial steps can turn an unfamiliar and overwhelming process into something more manageable while giving you and your professional advisors better information for the decisions ahead.

This article is based on the Paths Through Divorce podcast episode “Navigating Divorce: Rules, Team, and Steps,” from EP Wealth Advisors.

EP Wealth Insights Podcast Disclosure

The speakers featured in this podcast are employees and/or Investment Adviser Representatives of EP Wealth Advisors. The information discussed is provided for educational and informational purposes only and should not be considered personalized investment, financial, tax, or legal advice.

The views expressed are those of the speakers as of the recording date and are subject to change. Investing involves risk, including the possible loss of principal, and past performance does not guarantee future results.

Before making financial decisions, consult your financial, tax, or legal professional. EP Wealth Advisors is a registered investment adviser. For additional information, including our Form ADV, please visit www.epwealth.com.