Going through a divorce is not just legally and emotionally overwhelming. It can also have a profound financial impact on your life; and, if you are not careful, that impact can be negative.
At one of the most vulnerable times of your life, you must make critical decisions that could affect your short-term and long-term financial well-being. Understanding how your divorce can impact you financially and protecting your finances in preparation for it will require careful planning and clear-headed decision-making. The experienced Virginia Beach divorce attorneys at Melone Hatley, P.C. are here to offer some insight to help you understand and safeguard your financial interests during your divorce and ensure you are making the most knowledgeable financial decisions possible.
Get a Clear Picture of Your Current Finances
Before making any important financial decisions, you will want a clear understanding of your financial picture.
In order to do this, you should gather all your financial documents and create a comprehensive list of your assets and liabilities. Organizing and analyzing these can help you understand where you stand financially and prepare you for property division and any financial negotiations during your divorce process.
- Bank statements
will help you track income and expenditures and provide a picture of your immediate liquid assets. They can also reveal any suspicious activity or financial mismanagement by your spouse. - Tax returns
show all sources of income, deductions, and credits in one place and provide a multi-year overview of your income and expenses. - Investment account statements clarify ownership of investment assets, give you a real-time valuation of your investments, and provide a snapshot of interest and dividend income and management expenses.
- Retirement account statements
will show balances in any 401(k)s, IRAs, pensions, and other retirement accounts you have, which are significant marital assets. You will also want to understand the tax implications of withdrawing or transferring these funds during your property division. - Property deeds
will show official ownership of your real property and whether it is jointly or individually owned. - A comprehensive
list of all your liabilities should include all debt information concerning mortgages, credit cards, medical bills, personal loans, or car loans. You should know the balances owed on each and the repayment terms. - If you or your spouse own a business, a business valuation will also be necessary.
This information will help you understand your financial bottom line and what is at stake in your property division. If this feels overwhelming, you will want to get the guidance of a financial advisor, accountant, or your Virginia Beach divorce attorney to help you understand the information and its financial and legal implications.
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Understanding Property Division and Virginia’s Equitable Distribution Laws
In a divorce, only marital property and debts are subject to property division. Marital property is any income, assets, and liabilities you and your spouse have made or acquired during your marriage, and this must be fairly, or equitably, divided in your divorce. You and your spouse will typically retain your separate property, or the property you brought into your marriage.
In Virginia, property division is governed by equitable distribution rules. Equitable distribution aims to divide marital property fairly but not necessarily equally. When the court gets involved in property division, it takes a holistic view of your marriage and considers many variables when making an “equitable” property division determination. These variables can include
- Any financial or non-financial contributions each of you have made to the marriage
- The length of your marriage
- Your age and physical and mental health
- Your potential post-divorce needs
- Spousal support
- Use and dissipation of assets, or if one spouse wasted or misused marital assets
Negotiating a property settlement with your spouse without relying on the court to do it for you is often to everyone’s advantage. It is also critical to think beyond your immediate needs and wants to consider the long-term impact this property division may have on your financial well-being.
Considering the Financial Impact of Your Divorce on Your Future
Your financial obligations post-divorce will have both a short-term and long-term effect on your future. These obligations can include things such as child support, alimony, and the division of your marital debt.
Child Support
If you have children, you may be paying or receiving child support. Child support in Virginia follows specific guidelines to ensure fairness between spouses, and it is important to understand how it is calculated and its potential impact on your financial future.
Virginia uses the income shares model to calculate child support. These calculations consider the combined income of both parents, the number of children being supported, and other factors such as health insurance costs, extraordinary medical expenses, child care expenses, spousal support, or the noncustodial parent’s significant visitation time. Depending on whether you are the payor or receiver, child support will factor into your future financial considerations.
Alimony/Spousal Support
Under Virginia law, married spouses are financially responsible for each other until a divorce is granted. However, in some circumstances, one spouse will require financial assistance even after the divorce. Alimony, or spousal support, is the court-ordered financial support of one spouse to the other during and after a divorce. Alimony can have a defined duration or be permanent, only terminating in the event of remarriage or death.
An award of alimony is most common in situations where the couple has been married a long time, one spouse has not worked or there is a great disparity in income, or a disability is involved. The court has great discretion over who it is awarded to, and alimony won’t apply to every divorcing couple. Depending on your unique situation, alimony may or may not factor into your financial concerns.
Divided Debt
Division of your marital property will also include dividing marital debt, which will also have an impact on your financial situation.
Joint debt can be tricky in a divorce, and extricating yourself from joint accounts can be complicated. You may become legally responsible for paying some debts post-divorce regardless of who incurred them. If your ex-spouse fails to make payments on joint debts after your divorce, it may negatively impact your credit score, even if you are no longer responsible for that debt. It will be crucial to work closely with your Virginia Beach divorce attorney to negotiate favorable debt terms, communicate with your creditors, develop a comprehensive financial plan, and protect your financial welfare as much as possible during your divorce process.
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Protecting Your Finances Before and During Your Virginia Divorce
Once you and your spouse have decided to divorce, you should begin to carefully separate your finances to protect your financial interests and ensure a smoother transition.
Some proactive measures should include
- Opening an individual bank account in your name only so you can control your finances and manage your income and expenses independently. Remember that income is still considered marital property until your divorce is final, no matter which account it is in.
- Dividing liquid assets and closing joint bank accounts. If this isn’t possible, you will want to notify your bank of the divorce and request that any joint accounts require both signatures for withdrawals.
- Updating any direct deposits and automatic payments to ensure your income and expenses are being directed to the new account instead of your joint account.
- Establishing new credit accounts in your own name.
- Paying down balances in anticipation of closing down joint credit accounts. However, you will want to get legal guidance to ensure your property division is not negatively impacted by this.
- Obtaining, reviewing, and monitoring your credit reports from all three credit bureaus to ensure there are no unauthorized accounts or activities that could affect your individual credit.
- Changing beneficiary designations on your financial accounts and life insurance policies.
- Reviewing and updating your will and any other estate planning documents.
- Documenting everything and keeping detailed records of all your financial transactions, account statements, receipts and any communication you have had with your spouse regarding your finances. Keep copies of any correspondence you have had with your financial institutions and creditors.
- Keeping an inventory of any valuable personal property, and documenting its condition and location.
Because divorce can seriously impact your financial life, both in the short-term and long-term, being proactively prepared and protected should be a priority.
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The Importance of Having Experienced Legal Advice for Protecting Your Financial Interests
Because divorce is highly emotional, having an experienced Virginia Beach divorce attorney’s guidance can be critical. An attorney will maintain an objective and knowledgeable perspective so you don’t make decisions that could work against your financial best interests or lead to an unfair settlement.
Your attorney will know how state-specific laws and rules apply to your circumstances, how equitable distribution will impact your unique financial situation, and offer strategies for safeguarding your financial interests. In complex financial situations, having an attorney’s insight and specialized knowledge can be crucial when dealing with hidden assets, significant investments, or high-value assets.
At Melone Hatley, P.C., we are your partners throughout your divorce process, dedicated to protecting your legal, emotional, and financial welfare each step of the way. With convenient locations throughout Virginia, North Carolina, and Florida, our philosophy is to provide each client with the highest quality legal representation possible. If you are considering or currently navigating a divorce and have concerns about your financial interests, we are here to help. Call us at (877) 416-5071 or schedule a free consultation through our website contact page.
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