How to Handle Finances if a Divorce Seems Inevitable
" Nowadays, love is a matter of chance, matrimony a matter of money and divorce a matter of course. " - Helen Rowland
Nobody likes to think about a divorce in a marriage, but in the day and age that we live in today, divorce is a stark reality and may throw your financial situation out of gear altogether if things are not sorted out properly. Getting a divorce is an immensely stressful affair, but if this unfortunate incident were to occur in your life you need to keep your head on your shoulders and be mature enough not to confuse money matters with the emotional baggage of separation.
Things should be done in such a manner that the discord in your marriage should not wreck your financial future. This holds true for both the spouses, so here's how to go about it in a sane way, instead of taking rash decisions that are emotionally driven.
Division of assets
If you have decided to part ways, you must both be able to sit down and work out a budget depending on both your incomes, expenses, child care and servicing of debt. Take stock of all your assets and liabilities. This will include all your investments, retirement savings, property, car and even household goods.
The right thing to do is jot down the current market value of all of these and go for an amicable split, but more often than not, that is not possible, since both spouses are high strung and mentally disturbed. The best option under such a situation, then, is to take the help of a professional i.e. a financial planner. The division of assets is to be made taking into consideration the contribution of each spouse towards building the home.
The liabilities must also be taken into consideration at this stage. The spouses have to reach an agreement about whether they want to sell of the particular asset and divide the earnings or transfer the loan in either of the spouses' name.
If the wife is financially independent the husband need not pay for her regular expenses or an alimony, but if she does not have an income to support herself or her income is not at par with that of her husband's, Indian divorce laws entitle her to a maintenance fund by the husband for her comfortable upkeep. This may be paid in a lump sum or may be staggered over the years. The amount of money she will be entitled to, will depend upon the financial position and the standards of living maintained by the family.
Child care arrangement
Irrespective of who gets the custody of the child, both the parents would obviously be interested in the welfare of the children. In order to secure the future of the children, some investments can be made in the name of the child taking into account the investments that have already been made by both the parents. If an amicable solution is not working out, the other option is to set up a trust. A trust will ensure that the child's/ children's benefits are primary and the income and assets are managed and distributed as per the needs of the child.
Documentation and keeping your records clean
After you have reached a financial situation that works out best for both of you, you should ensure that the agreement is drafted in a manner that it is fair to both the partners and the understanding about division of assets and other arrangements such as child care etc. are spelt out in black and white. Documentation is an important part of the process as it will be required by the courts and will form the basis of your final divorce settlement. If both of you have been earning members of the family, make sure all your financial records (such as photocopies of bills of important purchases made in your name) are in order and your tax returns for at least five years are ready, in case there are any queries after the scrutiny by the court.
Going ahead with your financial plan
Life must go on even after a divorce and you have to ensure that your financial future is secure. Make sure you do not stray from your long term goals. You will obviously need to reassess the plan given the change in the course of your life and divert the direction of some investments, perhaps consolidate some of them. If you have to pay alimony to your wife or need to contribute to your children's expenses, make sure you set up a separate account for it and make some additional savings so that this fund is replenished and takes care of your responsibilities. Make sure there are no defaults as far the court's directives are concerned as you may face legal action for the same.
To break a marriage is never an easy thing to do, and should be avoided under all circumstances, but if push does come to shove, you must maintain both your financial sanity and sorts out money matters in the best way possible. Taking the advice of a financial planner at this stage is highly recommended.