Handling Money and Property Before Divorce Is Legally Granted
Managing finances and property can be both complex and time-consuming when a divorce case extends for months or years. Proper attention to financial responsibilities and preservation of assets during this period can help both spouses maintain stability while safeguarding their rights. Laws governing divorce vary significantly among states, so it is important to become familiar with the particular rules and procedures in the place where the divorce is filed.
Identifying and Preserving Marital and Separate Property
A clear understanding of which assets are marital and which are separate can be essential when preparing for court rulings or settlement negotiations. Marital property generally includes income, real estate, personal property, and other assets acquired during the marriage. Separate property often refers to assets owned prior to marriage or obtained by gift or inheritance during the marriage. Separate property may, however, become part of the marital estate through transmutation if it is commingled. An example is deposits from an inheritance being placed into a joint account shared by both spouses. Proper recordkeeping and documentation help clarify whether transmutation has occurred.
Budgeting and Managing Household Expenses
Moving from one household to two during the divorce process can increase expenses. Careful budgeting allows each spouse to determine necessary payments for housing, utilities, child-related costs, and other essentials. Maintaining clear records of what has been paid and by whom provides clarity when dividing expenses and resolving any later disputes. If one spouse refuses to participate in joint budgeting or hides financial information, the other spouse can proceed with good-faith estimates.
Joint Credit and Potential Risks
Joint credit cards, lines of credit, and loans can lead to difficulties if payments are missed or if additional debt is incurred. Creditors are generally not bound by agreements between spouses that designate who will pay which debts. Even when the divorce judgment assigns responsibility for a specific debt to one spouse, the other spouse can still be pursued for payment if the first spouse fails to pay. Many couples choose to close or freeze joint credit accounts to prevent further obligations from accruing. If a lender allows an account to remain open for the existing balance only, no new charges can be made, reducing the risk of an unexpected increase in shared debt.
Conducting an Inventory
Preparing an accurate inventory of all marital and separate property is crucial. This inventory should include bank accounts, real estate, vehicles, business interests, investments, retirement accounts, household furnishings, artwork, jewelry, and any other assets with financial or personal worth. All debts, including mortgages, credit card balances, student loans, and business liabilities, should also be documented. Retaining copies of statements, deeds, benefit summaries, and any other records provides tangible evidence if one spouse later denies the existence of an account or fails to disclose important financial information.
Valuing Complex and Business Assets
Accurate valuation of property can be key to fair asset division. Complex assets—such as family businesses, professional practices, stock portfolios, or specialized retirement accounts—may require an appraiser, forensic accountant, or other expert to determine present or future value. Courts generally rely on objective evidence regarding a business’ worth, including balance sheets, tax returns, or industry-specific valuation methods. Having this information at the ready helps ensure that final property settlements reflect the actual value of all major assets.
Automatic Temporary Orders for Marital Assets
In many jurisdictions, filing for divorce triggers automatic orders that prevent either spouse from transferring, concealing, or damaging marital assets. These orders also may apply to changing beneficiaries on insurance policies or incurring large debts that do not meet genuine living expenses. A violation of these orders can result in court sanctions or unfavorable rulings on property division if a spouse has taken actions that reduce the value of the marital estate or infringe upon the other spouse’s rights.
Discovery and Enforcement During Divorce Proceedings
If one spouse is reluctant to disclose financial information, legal processes allow for compelled production of documents and testimony. Formal discovery methods include written questions answered under oath, demands for documents, and depositions. Courts can enforce compliance by imposing fines, shifting legal fees, or treating certain statements about hidden or undisclosed assets as established facts. Thorough discovery ensures that neither spouse can withhold property or misrepresent debts.
Fiduciary Duties and Potential Liability
While the divorce is ongoing, spouses frequently continue to owe each other numerous obligations regarding the use or preservation of marital property. Major changes, such as substantial purchases, disposing of shared assets, or taking on large debts without the other spouse’s knowledge, can lead to legal and financial liability if those actions diminish the overall marital estate. Courts may impose restitution or modify property distribution to compensate for any misconduct. Keeping clear records of transactions and confirming large expenditures or transfers in writing can prevent misunderstandings or future disputes.
Temporary Support Agreements and Court Orders
When a marital split results in two households, temporary orders for spousal support or child support can help relieve financial stress during the divorce process. Many courts rely on guidelines or formulas, often similar to those applied in final orders, to determine the amount of temporary support. These orders can be modified as more information becomes available or upon a change in circumstances. They serve to maintain a reasonable standard of living for both spouses and any children involved until the court issues a final judgment.
