In a divorce or separation you will have to divide your finances. The first step in dividing your finances is making sure you know exactly what you own and owe, both as an individual and as a couple.
- Collect Copies of Important Papers ( (Tab 1) below)
- Make a List of what You own and what You owe ( (Tab 2) below)
- Deal with Joint Bank Accounts ( (Tab 3) below)
- Decide upon Joint Credit Cards ( (Tab 4) below)
LAST BUT NOT LEAST
Review Your Budget
…so you can handle changes to your expenses.
Write down the names of financial institutions and account numbers for your chequing and savings accounts, credit cards, loans, insurance and investments. Make sure you have copies of important financial information, such as:
o Current statements for loans.
o Recent pay stubs.
o Your tax returns for the past three years.
o Bills and receipts for expenses related to your family.
o Investment statements.
Making a list will help you decide how to divide your property. Make a list of what you own (your assets) as a couple and as an individual. Your assets may include:
o Joint or separate bank accounts
o Life endowment policy.
o Life insurance policy.
o Health insurance policy.
o Private / Occupational Pension Plans.
o Your home.
o Antique furniture.
Make sure you know what everything is worth now. Consider what it’s likely to be worth in the future. A financial advisor may help you figure out the future worth of some of your investments.
Make a list of what you owe (your debts) and how much you owe as a couple and as an individual. Your debts may include:
o A line of credit.
o A personal loan.
o A credit card debt.
o A mortgage.
o A car loan.
o A student loan.
o A business loan.
Note that any borrower listed on your loan agreement is responsible for the full amount of the loan. Make sure that you ask an accountant and a lawyer for help when you separate or divorce. They will help you understand the financial and tax implications of separation and divorce.
You should decide right away what to do about any joint accounts or debts you share with your partner. This includes any bank accounts, lines of credit, credit cards and other loans.
If you do not close joint accounts, both of you will continue to:
o Have access to the money in the account.
o Be legally responsible for repaying any debts.
This is the case even if your separation agreement says only one person is responsible for debts or can access the funds in the account.
You and your former spouse / partner may decide to keep a joint account open for a period of time. For example, your mortgage payments could continue to come out of a joint account.
It’s a good idea to get advice from a lawyer if you decide to keep your joint account open. You may choose to make a formal agreement about what money each person needs to deposit each month, and what bills you’ll pay from the joint account.
Work with your bank if you decide to change the way you manage the joint account. For example, you may make it a requirement that both you and your ex-spouse/ partner must approve withdrawals from the account.
You may have signed a form to say you do not want to receive information from your bank about your joint account. Now that your marital situation has changed, ask your bank to start sending you bank statements and all other information about your joint account.
If your former spouse or partner is an authorized user on your credit card, remove them from the account. If you don’t remove them as an authorized user, they will still have access to the account and you will be responsible for any money owing on the account.
If you are a co-borrower on a credit card with your former spouse or partner, cancel the account. As a co-borrower, you both have access to the credit card account and are equally responsible for any money owing on the account.
Update Your Will
Review and update who you’ve named as beneficiaries in your will. If you don’t remove your former partner as a beneficiary, he or she can get benefits even though you’re no longer together. In some cases, you may need to get your former partner’s consent to remove his or her name as a beneficiary.
Review Your Budget
Your finances are likely to change when you separate or get divorced.
o You no longer share household expenses with your partner.
o If both of you worked you will no longer have two salaries.
o You may have to make support payments.
o You may have extra expenses related to setting up your home for your children.
o You may have legal costs.