Changes in Your Marital Status

Changes in Your Marital Status

A change in marital status can result in big changes to your financial situation. While middle age used to be a relatively calm period of life, many people today experience all kinds of life changes while in their 40s and 50s.

They divorce. They remarry. They become parents again after already having raised children. They become stepparents. They worry about whether their kids and stepchildren will get along. Life can be pretty exciting during middle age, and pretty hard on your finances, as well. If you're experiencing—or expect that you will experience—a change in marital status, you'll need to take steps to protect your personal financial situation.

Dealing With the Big D

While death can change marital status in an instant, it is more often divorce or separation that does so during middle age. With about half of all marriages in America ending in divorce, the big D is forcing millions of people to reevaluate their lives, and their financial situations.

Getting divorced is rarely a simple matter, emotionally. Many people see divorce as a symbol of betrayal of trust, broken promises, or failure. It causes hurt and anxiety. If children are involved, you'll need to deal with their feelings concerning the divorce, as well as your own.

If you're facing an unwelcome divorce, keep in mind that there are many support groups and other help available.

Divorce and Your Finances

While divorce can wreak emotional havoc, it also can be extremely hard on your financial situation. If you're looking at a divorce, it's extremely important to pay close attention to financial issues and make sure that you get what you're entitled to. Many people have been forced to dramatically alter their lifestyles after divorce due to financial considerations.

Basically, the legal steps of divorce, and actions you should take at each step, are as follows:

• Decision to divorce. When the decision is made to divorce, you should consult a lawyer, or begin some legal research on your own. You'll need to learn about your state's laws in regard to issues such as child custody and support, alimony payment, debts incurred after separation, valuation of marital property, and so forth. Any joint bank accounts should be frozen or closed at this time, and you should organize all financial papers and documents.

• The couple physically separates. Although this doesn't always happen, normally either the husband or wife leaves the household and takes up residence elsewhere. Obviously, this can cause financial problems. If you're still paying a mortgage and keeping up with the expenses of a home, finding cash to rent an apartment or other type of dwelling can be difficult.
  
  Each person should document all debts incurred, including moving expenses. Money spent on improvements or repairs to the marital home should be noted. Keep track of any joint bills you pay, and make sure that you have adequate insurance policies for the current living arrangement. Start thinking about tax issues at this point, deciding whether you'll file jointly or separately.

• Filing for divorce. One spouse files the complaint or petition for divorce, officially beginning the divorce process. The other spouse will need to file an official response to the complaint or petition.

• Requesting temporary court orders. One spouse files a request for temporary court instructions regarding issues such as alimony, child custody and support, and visitation. The request may also ask for one spouse to pay the other's legal fees. All child support and alimony payments should be documented in order to assure that court orders are being followed and for tax purposes.

• Legal discovery. Legal discovery is a series of procedures used to obtain information about your divorce case. It involves financial fact-finding, and identification and consideration of the value of all marital property. Child support and alimony payments to be made once the divorce is final will be set during this period. You should make a list of all assets such as stocks, bank accounts, real estate, automobiles, and so forth. You may need to hire a financial planner or tax advisor who specializes in divorce issues during this stage.

• The settlement. Following the discovery process, legal and financial settlement negotiations will begin. If both parties are in reasonable agreement concerning division of property and other matters, these negotiations can be fairly simple. Lawyers representing each party can conduct these negotiations, as can a mediator that both parties agree to use or an arbitrator with the power to make binding decisions that will be transferred back to the court. An arbitrator normally is used when a couple is not cooperative as to the division of property and other matters. The legal settlement can be long and drawn out, or fairly simple, depending on circumstances and the people involved. Make sure that all legal and financial issues—such as alimony and child support, child custody, and tax implications—are addressed at this time.

• The settlement agreement. This is a formal document that sets forth the terms of the settlement.

• The judgment of divorce. This is the document that finalizes the divorce and ends proceedings. Once the divorce is final, you'll need to make sure that all legal documents, such as deeds and wills, reflect your change in marital status and any changes in ownership. Check all bank records, stock certificates, insurance policies, and so forth.