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How to Protect Your Money During Divorce: 8 Strategies You Can Use

How to protect your money in a divorce

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Nobody plans to be divorced in the future. When we get married, we have the best of intentions, excited about the prospect of spending the years ahead with the love of our lives. But life happens, and sometimes it can get the best of us, which can ultimately lead to a parting of ways with those we made promises to spend the rest of our lives with.

In fact, divorce is so prevalent that nearly 50% of couples who marry end up in divorce at some point.

It’s amazing how a relationship between two people can turn so sour, but it happens. The sad thing is that such relationships can go from looking out for each other to making every effort to hurt one another, and many times our pocketbooks are the target of such attacks.

No matter how much money you have, it’s important to protect every morsel of it in the event of a divorce. If your marriage takes a turn for the worse you need to take steps to protect your finances from your soon-to-be-ex.

If you are wondering how to protect your money during the divorce, here are a few ways to help you do just that.

Read more: Marriage and Finances: How to Beat the Odds

1. Hire the Right People

You’re obviously going to need a lawyer if you’re going to battle it out in court throughout a divorce, but when it comes to your money, you’ll also need a seasoned financial advisor in your corner.

Having a professional like this on your side will prove to be even more helpful if your spouse handled the household finances. Divorce proceedings can be emotionally-charged, so it’s helpful to have someone to speak for you when it comes to your finances. A financial advisor can provide level-headed advice that will help protect your money during and after the divorce.

2. Clearly Identify and Document Your Assets

Before your ex has a chance to claim a stake in certain assets that are technically yours, make sure that you’ve taken the time to itemize these belongings and document them accordingly. Before you can truly fight for your things, you need to find out exactly how much money you actually have, whether in liquid form or in the form of assets.

Clarify the things that are in your name versus what belongs to your spouse, as well as things you may own together, such as property, mortgages, investments, bank accounts, and others. Along with such a list should be statements that outline the exact value of such assets and proof of ownership. A judge is going to want to see careful documentation of what belongs to who rather than trying to sift through a he-said-she-said type of scenario.

While you’re at it, get familiar with a qualified domestic relations order (QDRO), which is a judicial order in the US that’s involved in the division of property in a divorce. More specifically, this order deals with the division of retirement plans or pension plans. You’ll need to know what will be allowed in the split of these plans before dividing up other assets.

Just make sure the QDRO is approved by your retirement or pension plan, so contact the plan administrator early on in the process to ensure that the splitting of these assets is in line with the rules of the plan.

3. Get Everything in Writing

Copies of your financial statements will come in really handy in court, so be sure to go into the fight armed with as much documentation as you possibly can regarding your finances. This includes things like your tax forms, bank account statements, investment statements from your broker, and any other relevant financial statements that you may have at your disposal.

4. Understand the Laws in Your State and Municipality

The laws surrounding divorce are different in every state, so you will want to get familiar with the laws where you live. For instance, California is a state with community property laws, which means it’s possible for you to lose half of anything that you own jointly when you get a divorce.

In this state, any marital assets and debts that were accumulated by either spouse throughout the marriage will be split 50/50. It’s important for you to take that into account when you file for divorce, as you could be stuck with less than what you contributed if your spouse earns a much lower income.

Puzzle of 100 dollar bill partly separated.
Dividing marital assets will be a lot easier if you take inventory of exactly what you brought to the marriage.

On the other hand, any separate assets that are only in your name or were acquired before the marriage are not be subject to this law. Learning how to protect your money in a divorce is a highly detailed and involved process, but it’s necessary if your goal is to ensure a satisfying outcome when all is said and done.

5. Move Liquid Cash Into Your Own Account

It’s pretty common for spouses to open up joint accounts after they get married and use the funds from that account to pay their bills. But with impending divorce on the horizon, you don’t want to risk getting stuck with no money to get by as a result of a scorned ex taking control of money that you’ve contributed to the account.

Do yourself a favor and set up an account in your name only and move some of those liquid assets over. This is an important lesson when it comes to learning how to protect your money during the divorce. Make sure the funds you withdraw are enough to cover bills that you’re still responsible for paying.

If not, you could inevitably have to fight in court to get your money back. That’s a time-consuming and pricey endeavor, so your best bet is to be proactive with your account funds before having to take this lengthy and expensive route.

6. Consider How Much You Need

Divorce lawyers will typically consult with their clients to determine exactly how much money is needed to continue living a certain lifestyle. They’ll do their best to look out for their clients’ best interests and attempt to reach an agreement as easily and quickly as possible. In order to do that, you’ll need to determine exactly what you think you need to maintain your lifestyle or at the least, the amount of money needed just to pay your bills.

Without carefully examining your long-term needs, you could be signing off on a settlement that might not work for you.

7. Consider Splitting a Retirement or Pension Plan

If you don’t own the pension or retirement plan that you share with your spouse, you could be stuck with nothing at the end of the settlement. Instead, you can split the assets down the middle and establish your own separate accounts to maintain some level of control.

The last thing you want is to be tied to your ex who might have completely different plans. For instance, if your ex wants to remain in the workforce a lot longer than you do, you could be stuck waiting around for him or her to retire before you can tap into any benefits.

8. Make Necessary Changes to Your Beneficiaries

Any wills that you may have put into place while you were married should be reviewed. The same is true of retirement funds. If your ex is named as a beneficiary he/she may receive benefits that you want to go to someone else.

Final Thoughts

When it comes to divorce, money always tends to be front and center of disputes between spouses and is often a sore spot that can complicate and delay divorce proceeding resolutions. If you are wondering how to protect your money in a divorce, the best advice is to take a proactive approach to your finances.  Planning and taking action early can help protect your assets and allow the divorce to be settled sooner rather than later so everyone involved can move on with their lives.


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