Steps to Prevent Potential Divorce Issues - III

Today's post will conclude the previous discussion of steps that separating Colorado couples can take to minimize their exposure to potential divorce-related issues. As previously stated, careful consideration and thoughtful actions can help former spouses avoid major financial pitfalls and help ensure that the proper asset protection mechanisms are in place.

(Please see "Steps to Prevent Potential Divorce Issues - I" and "Steps to Prevent Potential Divorce Issues - II"  for more information.)

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7. Create a Budget

Whether you were the primary wage earner in your family or stayed home to raise the children, you should strongly consider creating a budget that reflects your post-divorce economic realities.

By taking the time to examine your various financial wants, needs and responsibilities, you will gain a greater understanding of what sacrifices need to be made or what steps need to be taken.

For example, if you were accustomed to certain luxuries in life, budgeting may help you realize that you will need to cut back on your spending or secure a better job. Similarly, if you are ordered to make child support or spousal support payments, budgeting may help you learn that you need to forgo otherwise customary expenditures or make certain financial adjustments.

8. Protect your retirement accounts

If you anticipate that your retirement accounts will be divided as part of a property settlement, you will more than likely want to consider creating a qualified domestic relations order (QDRO).

A QDRO is standard, semi-complex language that is typically included in final divorce papers. It has two distinct benefits:

• It establishes the legal right of a former spouse to receive either 1.) a set amount of payments from a retirement plan or 2.) a certain percentage of the balance of a retirement account.

• It enables a former spouse to withdraw their share of a retirement plan and deposit it (aka "roll it over") into a tax-free individual retirement account (IRA) sans tax consequences.

Failure to have a QDRO as part of your final divorce papers can result in serious tax penalties. A legal professional can help ensure that this essential asset protection mechanism is in place.

9. Safeguard Your Interests in Real Property

If possible, you may consider taking steps to ensure that your name is listed on all titles to real property.

Why?

Simply put, it can help ensure that you receive your fair share of the real property in the event of a divorce.

This post is provided for informational purposes only and is not to be construed as legal advice.

Stay tuned for more from our Denver divorce blog ...

Related Resources:
  
• 10 Ways to Avoid Divorce Disaster (Bankrate.com)