One of the most frequent questions people have at the outset of a divorce is, “how to I protect myself?” In this episode Kevin and Pat give you their top 12 practical tips to protect yourself financially and personally at the outset of the divorce process.

Episode 5 Transcript:

Kevin: I’m Kevin Handy.

Pat: And I’m Pat Cooley.

Kevin: And this is episode five of the Divorce Rulebook podcast. The top twelve ways to protect yourself in divorce. When people are going through divorce and when I’m consulting with them, a lot of times one of the first things I hear is, hey, what do I need to do to protect myself? What are your top recommendations? That’s something people bring up in consultations or that they’ll ask me over the phone. I’m sure you’ve had that same experience, Pat.

Pat: Absolutely. people are concerned. It’s a new area for them. They’ve not been in the context of a divorce, so they’re not sure, not sure what to do.

Kevin: And it’s important. I mean, there are steps that most people who are going through divorce should take to protect themselves. So Pat and I came up with our list. We’re going to tell you what our top recommendations are and explain to you why each of them is important. So the list now, it doesn’t have anything to do with custody. We’re not covering custody in this. So it’s really a divorce specific list. So financial aspects, legal aspects, how to protect yourself, those sorts of things. So number one, close joint bank and investment accounts. Now Pat, why do you think that’s important?

Pat: Well, it’s important because first of all, you’ve got to fund your divorce. You got to have money to live moving forward. There’s things you’re going to need right away and you don’t want your spouse to lock up the money so that you don’t have access.

Kevin: Yeah, the thing that I immediately think of when people are going through divorce is that someone is going to come in and grab all of the money from the account. And it does happen. Not infrequently absolutely happens.

Pat: I often say to people in the consultation, your spouse could be at the bank right now cleaning out the account.

Kevin: We tell people, don’t go and clean out the account completely, but you should go take maybe 50% of the account and then leave 50% of the account for your spouse. Now that also depends on what you think your spouse might do with the money. So sometimes it makes sense to try and protect the money from being wasted or dissipated.

Pat: Dissipated, right.

Kevin: Yes. So if a spouse is a spend thrift or maybe they use drugs or alcohol or gamble or something like that, then it does make sense to take the entire balance. So there’s definitely been occasions where I said, hey, go and move all of the money out of this account, close the account and then sit on the money until the divorce is completed.

Pat: That’s right. In those circumstances, I always say, don’t spend all the money. You’re doing this to protect the money. Ultimately, there is a process available in court, special relief, where the court will freeze assets or protect the money. But it takes time to go through court and you don’t want something to happen in the interim. So if you can set it aside and hold on to it, even if ultimately the other side seeks that protection, the money is preserved either way.

Kevin: Yeah. Another thing is sometimes the money in a joint account is actually one person’s money. Maybe it’s from an inheritance or some other windfall. And that incident also makes sense to take the entire balance of the account again to protect it. People probably were wondering, don’t you get in trouble for taking all the money out of the account?

Pat: Well, I mean, it’s your money. The trouble is, what I kind of touched base on is the other side will throw up their arms and run to the judge and say she or he is stealing all the money. That’s why we say don’t spend it, hold it, protect it. And then your response is, I was protecting it and the court will ultimately protect it. But yeah, it’s definitely a place that.

Kevin: Is better to ask for forgiveness than permission.

Pat: Exactly.

Kevin: Because as soon as you get to ask permission, then the other side is going to grab the money themselves.

Pat: Right. And it’s not unlawful to take the money, it’s your money, too. It’s just in the context of the divorce and if it is relatively small amount in comparison to the rest of the estate, just know that if you keep it or you use it, it’s going to be assessed against you. You got it. It’s going to count as a distribution to you.

Kevin: Right? Yeah. Just because we’re telling you to take and protect the money doesn’t mean we’re telling you to spend the money.

Pat: Right, exactly.

Kevin: Although, like you said, the very first thing is you’re going to need money to fund your divorce, to maybe fund new living arrangements, put a down payment on a house or an apartment, those sorts of things. So those are things you want to take the money to have on hand to use it for. All right, let’s move on to number two, closed joint credit accounts. So here we are talking about credit cards, lines of credit.

Pat: So the idea is to protect your spouse from running up the credit card for one, because then there’s a lot of money owed on your name. That affects your borrowing power, your credit. But also then if you can’t pay it, you’re going to be in trouble with credit card company and you’re going to get into a bad credit situation. It’s absolutely one of the first things I recommend to people, which is to close joint credit cards. The other thing I recommend. Particularly to income dependent spouses. The person who’s not the money maker is that they. While still married. Apply for a major credit card MasterCard or Visa while they can still kind of run on their spouse’s credit. And they’ll get a credit card in their own name because if you let the divorce go through and you don’t have a job and you don’t have any money. You might not be able to get a credit card. Which you will need in the future.

Kevin: Yeah. So once you’re separated, if your spouse runs up charges on a joint credit card or perhaps takes money out on a joint line of credit, the court is probably going to assign that debt to the spouse that took out the money or ran up the charges. But the problem you run into is if they can’t pay it, it’s still going to affect your credit. In other words, the court can’t order a credit card company to not collect from both people that are responsible for the debt. So on a joint credit card, the credit card company doesn’t care if the court says that husband is responsible for all the money he took out post separation, they’re still going to come after the other spouse for the money. And then the only option is to go back to court and try and have the court force the spouse that’s responsible to pay it. And that can be expensive and difficult, so it’s better to protect yourself upfront. All right, moving on to number three. Number three is change direct deposit and cancel automatic deductions from bank accounts and credit card accounts. Most people are going to have their paychecks automatically deposited, probably into a joint banking account. That seems to be most common. So if you’re in that position, you probably want to go ahead and contact your payroll company, your HR department, and have your paycheck direct deposited into an individual account. That depends on how well you get along with your spouse and how you’re going to handle paying bills post separation.

Pat: Yeah, the direct deposits post separation are not the best. It doesn’t mean you might not still be sharing some expenses. But if you both open up your own accounts, put your money in your own account, and then if you do have joint expenses that you want to continue to pay, then you can deposit money for those expenses into a joint account.

Kevin: Yeah, a lot of couples will keep a joint account that they’ve used to pay bills open and then each deposit some money in each month. Although I’d say a fair amount of couples just sort of I wouldn’t say maintain the status quo going forward.

Pat: Absolutely. I mean the bills have to be paid and so one thing to be careful of, we talked to you about closing joint bank accounts, but there are often automatic debits from those accounts. So you have to be careful that you’re covering everything and I think we want to talk about that next.

Kevin: Yeah, you want to look at your automatic debits from your joint accounts as well and start to think about those and which ones you should cancel. Again, most people are going to have a joint checking account or savings account that they’re going to have maybe their mortgage taken out of automatically, their rent, maybe their utility bills. And so you really need to sit down and think of how are you and your spouse going to work out those expenses post separation. If you’re moving out of the house and you think, well, I’m not going to be responsible for any of those, then you need to make sure they’re canceled from the joint account or at least stop depositing your money into that account.

Pat: Right. In terms of automatic debits, don’t forget that they also, in addition to taking them out of your bank account, sometimes you’ve set those up on credit cards, for example, easy pass or things like that. So if you’re now separating credit cards, you have to make sure that those direct credit card charges are also taken care of.

Kevin: Yeah. And it also kind of brings to mind sort of things like cell phone bills, your cell phone accounts, you often see people start to cancel those or move their cell phone onto a separate plan so they don’t have to pay for their spouse’s cell phones.

Pat: I’ve seen that with car insurance too. The only caveat thing warning I give people is let the other side know if you’re canceling their cell phone or canceling their car insurance because they’d have to pick it up. So keep that communication open.

Kevin: Yeah. When I’ve handled that in the past, I’ll usually send a letter to I mean usually at that point people represented they’ll send a letter to the other party or the other parties attorney saying, hey, my client is going to be canceling the joint cellphone account. Your client needs to get one within the next 30 or 45 days and then that gives them warning so they’re just not cut off. Same thing with car insurance. Now, one thing you can’t cut off is health insurance and the court is almost always going to order that the parties maintain their current health insurance policies while the divorce is pending for both the spouses and the children, if there are any. The court really frowned upon when a party tries to cancel the health insurance of the other party. And have you seen that before, Pat?

Pat: Oh, absolutely. First of all, as soon as it gets before the court, they’re going to order it reinstated. And second of all, people don’t seem to realize that by doing that, you’re hurting yourself. There’s no guarantee that your spouse will be able to pick up insurance for yourself or for the children. And there’s a familiar legal responsibility to pay. So if you don’t have insurance, now, you’re paying their medical bills, and you don’t want to be doing that, especially in an emergency.

Kevin: Yeah, I’ve seen cases where health insurance was canceled and then the party who was canceled had to go in the hospital, ran up medical bills, and the spouse who canceled it had to pay those medical bills because there wasn’t insurance and it was their fault insurance.

Pat: That’s right. And that’s why we say don’t cancel health insurance.

Kevin: Yeah. In general, the responsibility to carry your spouse on health insurance will end at the divorce. But again, that’s date specific. But in the meantime, just maintain the current policies. Now, if you lose your job or something like that, then that can become an issue. All right, so let’s move on to number four. File for child support or spousal support if needed. So this is something that most people can do on their own. Most courts have some kind of support office now. If you’re going to need money post separation or during the divorce, then you want to go file for support pretty much as soon as you can. Most times it takes several months before support starts coming in, so you want to do that as soon as possible. Do you have anything to add to that, Pat?

Pat: No. That’s right. I mean, keeping in mind, certain jurisdictions will look at whether you’re still living under the same roof or separated. And just as an aside to that and the idea of getting money coming in, sometimes a client or a party to a divorce doesn’t have access to any money. So not only do they need some support coming in for their living expenses, but there is a means that you can get help with. Attorneys fees and expert fees is kind of an advance from the estate. So it is very important to kind of assess your finances and move on those issues. If you need funds, if you need support, or if you need assistance with paying for the cost of hiring attorneys and experts.

Kevin: Yeah, most likely if you need that sort of assistance where you’re going to have to get advances, you’re probably going to have to be talking to a lawyer to file the paperwork because that’s fairly complicated. Okay, number five secure important and valuable personal property. This is one of my favorites just because it generates funny stories. Basically, once a divorce is filed or pending or someone who’s out of the house, basically anything can happen. The other spouse gets really upset sometimes. And one funny story one of our associates had was actually her client who did this, but during the divorce, her client got really mad and took the party’s wedding album out to the grill, doused it in later fluid and let it on fire. So that was the end of that. I mean, you might think, well, I don’t want my wedding album anymore. But your spouse can destroy all kinds of property, photos, furniture, you name it.

Pat: My favorite war story in regards to that was a case where I had one spouse went in and pretty much wiped out everything in the house. Took everything, including like the toilet paper off the walls and the light bulbs out of every socket. But she was coming back the next day to pick up the horses while my client went and got the horses and boy was out of battle.

Kevin: Yes, the stories in the news or whatever, the wife selling the husband’s Ferrari for $10. I’m not sure that happens. But this other sort of stuff happens all the time. And one of the more common things that happen is that someone will show up with them. One of the spouses will show up with a moving truck while the other spouses at work and literally clean out the house. Take all the furniture, all the dishes and everything.

Pat: Yeah, and just a couple of other pointers, because you may not be able to take everything, or depending upon your circumstances, it wouldn’t hurt in preparing to take photographs of each room in the house to kind of get an idea, have a photo picture of what your personal assets are, or create a list or an inventory of what you have.

Kevin: Yeah. So my recommendation, I love the idea of taking pictures. Do that first thing, go around taking pictures of all the rooms, etc. For then you should take anything that’s particularly important to you, antiques, photos to protect them. And then if you’re moving out and you want to take some of the furniture, I always tell my clients, look, take half the stuff. If you take the kitchen table, you’ll leave the dining room table. If you take the living room furniture, leave the family room furniture. Don’t go in and take everything because then you’re going to be facing go into court to return the furniture. Number six, secure and or copy all important papers. When you’re going through a divorce, you are going to need all kinds of financial things like tax returns, bank account statements, credit card statements, et cetera. So one of the things I tell clients before they move out of the house is, look, go and either take all of the important documents, all the financial documents, or photocopy them. And that might also include monitoring the mail for a few weeks or a month or two to make sure you’re capturing your spouse’s account statements, bank account statements, retirement account statements, get copies of those because it’s going to make the discovery process a lot easier. Do you have anything to add to that, pet?

Pat: No, I was just going to say the same thing, not only easier, but less costly. I mean, at least you’ll have a good picture of what the assets are currently. And absolutely. Just to stress that the statements you want to be copying are not only around, but also your spouse’s.

Kevin: Yeah. This mostly is going to be applicable to cases where you think your spouse is going to be hiding money or you don’t know much about their assets or income, et cetera. I’ll see a fair amount of cases where one spouse is really kind of clueless as to what the other spouse has. Now, this would also include copying computer files. I had one client take the other spouse’s computer to a computer expert and literally just download the whole hard drive to preserve it. And it could include, like, breaking into filing cabinets and getting that sort of stuff. Look, if it’s in your house, it’s a marital asset, it’s a marital property. You have the right to access it.

Pat: That’s right. And if you have the good luck to find safe deposit box keys or things like that, you could check to see what’s in those as well.

Kevin: Yeah, so basically, probably want to do a search of the house before you move out. Again, look for important papers. If you have a prenup, make sure you take a copy of the prenup before you leave too.

Pat: Absolutely.

Kevin: We have a funny story about that. Okay. Number seven, change your mailing address. If you’re not moving out of the house and some couples will live together for a while for the entire divorce, you got to get your own mailing address. You do not want your mail going to the house. We’ve had clients where we’re sending them legal papers and their spouse is opening the letters and reading them. So typically, if someone is staying in the house, we say get a post office box. If you’re moving out, change your address with, obviously your lawyer, your financial accounts, et cetera.

Pat: You spend a lot of money on your lawyer creating strategies and coming up with legal theories. And if you leave it lying around, your spouse is going to know what you’re doing and be able to prepare or defend. So it’s really important to get a separate post office box. And even beyond that, keep your legal papers secured separately. We do have a funny story about a man who, at the end of the divorce, re-entered the house and was able to get access to the wife’s attorney’s letters, and it was somewhat damaging to their case. So keep everything secured and either burn it or take it with you when you go.

Kevin: This goes right into our next one. Number eight, change your passwords. It seems pretty obvious, but people forget about it. Your spouse probably has at least some of your passwords, your email account or computer or iPhone or whatever. Think of everything that you have a password to and then start changing them immediately.

Pat: That’s not just financial information, but also things like Facebook and emails and all of that stuff change. Really think about everything.

Kevin: Yeah, exactly. All right. Number nine. Forget what your friends, family and neighbors have told you about divorce. Having done a lot of divorce consultations, clients come in and say, hey, I heard this about divorce. I heard that I’m not going to get my kids or I’m going to get the assets, or just kind of wild things they’ve heard from either their friends who have gone through divorce or their family who knew someone who went through a divorce. And divorce is very fact specific. So just because your neighbor got ten years of alimony doesn’t mean you’re going to get ten years of alimony. They’re very fact specific. And just because one person got full custody, it doesn’t mean you’re going to get full custody. You need to really kind of clear your head of all your preconceived notions about divorce and listen to whether you go to a divorce lawyer or a mediator, listen to them as to what is going to be a reasonable outcome to the divorce.

Pat: That’s absolutely right. I mean, if you listen to your lawyer, you should be taking the right direction. If you start listening to friends and family, it’ll get confusing. And 100% agree. Every case is unique and fact specific. So even though you might feel deserving of a similar outcome, it’s not just the facts your case, it’s what judge you’re going to get. Who’s the other attorneys. But there are so many things that can happen in a divorce that you got to listen to the experts, the lawyers, the mediators, the person giving you advice, and not all of the outside influences.

Kevin: I’m actually surprised how often people don’t listen to their lawyers. You give people advice and then they listen to their brother in law instead, because people are inclined, they hear what they want to hear and they believe what they want to believe. They’ve got confirmation bias. So when the lawyer tells them something they don’t want to hear, they tend to ignore it and want to believe what their brother in law told them. And that’s a huge mistake. You really need to listen to your lawyer. I can think of one case as associate of ours had a case, and the case went off for a couple of months, and she kept telling her client, like, do this, do that, or here’s the law. And every time she wouldn’t listen, the client eventually our show. She said, Look, I don’t know what you’re paying me for. You just do what you want. Anyway, it’s kind of funny. So anyway, listen to your lawyer. Number ten, protect your credit. And this kind of goes back to what we said earlier about changing automatic debits and canceling joint credit cards and possibly applying for a credit card before you’re divorced. You want to make sure you’ve got as good credit as possible coming under your divorce.

Pat: Yeah. And I always tell people when they’re deciding, hey, what bills should I pay? I mean, clearly pay credit cards in your name first, you know what I mean? Don’t worry about the credit cards or other bills that are in the other spouse’s name. Make sure that bills are paid that your name is on. Those should take priority.

Kevin: One of the things I’ll do when I first meet with a client is actually kind of an assessor financial situation and give them advice on in terms of like, how do you start clearing up bills that are in your name to prepare yourself for post divorce, the post divorce reality of how much money you’re going to have. And I can think of one gentleman I was representing and he came in and he had like, I want to see at three car payments. And I said, look, you’re not going to be able to afford all these. I said, go return these cars to the dealership or get out of these leases or purchase plan, whatever they were. I said, get rid of these cars because you need to start cleaning up your credit. How much you owe to prepare yourself for the divorce. Number eleven, consult with an attorney or a mediator. Do you want to take this one?

Pat: Sure, absolutely. If divorce is in the air, it’s always important to get information. It doesn’t matter even if you’re just thinking about it or just kind of you’d like to know what would happen if you went down that road. So there’s no wrong time to consult an attorney if you’re even contemplating divorce. I’ve had people come in and they never go through with the divorce, but others have gotten information that’s very useful. A lot of the information we’re giving you today is what you’re going to get when you have a consultation. Hopefully the lawyer is going to give you these ideas. So these are definitely things you should approach in a consultation. But knowing your rights and knowing how the process works is just so important in not only going through a divorce, but making a decision as to whether you’re going to park on that journey.

Kevin: Sure, yeah. Good advice. All right. Number twelve, this is sort of one of my favorite ones as well. Don’t sign anything before you’ve consulted with an attorney or have gone through mediation or whatever the process is. Don’t sign any documents that your spouse presents you. We see cases where people come in and they signed a property settlement agreement and essentially foreclosed all of their rights in the divorce.

Pat: Another scary one is when they’ve signed an affidavit of consent, which allows the other side to move the divorce forward quickly and your attorney, you may not have the knowledge of the assets and the documents we need to process the divorce so you can find yourself at the courthouse door without being prepared.

Kevin: Yeah. So there’s all kinds of ways you get yourself in trouble by signing things. It could even be like, hey, we need to refinance the house, and your spouse is actually taking money out, or could be signing a loan document. Your spouse may try to get you to sign all kinds of different things when they know a divorce is pending. So again, just to reiterate, don’t sign anything without either talking to your lawyer or until you’re kind of in the mediation process.

Pat: And that goes for when you’re preparing for a divorce, when the divorce is starting, and throughout the entire process, always consult your lawyer or your mediator before signing.

Kevin: Absolutely. All right, so that’s our top twelve ways to protect yourself during divorce. I’m just going to run the list one more time to recap. Number one, close your joint bank and investment accounts. Number two, close joint credit accounts. Number three, change direct deposit and cancel your automatic deductions from bank accounts and credit card accounts. Number four, file for child support or spousal support if needed. Number five, secure important and valuable personal property. Number six, secure and copy all important papers, including computer files. Number seven, change your mailing address or get a post office box. Number eight, change all of your passwords. Number nine, forget what your friends, family, and neighbors have told you about divorce. Number ten, protect your credit. Number eleven, consult with an attorney or mediator. And number twelve, don’t sign anything. Anything else to add?

Pat: Pat just a final caution. As you’re doing these things, do your best to do it in as peaceful and amicable a fashion as you can. And you’ve heard us say, don’t take it all, take half. Because the judge will look at how you’ve behaved in the divorce and it could impact the judge’s decision.

Kevin: And frankly, keeping on good terms with your spouse is going to go a long way towards helping you resolve your case.

Pat: Amicably difficulty is protecting yourself and doing just that.

Kevin: Right, always the challenge. All right, that’s it for this podcast. I’m Kevin.

Pat: And I’m Pat.

Kevin: Thank you for listening to this episode of the Divorce Rulebook podcast.