This article was written by [company] associate attorney Beverly Ward Via.
A few weeks ago, I ran across a Washington Post article covering a study showing that women are now more likely to get divorced. The article notes, “For most of Western history, marriage had little equality. Wives bore the brunt of child care and housework depended on their husbands for financial support and enjoyed little social autonomy while men openly had affairs.”
That, of course, has changed — women now have the financial independence that they haven’t had in previous generations, and can therefore conceive of life after divorce in which they can support themselves.
The study points to the idea that women, not being as financially reliant on husbands as they once were, may now evaluate their marriages more incisively, and if they’re not happy, they’re more likely to leave.
I work with both male and female clients to help them reach divorce settlements with their spouses, but as I read this article, I couldn’t help but think about the women I’ve worked within the past. Some women come into a divorce fully prepared – knowing where they stand financially, knowing what assets and debts they hold jointly and individually, and knowing what they want out of a settlement. Other women are completely in the dark as to their finances – either by choice, because they are not interested or they feel less qualified, or by default, because their spouses have always managed the money.
In some marriages, handling family finances is a power play. Some men (and occasionally women) manage the finances with the specific intent to keep their spouses in the dark. Surprisingly, when it comes to family finances many otherwise progressive couples fall into very traditional roles. This arrangement leaves the women in those marriages with far less understanding of where they stand financially when compared to couples who handle finances together. I certainly advise any woman who is thinking about divorce to get a handle on her financial situation before filing a petition for divorce.
The first thing you should do when planning for divorce, regardless of gender, is to gather as much information as you can so that you have a clear (or better) understanding of the family finances. If possible, identify all assets and debts held by you and your spouse; for each asset or debt, confirm whether it is held jointly by both spouses or in the name of one spouse individually and when the asset or debt was acquired. If you owned property or had debts before marriage, gather documents that prove your ownership before marriage. I recommend making copies of all relevant documents and keeping them in a safe place, probably away from your home. The essential documents needed include:
Tax returns – Your federal income tax returns can be a great roadmap as to assets owned by you and your spouse and are essential for proving income in order to determine spousal maintenance, contractual alimony, and/or child support. Depending on the length of your marriage and the nature of property owned, locate and copy at least the past five (5) years of federal income tax returns filed by both spouses.
Credit report – Not only does a credit report give you a sense of what debt you currently have individually, but it also allows you to determine which debt is shared jointly with your spouse. Your spouse may have incurred debt without your knowledge for which you could be held responsible. Your credit score also helps you gauge the likelihood of being able to borrow money – and under what terms – should the need arise. You can request your own credit report each year free of charge.
Credit card statements – Again, the credit card statements will help you identify the total amount of debt held by you and your spouse and provide clues as to spend.
Bank statements – You should be able to access your personal accounts and jointly-held accounts with your spouse easily enough. While the balances are vital to figuring out the value of the marital estate, the individual transactions on your statements can also clue you into spending habits. Since divorcing couples go from maintaining a single household to two separate households, most couples have to be more budget-conscious regardless of the settlement.
Mortgage statements – The equity you have in a house, as well as what you still owe the bank, will be key components in a fair divorce settlement, particularly if the marital residence will be transferred to one spouse rather than sold.
IRAs and other retirement account statements –– When valuing each spouse’s assets, retirement accounts do figure into the equation. While it is typically better to leave retirement dollars in retirement accounts if, at all possible, you can make a one-time withdrawal from a retirement account if authorized by a divorce decree. If those retirement dollars are rolled into an IRA, you shouldn’t owe taxes or penalties. However, if you withdraw cash from a retirement account as authorized by a divorce decree, you can do so without paying the 10 percent penalty, but you will have to pay taxes on the money as ordinary income.
It’s important for women to know where they stand financially going into a divorce, even if and especially if they’re not sure they can initially sustain themselves financially. If a woman seeking divorce hasn’t worked or has worked less than her husband, the court may award spousal maintenance in addition to child support (or just spousal maintenance if they don’t have children) or the parties may agree to some form of contractual alimony – but Texas courts typically won’t make a husband pay spousal maintenance forever. Women who know what they have, as well as what they’ll be able to earn post-divorce, can better plan for not only their immediate futures but their long-term futures as well.