Commonly Overlooked Financial Issues in Divorce
Divorce is likely to be one of the most challenging experiences you will ever endure, and it’s important to approach the situation as informed as possible about the obstacles you are likely to encounter. Divorce is more than just terminating your marriage contract; it is also the legal process of assigning individual ownership rights over the property and debt you and your spouse jointly control.
Navigating any divorce can be incredibly difficult, but this is especially true for cases that involve complex financial issues. Do not assume that if you are not wealthy, you will not face significant financial concerns in your divorce proceedings. The following are some of the biggest financial problems that catch divorcing spouses by surprise as their cases unfold.
California enforces a strict community property law that requires divorcing spouses to evenly divide all the marital property they jointly control. State law allows divorcing spouses to retain ownership over certain types of separate property, but all community or marital property must be divided equally. The court requires divorcing spouses to submit financial disclosure statements to ensure this happens. These packets of information include complete financial records, titles, deeds, and other ownership certificates. A divorcing spouse must be prepared to divulge the complete details of all the property and debt they control.
While divorcing spouses may have minimal trouble completing their financial disclosure statements with the help of legal counsel, disputes can arise for various reasons. There could also be discrepancies between the spouses’ respective disclosure statements. If a divorcing spouse tries to hide any assets subject to property division in a California divorce, they can face severe consequences.
If you have any reason to suspect your spouse has lied in their financial disclosure statement, intentionally squandered marital assets to spite you, or engaged in other unethical financial activities that will influence your divorce, you must bring these issues to your attorney’s attention as soon as possible. If the judge handling your case discovers your spouse lied to the court, your spouse faces contempt and possibly further prosecution.
Most adults in California are familiar with property division in divorce, but many overlook the fact that this rule also applies to debt. As a result, many conflicts can arise regarding responsibility for the debt. For example, one spouse may argue that the other shares responsibility for their student loans because they verbally agreed to support them through college, and their education benefitted them during the marriage. It’s also possible for one spouse to run up tremendous credit card debt with the intention of leaving the other spouse holding the bill out of spite.
Your divorce may demand that you prove you are not responsible for certain debts, or you may need to prove that you are not solely responsible for certain debts your spouse contributed to accruing during your marriage. Establishing true legal responsibility for a debt typically hinges on the time the debt was acquired. Though possible, it’s rare for a divorcing spouse to face liability for debts their spouse held before their marriage.
Legal counsel is an invaluable asset regarding the various elements of your financial disclosure statement. For example, if you have reason to believe your spouse has been untruthful in property division proceedings, if you need help establishing separate property ownership rights, or if you don’t know how to prove responsibility for the debt, an experienced attorney is the best resource.
Estate Planning and Conflicting Beneficiary Designations
If you have any type of estate plan in place at the time of your divorce, it’s vital to revisit your plans after finalizing your dissolution proceedings. While you might assume it can wait, life is unpredictable, and it is always best to err on the side of caution when it comes to your estate plan. In addition, if your ex is still listed as a beneficiary on any of your accounts, they would have the right to collect the proceeds should anything happen to you after your divorce.
Estate planning requires careful thought and consistent effort. First, you must periodically review any estate plans you have in place to ensure they continue to accurately reflect your circumstances and wishes. For example, your now ex-spouse could still be listed as a beneficiary for work-related benefits or separately owned insurance policies you possess. You will likely need to manually change these beneficiary designations after divorce, and it’s usually best to do so as soon as possible.
Family Court Order Modification
Finalizing your divorce is likely to feel like the beginning of a new chapter of your life. However, securing your divorce order does not mean you will never interact with your ex again. If the two of you have children together, you must prepare to be part of each other’s lives until your children are old enough to care for themselves. In addition, if you have any long-term financial agreements in your divorce, such as child support or alimony, it’s important to remember the terms of these orders can change over time.
The family court system of California recognizes that life can pose unpredictable challenges, sometimes influencing the terms of a standing family court order. When such incidents occur, the affected party has the right to request reasonable changes to orders that more accurately reflect their new circumstances. For example, losing your job due to a medical issue or some other force beyond your control could impact your ability to pay child support through no fault of your own. Therefore, you could petition the court to reduce your support obligation until you secure new employment. You cannot, however, simply quit your job and claim you cannot afford to pay child support.
Ultimately, there are many financial issues likely to arise in your divorce. At a bare minimum, you must be prepared for a complex financial disclosure process under California’s strict community property statute. It’s natural to have many questions about what you can expect in your divorce, and the right attorney is an invaluable asset in this challenging situation. Contact Bickford Blado & Botros today for more information about the family law services we offer and how we can help you address the financial aspects of your impending divorce.
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