When a couple files for divorce, they both have some immediate financial needs they must work out. Their income has been supporting one household and they must figure out how that income will support two households. Even if one of those households becomes a small apartment that one spouse moves into, it still increases the couple’s expenses.
California Temporary Restraining Orders
When a petition for divorce is filed in California, automatic temporary restraining orders (ASTROS) are issued. These orders prohibit either spouse from making changes to the family’s financial situation, such as closing bank accounts. Neither party can move money for any reason other than paying for the necessities of life, such as mortgage, rent, and food.
This requires for the couple to make some financial decisions. They each need to prepare realistic budgets so they can determine how to meet their new expenses and continue to pay for the old expenses.
Collaborative Divorce Provides the Couple the Help they Need to Make Financial Decisions
The spouses need to sit down together and review the bank statement. They need to look at all the sources of income, identify all the reserves, like retirement accounts. They then need to look at all their expenses. When all this information is considered, they can then make individual budgets for meeting the immediate life expenses.
This is not easy for a divorcing couple to do. One benefit of a Collaborative Divorce is that a neutral financial professional is part of the team. The financial professional can sit down with the couple and guide them through the decision-making process.
The financial professional will look at the big picture. For example, there may be tax consequences of taking money out of a retirement account early.
The couple may have equity in their home they can tap into, or perhaps they have already been approved for a line of credit based on that equity, that they can use to cover their immediate financial needs.
Credit cards should only be used as a last resort and only if the balance can be paid by the end of the month.
The financial professional will give input, suggestions and guidance, but ultimately, it is for the couple themselves to make the decision of how to handle their immediate financial needs.
Heberger & Company Can Help
For more information about how a neutral financial professional can help you with determining your immediate financial needs when divorcing, contact us at Heberger & Company An Accountancy Corporation.
This article was originally posted on the Collaborative Divorce California’s website.
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Rebuilding Your Finances After a Divorce
Going through a divorce can play havoc with your finances. Generally, the same amount of money that supported one household must now be divided to support two of them. This often means, at least for a time, each individual's net worth and household income will be reduced. If a couple can work together in a Collaborative Divorce process, you can establish new financial goals and create a … [Read More...]
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