Some of the steps that can protect your finances during divorce can happen years earlier, while other actions usually take place around the time of the separation. It is best to talk with North Carolina family law attorneys before taking these steps because a misstep can alter the distribution of assets and debts if the judge interprets your actions in a negative light.
You are not allowed to illegally hide assets from your spouse. Still, there are ways of protecting your finances during divorce. Here are some important tips for North Carolina residents.
Prenuptial Agreements
If drafted and executed correctly, a prenuptial agreement can specify the terms of how the assets and debts of both spouses will get divided in the event that the couple divorces. A prenuptial agreement gets signed before the couple gets married.
It is possible to enter into a similar arrangement during the marriage, but this document is a postnuptial agreement. Postnuptial agreements can be legally binding and enforceable if found valid. Neither prenuptial nor postnuptial agreements can cover child custody arrangements.
The Date of Separation Controls
The court will look to the date that you and your spouse separated when evaluating how to divide your assets and debts. Some people think that the date that the judge grants the divorce controls, but the value of the marital estate is usually calculated from the value of the debts and assets as of the date of separation.
If one spouse, for example, runs up credit card bills or squanders money from the savings accounts, the judge might view that spouse as having already received part of their portion of the assets or assign their post-separation debts entirely to that spouse. In other words, the other spouse might receive more than half of the remaining assets or have to pay less than half of the debts that remain on the date of the divorce.
How to Minimize Future Financial Fallout from Divorce
Few people get through a divorce without a negative impact on their credit score, but there are some ways to minimize the harm to your finances. It is best to work with your spouse on these steps.
- If you did not have a prenuptial agreement, you might want to enter into a postnuptial agreement.
- An amicable divorce can be far less expensive than a bitter, contested divorce, which leaves more money to rebuild your life after divorce.
- You might reach a settlement that sets aside all the assets and debts to each spouse and avoids problems. For example, you might decide to pay off the debts and close credit card accounts.
- Your settlement agreement can include a provision that each party will open their own bank accounts and credit cards to start building individual credit. The written agreement should stipulate who will own each account after the divorce.
If you own a jointly titled home with a mortgage, your agreement can specify that the spouse who will receive the house will refinance the mortgage in their own name within a certain number of days after the divorce, at which time the other spouse will sign a quit claim deed giving up their marital interest in the property.
Also, you will want to be mindful of the tax implications of various actions regarding assets and debts. Depending on the facts of your situation, there might be additional steps you should consider taking to protect your finances when contemplating or going through a divorce. North Carolina family law attorneys can provide the guidance you need. Reach out to us today, we gladly offer a free consultation.