Going through a divorce in Massachusetts is one of the most difficult challenges you’ll likely face. While the emotional toll is significant, protecting your financial well-being is just as critical.
The decisions you make before filing for divorce can profoundly impact your final settlement and future security. By avoiding these common mistakes, you can enter the divorce process with greater clarity and confidence.
1. Spending sprees
Courts scrutinize how you spend money just before filing. You risk being found in contempt of court for transferring large sums or making purchases that are not for reasonable living expenses, such as a new car or investment property.
Avoid moving large amounts of money to friends or family, as these actions violate the automatic financial restraining order (Supplemental Probate and Family Court Rule 411) that takes effect immediately upon filing for divorce.
2. Ignoring credit scores and joint debt
Be cautious about closing joint credit accounts immediately, as this can negatively impact your credit score. If your spouse is accruing new debt, you should consult with your attorney immediately to seek a written agreement or a court order to freeze the available credit or reduce the limit temporarily.
You should also pull your own credit report. Knowing your complete debt picture prevents surprises and allows you to plan for a secure financial future after the divorce is final.
3. Not identifying all digital assets
A significant portion of your net worth may exist in digital accounts that are easy to overlook. You need to identify and secure all digital holdings immediately.
- List all online accounts, including banking and investment platforms.
- Document cryptocurrency holdings and trading accounts.
- Gather account information for loyalty programs, frequent flyer miles or reward points.
Failing to account for these assets means leaving valuable property on the table during the division of marital assets.
4. Relying on an unrealistic budget
Your life after divorce will mean an entirely new budget, and it’s crucial to create this plan as soon as possible. Determine the cost of running two separate households instead of one. Include estimates for new expenses such as separate housing, insurance, and costs like daycare or therapy. Creating a realistic budget helps you clearly define your financial needs during negotiations.
5. Draining retirement funds
Resist the urge to take a loan or make a withdrawal from a 401(k) or IRA. Withdrawing money from these accounts without a strategy often results in penalties and unexpected tax liabilities.
Seeking experienced legal guidance is advisable before touching any retirement savings for legal fees or living expenses. An early withdrawal could cost you far more than you save.
6. The “blind faith” document dump
Massachusetts law requires you to exchange detailed financial disclosures with your spouse. However, never turn over original financial documents without first making copies of everything.
Consulting with your attorney before you share any requested financial paperwork is crucial. Your lawyer should first review your tax returns, bank statements and investment records to ensure accuracy before they are formally disclosed.
7. Changing beneficiaries prematurely
Wait until the divorce is officially finalized before updating your beneficiaries unless you have the written consent of the other party or an express Order of the Court. The automatic financial restraining order in Massachusetts generally forbids you from unilaterally changing beneficiaries on insurance policies or retirement accounts while the divorce is pending.
The financial part of divorce does not need to be a guessing game. A skilled divorce lawyer can be invaluable for protecting your financial well-being and planning for your future.