Many of the most common financial mistakes before divorce occur during the period when a spouse is considering separation but has not yet started the legal process.
By the time someone has an initial consultation with a divorce attorney, financial decisions have sometimes already been made that may affect property division, support discussions, access to important records, and how the judge may view each party in the case.
Some of these decisions are made out of concern about future finances. Others happen because a spouse believes certain actions are necessary before separation. Often these decisions are made in good faith, but sometimes they are not.
One challenge is that choices made during this period often have consequences that are not immediately obvious. While you need to protect yourself and your own rights, there are limits as to what you can do.
Common Financial Mistakes that Often Appear Before Filing
The following issues are not necessarily intentional. In many cases, they result from uncertainty, assumptions, or attempts to prepare for a major life change.
However, these are some of the most common financial concerns that arise during the period leading up to a divorce filing.
Withdrawing Large Amounts From Joint Accounts and Moving Money
One question that frequently comes up during initial consultations is whether a spouse should move money from a joint account before discussing divorce with the other party.
In many situations, the concern is practical. A spouse may worry about losing access to funds needed for housing, bills, or daily expenses. They worry that the other spouse will remove their access to funds if they don’t protect themselves.
A spouse might begin moving money between accounts, several days, weeks or even months before filing. Later, when financial records are reviewed, neither party always remembers the purpose of every transfer. The party that moved the funds may have had good intentions, or maybe not.
Large withdrawals are not automatically improper. However, the timing, amount, and use of those funds often become part of the discussion when marital assets are being evaluated.
In general, spouses should discuss major money decisions before making them. The spouses should discuss moving funds and closing joint accounts before doing so unilaterally. In situations that are strained, it is not uncommon for a spouse to move half and leave half for the other spouse. However, you have to take into consideration the regular expenditures before doing this. Removing funds and allowing a check to bounce or a regular bill to go unpaid is likely to cause problems moving forward.
Making Major Purchases Before Filing
Another issue that appears regularly involves significant purchases made shortly before a divorce is filed.
The Court is going to divide your assets and debts as part of the divorce. If you make a major purchase, you now have one more large asset to figure out how to divide. If you are seriously considering separating, now may not be the best time to purchase a new vehicle or purchase real estate together. Liquid assets, such as bank accounts, are far easier to value and divide than tangible assets.
Taking On New Joint Debt Before the Divorce Process Begins
This often ties in with a new major purchase, such as real estate or a new car. Your divorce decree will divide up your assets and debts. Joint debt is often some of the trickiest debt to divide. Even if divorce decree states that one party is responsible for the debt, this does not change the agreement with the creditor. For joint debt, the creditor can come after either party to collect the debt even if the divorce decree states only one party is responsible for paying the debt. Because of this, the goal in a divorce decree is often to have each party responsible only for the debt in their own name or for the divorce decree to state a specific period of time that a party has to pay off joint debt or refinance the joint debt into only one party’s name.
If your relationship is rocky, this may not be the best time to take out a joint car loan or purchase a home with a joint mortgage. You may find yourself having to sell or refinance to resolve a joint debt in the divorce action.
Waiting Too Long to Gather Financial Records
One of the most expensive parts of a contested divorce case is often the discovery process. The discovery process includes the exchange of important financial records, such as bank statements, tax return information, and pay information. Gathering your financial records before filing can simplify the process.
Many spouses can quickly identify their checking account balance but may have only a general understanding of:
- Retirement accounts
- Investment accounts
- Long-term savings
- Life insurance policies
- Outstanding debts
In some situations, a spouse knows an account exists but does not know its current value. In others, important records are stored electronically and have not been reviewed for years.
While you are still married, you often have legitimate access to financial records of both spouses that you will no longer have once the divorce action is filed. Having a thorough understanding of your assets and debts and gathering your records before filing can substantially decrease the time and costs necessary to complete your divorce case. Even if you are only considering filing for a divorce, it is often best to try to gain a real understanding of your financial picture before you make any major decisions about your life.
Assuming Certain Assets are Off Limits
One common misconception that appears regularly is the belief that an asset automatically belongs to one spouse if only one name appears on the account statement or title.
This is very common with retirement accounts. A spouse might think that they will not receive any share of the other spouse’s retirement account as it is not in their name and they personally made no contributions to it. This is the opposite of the truth. Under Nebraska law, the presumption is that any asset that accrued during the marriage, including retirements account in one party’s name, are part of the marital estate to be divided.
Nebraska divorce law is clear that we are not just looking at titles and names listed on the accounts. The focus is on the assets that accrued during the married, not just whose name is listed. The treatment of an asset as marital, non-marital, or part marital/part non-marital often depends on factors beyond whose name appears on the paperwork.
Relying on Advice from Friends or Online Sources
Many people begin researching divorce long before they speak with an attorney. Learning about the process can help identify questions and provide a starting point for discussion.
However, one situation that appears regularly is a spouse arriving at a consultation convinced that a particular outcome will occur because it happened to a friend or co-worker or because an AI-search suggested it.
After discussing the details, it often becomes clear that the other situation involved differences that are material or that the AI program’s information was wrong in a material way. The specifics of your case determine the outcome: a different history, different financials, a different judge, etc.
You need to be wary of information found online. General information can be helpful, but it may not reflect the specific facts, Nebraska law, or circumstances involved in a particular case.
Further, many AI programs are not programed to just find an answer. AI Sycophancy occurs when AI tries to find what it thinks you want to hear rather than the objective truth. AI Hallucination occurs when the program tries to find a useful-sounding answer and fills in the gap with what sounds plausible when it has no factual basis for the response. Depending on what search terms you give the AI program, you may get a very different legal answer to your question. AI tries to find the answer that you are seeking, not necessarily the true answer to the question.
It is now very common for the attorney to have to explain that what the client found online is not correct information or is not correct as applies to their case.
As a recent real example, a potential client called wanting help with a document that needed to be filed within ten days per the Nebraska Court rules. This was a hard deadline with relief denied permanently if the ten-day deadline was missed. The person looked up online and AI provided information that the ten days is ten business days. This was not true. For this type of filing, it was ten calendar days and thus effectively shorter than the information the person found online. Luckily, the potential client sought legal advice quickly enough and found out in time that the information found online was wrong. However, if the person had relied only on the information online, they would likely have missed the ten-day filing deadline.
Discussing Settlement without Knowing Your Rights
Many people strive for a relatively peaceful or amicable divorce. These do not make the news but many divorces do actually resolve relatively smoothly and quickly. A spouse might think that it is best to try to work it all out on their own before contacting an attorney for help with the paperwork. Although this sounds counterintuitive, this sometimes has disastrous results. If you do not know your finances or do not know your rights, then you should not be trying to negotiate a “fair” settlement. You do not have enough information yet to know what is objectively “fair.” If you reach an agreement and find out later that what you discussed is not really fair to you, you may have a much harder time convincing the other party to reach an agreement as to what is objectively “fair” without the need for a trial.
For an example, we can look back to the earlier remark regarding retirement accounts. If a spouse does not know that the marital value of the retirement accounts is usually considered as part of the marital estate, the spouse could be shortchanging themselves immensely by not asking for a share of it. If their retirement account has little value compared to their spouse’s, they could be shortchanging themselves by tens or even hundreds of thousands of dollars. If the spouse consults an attorney and now asks for their fair share, the other spouse may not be willing to budge when the parties had already had discussions that each keeping their own retirement accounts was what they personally believed to be “fair.” There may even been evidence of written statements, such as texts or e-mails, were they both agreed in writing that it was fair to keep their own accounts. This spouse may have made their case harder to resolve by negotiating a settlement before they had the information to make an educated decision.
First know your finances and your rights. Then you can make educated decisions as to what is fair.
Waiting Until a Financial Problem Becomes Urgent
Another pattern that appears regularly is that spouses delay seeking legal advice until a financial issue has already become a source of serious conflict.
Common examples include:
- Joint bank accounts divided but now bouncing transactions or unpaid bills
- Sale of a home but no agreement as to whether to use proceeds towards joint debts
- A spouse moves out without notice and the remaining spouse can’t make bills on own
- Children need support but no financial assistance provided
Many people spend months thinking about divorce before taking legal action. By the time professional guidance is sought, the discussion may focus on addressing existing problems rather than preventing them. Seeking legal guidance earlier in the process can help identify potential issues and find mutually agreeable solutions before they become more difficult to address.
Why Financial Mistakes Before Divorce Matter
Many of the most significant financial mistakes before divorce occur before any legal documents are filed.
Issues that frequently create complications include:
- Large withdrawals from joint accounts or moving money without agreement
- Major purchases before filing, especially if creates joint debt
- Incomplete financial records
- No plan as to how to each make bills when the parties stop residing together
- False assumptions about asset and debt division
- Reliance on generalized advice
One of the most consistent patterns in divorce cases is that decisions made during the planning stage often have consequences long after the case begins.
If you are considering divorce, speaking with an experienced family law attorney before making significant financial decisions can help you better understand your rights, obligations, and the potential impact those decisions may have on your case.
Law Office of Julie Fowler, PC, LLO
Trusted Family Law Attorney in Omaha, Nebraska
Facing a divorce, child custody dispute, or child support matter in Omaha? You don’t have to navigate family law alone. Whether you need an Omaha divorce attorney, an Omaha child custody attorney, or comprehensive family law representation, our experienced team is here to protect your rights and your family’s future.