How to Prepare Your Finances Before Filing for Divorce

If you're thinking about filing for divorce, chances are the divorce itself isn't the only thing weighing on you. Money can be a big part of that worry… What do you actually own? What do you owe? Where are the accounts, the passwords, and the paperwork you haven't looked at in years?

Sometimes, not knowing what comes next can make the decisions even harder. The good news is that getting organized can help take some of that uncertainty away. A clear picture of your finances not only makes the process smoother, it also allows you to walk into conversations with an attorney, and eventually with your spouse, with information instead of fear.

You don't need to have everything figured out, this is simply a place to start so you can feel more prepared for the conversations ahead.

Why Financial Preparation Is Important Before You File

Preparing your finances before you file can help you walk into the process feeling more confident. When you have a clear picture of your finances, the decisions you make about property, support, and your future can be based on what you actually know rather than just guessing or panicking when the time comes.

There's also a practical benefit. When you show up to your first meeting with an attorney with your records already gathered, your attorney can spend that time focusing on your situation, your options, and the guidance you need instead of tracking down basic documents. Having everything organized can also help save time and money as the process moves forward.

Step 1: Gather Your Core Financial Records

Start with the documents that give you the fullest picture of your financial life. These can include:

• Tax returns. At least the last three years can be a helpful starting point, although the amount you need can vary depending on your situation. Some cases may require going back further, particularly if your finances are more complex or include a business. Tax returns can also reveal income sources, investments, or property that might otherwise be overlooked.
• Pay stubs and other income documentation. Keep records for yourself and, if you have access to them, gather your spouse’s as well.
• Bank, investment, and retirement account statements. Have statements for both joint and individual accounts.
• Credit card and loan statements. Keep records of debts in either spouse's name, whether they're individual or joint.

Don't worry, you don't need every document that has ever existed. You simply need enough to give an accurate, current snapshot of your financial situation. Your attorney can help identify any specific gaps once you sit down together.

Step 2: Pull Your Credit Report

Your credit report gives you a clear view of joint debt, accounts you may have forgotten about, or anything that needs attention before you move forward.

Every consumer is entitled to a free credit report from each of the three major credit bureaus. You can check yours here through AnnualCreditReport.com, the official site for free credit reports.

When you pull your report, look for:

• Joint accounts you may not check regularly

• Any unfamiliar accounts or activity
• Outstanding balances and who they're associated with

• Errors that could affect your credit going forward

If you have access to financial records showing your spouse's debts or jointly held accounts, those can also help give you a fuller picture of the household's financial situation. But if yours is the only one you have access to, no worries. That's still a meaningful first step.

Step 3: Build a Simple Asset and Debt Inventory

Start a list of the assets and debts you have, and if you can include information about your spouse's accounts and debts as well, that's even better. It doesn't need to be polished, just accurate.

Don't worry about deciding whether something is legally marital or non-marital on your own. Just include the property you know about, including anything you owned before the marriage or received separately. Your attorney can help determine how different assets may be treated under Maryland law.

You can include:

• Bank and investment accounts
• Retirement accounts and pensions accrued during the marriage
• Real estate, including your home, vacation or rental property, and land
• Vehicles
• Business interests, if applicable
• Valuable personal property, such as jewelry, art, or collectibles
• Safe-deposit box contents, including the location of the box and a general description of what is stored there
• All debts, including mortgages, car loans, credit cards, and personal loans

What you're looking for here isn't precision down to the dollar. It's simply a way to start an inventory that your attorney can help you refine, while giving you a clearer idea of what's involved before any decisions have to be made.

Step 4: Understand Your Household Income and Expenses

Knowing what comes in and what goes out each month can give you, and eventually your attorney, a realistic sense of your day-to-day financial situation. This can be especially important when you're creating a budget during the divorce process, and it's often directly relevant to conversations about support.

Depending on your situation, you will likely need to complete a financial statement that provides information about your income, expenses, assets, and debts. The specific financial information you need to provide can depend on your case, so your attorney can help you understand what you'll need and when.

Step 5: Secure Copies of Key Documents

Once you've gathered your records, make both physical and digital copies of the documents you'll want to have available throughout the process. This can include:

• Deeds and property records

• Account statements

• Tax filings

• Insurance policies

• Retirement account statements

Save your digital copies somewhere secure and separate from shared devices or accounts, and keep physical copies somewhere you can access them when you need them. Having more than one way to access your important financial information can be helpful if account access or passwords change later.

Step 6: Consider Whether an Individual Bank Account Makes Sense

Depending on your circumstances, you may want to discuss with your attorney whether having an individual bank account for your own income and everyday expenses makes sense before you file. Having an account in your own name can provide some additional financial stability and make it easier to manage your day-to-day expenses during a transition.

If you're wondering whether this makes sense for your situation, this is a great question to raise early with your attorney.

Step 7: Hold Off on Major Financial Moves Until You Understand the Consequences

It can be tempting to act quickly: close an account, make a large purchase, take on new debt, or move a significant amount of money. But in most cases, it's worth pausing.

Big financial moves made before you understand how they'll be viewed in your specific situation can complicate negotiations or raise questions later, even when there was no bad intention behind them.

A short conversation with an attorney before making any major move can save a lot of headache down the road. Certain kinds of transactions, like unusually large withdrawals or asset transfers close to filing, can sometimes be looked at more closely during the divorce process. That's another reason it's a good idea to talk with an attorney before making major financial moves.

A Note on How Property Division Works and Why It Varies by State

How property and debt are handled during a divorce can depend on whether the property is considered marital or non-marital, as well as other factors specific to your situation. Maryland courts have a process for identifying and valuing marital property, and the court may make a monetary award to adjust the parties' interests in that property.

Maryland also requires parties to complete a Joint Statement of Parties Concerning Marital and Non-Marital Property, which is used in divorce cases to identify property owned by the parties.

Because property division can get complicated, it's important to understand what applies to your situation before making assumptions about what will happen to your home, retirement accounts, business interests, or other assets. Your attorney can help you understand how Maryland's rules apply to your specific circumstances.

What to Do Once You Have Your Finances Organized

Once you have your financial information organized, you'll be in a better position to have a productive first conversation with your attorney. Instead of spending that meeting trying to reconstruct your financial picture from scratch, you can focus on understanding your options, your state's specific rules, and what the process may look like in your situation.

Organizing your finances doesn't mean you've made a decision about what comes next. It simply gives you information you can use when you're ready to make those decisions. Having real numbers and documents in front of you can help you feel more confident and prepared as you move through the process.

Common Questions About Preparing for Divorce

• How far back should my tax returns go?

Gathering at least the last three years can be helpful, although depending on your case, you may need more, particularly if your finances involve a business, significant investments, or other complexity. Your attorney can tell you how far back you’ll need to go for your specific situation.

• What financial documents should I bring to my first consultation?

Bring whatever financial information you already have, such as recent bank and investment statements, tax returns, pay stubs, retirement account statements, information about property, and records of debts. You don't need to have everything perfectly organized before you meet with an attorney. Bringing what you have will give your attorney a better starting point and help them identify anything else you may need to gather.

• Will pulling my credit report affect my credit score?

No. Checking your own credit report through AnnualCreditReport.com is considered a soft inquiry and does not impact your credit score.

• What's the difference between community property and equitable distribution states?

In community property states, marital assets and debts are generally divided evenly between spouses. In equitable distribution states, on the other hand, courts divide property in a way that's considered fair based on the circumstances, which doesn't always mean a 50/50 split.

The framework that applies in your case depends on where you live, and it can significantly affect how your situation plays out. That's why it's an important topic to discuss with your attorney early in the process.

• Do I need to have all of my financial documents ready before I talk to an attorney?

No. You don't need every document gathered or every number finalized before your first consultation. The more information you can bring, the more organized and productive that first conversation can be, but even a partial picture can give your attorney a helpful starting point. Your attorney can then guide you on what else you need to gather.

• Is it legal to hide assets from my spouse during a divorce?

No. Financial disclosure is an important part of the divorce process, and trying to hide assets or financial information can lead to serious consequences. The goal of organizing your financial records is to understand and account for what you have, not to hide anything. If you're unsure about what you need to disclose, your attorney can help you understand what's required in your situation.

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