Divorce causes not only emotional turmoil but places financial strain on parties that they are often not prepared for. Divorce is also a costly endeavor and parties may make financial mistakes that end up costing them more in the long run.

The commencement of a divorce action triggers what is known as “automatic orders”. The purpose of the automatic orders is to preserve the marital estate and to avoid disposing of assets during the pendency of a divorce action.

With these “automatic orders” as our guiding posts in divorce litigation, I have outlined below four (4) key money mistakes not to make in your divorce action.

1. Do Not Dispose of Property
The automatic orders prohibit individuals from disposing of property, whether held individually or in joint names, in any manner absent agreement of both parties in writing. While this may sound simple enough, property is an all-encompassing term. The term property, includes, but is not limited to, real estate, personal property, stocks, bank accounts, mutual funds, boats and cars.

However, there is an exception to this rule. Parties may “dispose” of property if it is being done in the usual course of business, if you are simply paying for household expenses or if you need to pay for attorney’s fees in connection with your pending divorce action. The exception to the general rule that you are not to dispose of property has a number of gray areas. Thus, it is best to consult with legal counsel if you are considering of disposing of any property.

2. Do Not Touch Retirement Funds
A divorce action has the potential to cause financial strain on parties. Individuals may wish to dip into their retirement funds as a way to ease this financial strain. Aside from the penalties and tax consequences that may occur, the automatic orders prohibit parties from encumbering, assigning, withdrawing, transferring or disposing of retirement funds in any manner.

3. Do Not Incur Debt in Joint Names
Once the divorce action is commenced, parties should not incur any unreasonable debts. Specifically, parties should not be taking a line of credit against the martial residence or further encumbering assets in any manner. Moreover, parties should not incur unnecessary credit card debt.

As with disposing of property, there is a general exception that parties may incur debt in the normal course of business, for usual or customary household expenses or to pay reasonable attorney’s fees in connection with their pending divorce action.

4. Do Not Change any Insurance Benefits
This rule is straightforward. Do not change any insurance benefits. This includes life insurance, health insurance, dental insurance, car insurance, homeowners insurance or any other insurance policies that were in place prior to the commencement of the divorce action. One thing parties often attempt to change is their life insurance beneficiary. However, this is a violation of the automatic orders and is prohibited. Additionally, if you carried your spouse on your health insurance benefits prior to the commencement of the divorce action you are required to maintain that policy.

Violating the automatic orders may result in a contempt application being made by your spouse, causing you to incur legal fees that could have and should have been avoided. As such, it is imperative you consult with an experienced attorney regarding the automatic orders and your compliance with them.

The material in this blog is meant only to provide general information and is not a substitute nor is it legal advice to you. If you have specific questions regarding this article or general questions regarding your divorce, Hanna Kirkpatrick may be reached at 516-393-8259 or by e-mail at hkirkpatrick@jaspanllp.com.