The Keep - Your - Cash Divorce

Don’t risk losing your hard-earned money, your retirement account and your home. Here’s our in-depth guide to ditching your husband without forfeiting your finances.

By Jean Chatzky
Photograph: illustrated by Mark Matcho

Divorces are resolved very differently today than they were in the past, when women were treated like stereotypical 1950s housewives and were often awarded alimony and full custody of the children. In 2011 there’s a greater chance that the wife is the spouse with more money in the bank, a substantial retirement account and the bigger salary, and judges will treat her accordingly. In other words, when it comes to divorce, equality has its drawbacks. “These days there’s not a presumption that Mom gets the kids,” says Lois J. Liberman, a partner in the matrimonial department at Blank Rome, LLP (full disclosure: She represented me in my divorce). “And you may have to pay your husband alimony or maintenance.” This often comes as a surprise, perhaps because women still work harder to earn every dollar while continuing to handle a majority of the child- and home-related challenges. “Women are much more outraged when they have to pay support,” says Liberman. “We take the news worse than men do.”
Remember, a marriage is a business deal, and unwinding it to your advantage means putting aside anger and maneuvering into the best possible financial position. That strategy, never easy, has been made even more difficult by the recession. But if you follow these guidelines, you should come out on the other side with your savings—and sanity—intact.

New divorce rule: Protect Your Interests Before You File

If you’re preparing to ask your spouse for a divorce, some financial planners
recommend opening an individual account in a bank where you and your husband have never done business. Check with your lawyer first, then set aside enough money to pay your legal fees and keep yourself going for several months. Savings of this kind give many women some psychological relief, says Lili A. Vasileff, president of the Association of Divorce Financial
Planners, in Greenwich, Connecticut. It’s a risky step, however, because when you reveal the existence of your new account during the divorce process (which you are legally required to do), you may appear untrustworthy. So your attorney could tell you to return the money to the original account at this point.

Or you could instead ask your lawyer to immediately freeze all joint accounts once you file, says Michelle Smith, a divorce financial planner in New York City. After the freeze, you and your spouse would each open a new, separate account, funded with an agreed-upon amount taken from the joint account (essentially an advance on what will eventually be the distribution of assets). If the divorce is not acrimonious, skip the freeze and ask for duplicate statements or online access so you can both monitor the accounts.

New divorce rule: Once You’ve Filed, Assemble a Team

A marriage involves finances, investments, tax planning and insurance, so for your divorce, you’ll need experts who can advise you on each of these topics. In addition to a divorce lawyer, look for a fee-only financial adviser skilled in investments, taxes and the divorce process. And if you have valuable art or a small business, you may need an appraiser who has specific
experience with marital dissolution.

If you suspect that your husband has been hiding money from you, says Vasileff, you may want to hire either a forensic accountant, who is a CPA trained to locate hidden funds, or a financial planner with divorce credentials. But keep in mind that despite rampant paranoia, hidden assets are not the norm: A study by the accounting firm Grant Thornton determined that in 2007, hidden funds existed in just 20 percent of divorce cases. Plus, paying someone to look for secret funds is not cheap. Costs start at about $10,000 and can rise into the hundreds of thousands if the investigator has to dig into privately owned businesses or hunt for money sequestered abroad. “Depending on the marital estate, when you’re looking for millions, it’s worth it. For $25,000, not so much,” Vasileff says.

New divorce rule: Consider the Value of Your Assets After Taxes

First Published March 8, 2011

What’s your reaction?

Comments

Nancy Liebman05.17.2011

Part of having a successful divorce is understanding what you will need to live on going forward. Establishing a realistic budget will help you determine what assets are most important to keep. You need to be realistic about the future but you should have a financial plan that will guide your discussions with your attorney, mediator etc.
My website http://www.getyourfairshare.us provides numerous resources including a budget excel spreadsheet for you to complete.

Jeffrey Landers03.26.2011

When going through a divorce (or thinking about it) you should immediately start gathering all of your financial records. Having all the information together and organized will save you time and money. My company, Bedrock Divorce Advisors, created a Divorce Financial Checklist (you can download it for free at http://www.facebook.com/BedrockDivorce) that will walk you through the key documents that you'll need. Please bear in mind that not everyone will need every document listed. Do not keep these records in your home! Bring copies to your parents, a trusted friend and/or keep them in a safe deposit box that your spouse doesn't know about or have access to.

Phoenix Rector03.23.2011

Marriage is more than a 'business deal'. There is the emotional bank account to take into the equation & attempting to ignore it can be more dangerous than the loss of any finances.
Yes, protect your financial interests, honestly! Don't be a jerk just because the marriage is ending!

Missy 03.19.2011

This article states that, in dividing up stock for divorce purposes, "the ones with the smallest gain would be better to own...those that have lost money could be better still because you could write off the loss." This may be true only if the taxpayor is in a tax bracket that is higher than 50%. For example, assume a taxpayor is in the 25% bracket. If that taxpayor has $1 of capital gain she will pay 25% in tax and keep 75 cents. If the same taxpayor has $1 of loss the deduction would give her only 25 cents ($1 deducted by someone in the 25% bracket saves them 25 cents of tax). Am I missing something?

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