Divorce Finance 101
First things first. Protect and defend your cash flow and credit rating. Close existing joint credit-card accounts. Consider freezing accounts or getting a credit- monitoring service.
Gather documents ASAP.
Start with your tax returns for the past five years. Then move on to bank, income, retirement-fund and investment statements for the past three years.
Until debt do us part.
“Credit card companies don’t care who authorized the charges,” says PlumTree Financial Planning’s Beth D’Andrea. “You own that debt together.” Mortgages, car payments, student loans—all of the debt acquired during the marriage needs to be taken into account.
50-50 isn’t always 50-50.
Agreeing on a 50-50 or 60-40 split is too general. “Which assets do you want 40 percent of?” poses West Chester-based financial analyst Christine Palmer Hennigan. “Will those assets appreciate or depreciate? Will you owe taxes on them, and if so, when and how much?” Clients’ attorneys need to know exactly what to negotiate for during the settlement process.
Money talks—and walks.
Hiding assets is so prevalent that attorney Greg LaMonaca created a forensic support team in his legal office. “We follow the money trail,” he says.
Retirement funds for stay-at-home moms.
In our area, many moms don’t work, which means they don’t have 401(k)s or their own retirement accounts. Retirement funds are marital assets and are usually divided, providing a nest egg for the nonworking spouse. And don’t forget about life insurance. “It’s not enoughto be the beneficiary on your former spouse’s life insurance plan because the beneficiary can be changed at any time,” says D’Andrea. “You want to own the policy outright.”
Health insurance, car insurance.
Having health insurance is now the law—and it can be expensive. Who will pay for it? And what about car insurance? Factor all of that into the divorce settlement.