How to Protect Your Money If Your Marriage Is in Jeopardy
If you're like Melissa, whose husband left her for another woman, you probably think you can win your partner back. You convince yourself that this is just a temporary situation and cling to the hope that everything will work out in time. You go to counseling sessions and hope that everything will return to normal. You delude yourself into thinking that a few months of separation will give your partner time to have the fling and be done with it. Or perhaps, you fall for your partner's tale of financial troubles and don't fight for what's rightfully yours. Empathy will get you nowhere.
Of course, it's not that you're simply naive. This reaction is perfectly natural. You want to believe the person you've spent years of your life living with, side-by-side, day-by-day, wouldn't really want to harm you. Down deep there's a layer of trust that makes you unable to fathom that the marriage is over, or that your partner would deny you and your child or children the support you deserve.
So you do nothing but wait and worry and feel rejected and lousy about yourself and, understandably, angry with your partner. But worst of all, you refuse to deal with the key money issues; you freeze. If you want to become a money-confident woman, get it together.
Once the love is gone, money is the issue, the only issue. It's what will help you live through the upheaval and start over. You must be coldhearted. Maybe that's not attractive, but it's survival at this point.
Here's what you need to do first if your marriage is on the verge of collapsing.
1. Call an Attorney
Even if things are just starting to get rocky, you need to get some advice from an impartial outsider. These are highly emotional times, and a friend's advice just won't cut it now. This is a matrimonial battle and you've got to look out for yourself. That's especially true if you have children.
Just going for a consultation doesn't mean you've set in motion a course that can't be reversed. It just makes good sense to hire someone who can help you evaluate your assets and press for the best possible settlement. You need to know how long the divorce proceedings will take. Each state has its own requirements for length of separation before divorce. How much are you going to need to live on during that time?
Ask your recently divorced friends and colleagues for recommendations. A tax or estate attorney can also provide a referral. You want to be sure the attorney you choose is someone who specializes in matrimonial law. Moreover, avoid using the same attorney your partner uses, or even asking for a referral from an accountant who currently works with both of you. It seems obvious, but often, especially when a divorce isn't a bitter one, couples opt to save money by having one lawyer do it all. Forget that. You want someone looking out for your best interests, not someone whose job is to make sure the divorce is pushed through smoothly and cheaply.
Use your lawyer's time wisely. When you are paying anywhere from $200 to $600 an hour for legal counsel, you want concrete discussions about your finances, not about your emotional distress. See a therapist to help you deal with those personal feelings. This negotiation is about cold cash.
2. Learn the 3 Basic Elements of Divorce
To fully take advantage of applicable laws, you should become familiar with three important factors: alimony, child support, and division of property.
Regardless of where you live, if alimony is awarded, a partner usually has to deliver financial support to an ex-partner for a narrow window of time, usually two to five years. Alimony is ordered by a court on the basis of one partner's need or entitlement and the other partner's ability to pay. Alimony is taxable to the partner who receives it and is a tax deduction for the partner who pays.
Every state has its own rules for figuring out the appropriate amount of child support for divorcing parents. Depending on your state, child-support payments usually last until the youngest child is eighteen. These payments are not taxable. You can get a copy of your state's support formula from your attorney or a clerk in the divorce court.
If you have a child whom you expect to be college-bound, write an agreement plainly stating who will pay for the child's college education. Also, if you are to receive child-support payments, insist that the paying partner purchase a life insurance policy covering the term of the payments, naming you as the owner and beneficiary of the policy. Your ex-partner will also be unable to change the beneficiary without your agreement.
Division of Property in Your State
Here are the three basic definitions:
Community property. All the property and assets accumulated during your marriage are considered to be community property, which is divided equally between the divorcing parties. Property acquired before the marriage and inherited property are excluded. The community-property states currently are Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin.
Common-law property. Property divided according to who holds the title to the asset is considered common-law property.
Equitable distribution. This is the basic method of distributing property in the remaining states plus the District of Columbia. The court decides how to divide the assets based on criteria such as need, earnings potential, and financial contribution to the marriage. Keep in mind that equitable does not always mean fair.
3. Determine Your Net Worth
Find out just what you're worth. By putting a dollar amount on what you own (assets) and what you owe (liabilities), you can calculate your net worth (assets minus liabilities). You may think you know what your assets are, but don't assume so. Your partner may hold properties or investments about which you are clueless. You may not even have the correct information about his or her pension or pensions if he or she has worked for several employers over the course of a career. A hard-nosed assessment of your financial situation is crucial.
Even in the best of unions, it's a good idea to check up on how your partnership is faring financially on an annual basis. However, if you haven't done so and are heading for a separation, do so at once. For pension and retirement plan sums, call your employer's benefits departments. You may not be able to get this from your partner's employer, but potentially you will find this documentation in household files. This is all information that you are entitled to know, so be persistent.
You might not be able to get the precise value for all your assets, but do your best to track down an approximate value. Hire an appraiser, if need be, to get a realistic value on your furnishings, jewelry, and collectibles. Check out the contents of any safe-deposit box, and make sure you haven't missed any deeds or documents that will add to your list. Your tax return from last year will help identify any assets you may have forgotten to include. For those of you who are really having trouble gathering the numbers, you should call your accountant or insurance agent.
It's fairly easy to track down those to whom you owe money, but if there's a problem, call each credit card issuer, your mortgage holder, and other creditors to get an up-to-date accounting. Visit annualcreditreport.com to request a free credit report from the three major consumer credit reporting agencies—Experian, Equifax, and TransUnion. They can give you a copy of your credit report, which will list all your creditors. You might even turn up a credit card or two that your partner has been carrying without your knowledge. Once your divorce is final, inform the credit bureaus in writing of your new status.
This is an adapted excerpt from Money Confidence by Kerry Hannon. Copyright 2017 Post Hill Press. Kerry Hannon is a nationally recognized expert on career transitions, personal finance, and retirement. She is a frequent TV and radio commentator and is a sought-after keynote speaker at conferences.