Saving Dollars & Making Sense Of Divorce - how to part ways without taking the financial plunge

Black Enterprise, Oct, 1999 by Monique R. Brown

Here's how you can part ways without taking the financial plunge

MILDRED MILLER WAS EXCITED ABOUT HER PROMOTION.

After living nearly five years of her married life as half of a commuter couple, she had finally gotten a position that would enable her to relocate from Elmira, New York, and live with her husband in Rochester. She excitedly packed her bags in anticipation that she and her husband, along with their son, would finally live under one roof--or at least that's what she thought. After only one day in the traditional family setting, her husband announced that he didn't think they were compatible. For Miller, this meant moving out as quickly as she'd just moved in, with a brief pit stop at the home of one of her brothers. "I was hurt and upset," the 50-year-old, now single mom recalls. "We visited each other on weekends and talked over the phone. I didn't expect this from ray husband of 22 years."

Miller is not alone. According to the American Association for Marriage and Family Therapy, in 1998, there were 19.4 million divorced persons in the United States. And regardless of who files for divorce, both partners and the children are dramatically impacted by the results. For the most part, a divorce requires that new living arrangements be made, marital assets be split and strategies for dealing with child custody and visitation rights be devised. Divorces can be uncontested, which are the quickest and least expensive types, or contested, which can drag on for months and sometimes years. Both of these options will cost you. But, if you've decided it's time for you and your spouse to part ways, here are some specific strategies you can employ to keep financially afloat:

DEVISE A PLAN AND BECOME INFORMED

Once you decide to divorce your spouse, "be prepared for a fight," advises attorney C. Victor Long of C. Victor Long & Associates in Atlanta. He says you shouldn't be surprised if your spouse becomes angry about the divorce because dissolving a marriage can bring out the worst in people. Some pre-divorce financial planning can ensure that your interests, and those of your children, are well-protected. For starters, get copies of the statements of all of your joint financial obligations, including those accounts with brokerage houses, credit card companies and other debtors. Also, secure insurance policies, bank and loan statements, pension plan documents, mortgage payments, recent tax returns and estate planning information.

Depending on how you believe your spouse will react, it may be best to keep your plans for divorce under wraps until you have all of the information you need to support your case (see sidebar). If you fear your spouse will try to take money from your accounts or hide important papers, you can ask a judge to intervene on your behalf. On the other hand, you don't want to be antagonistic either, advises Lee Borden, a lawyer and divorce mediator who manages a Website that assists divorcing couples (www.divorceinfo.com). He. says a divorce fight means that "both of you will be living your lives by your lawyers' rules and that's not a good thing."

When you're compiling information, take inventory. Early on, you'll need to determine what things you want to take with you when you leave the marriage, unless it's already been predetermined in a prenuptial or postnuptial agreement (see "Those Wedding Bell ... Greens?" October 1998). As pointed out by Edward A. Haman, attorney-at-law and author of How to File Your Own Divorce (Sourcebooks Inc., $19.95), the two basic legal terms for dividing property are equitable distribution and community property. Under equitable distribution, assets, earnings and debts are divided "fairly"--although this doesn't necessarily mean a 50-50 split. According to Borden, two-thirds of the assets are often given to the spouse with the higher earnings and the remaining one-third to the other spouse, except in community property states. "In Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin, all property of a married person is classified as either community property, owned equally by both spouses, or the separate property of one spouse," Borden says. "At divorce, community property is generally divided equally between the spouses, while each person keeps his or her separate property."

Typically, separate property that is combined with community property becomes community property. Check the divorce statutes in your state to find out which factors the courts use to divide marital property.

At some point, you may need to consult with an accountant or some other resource (e.g., www.divorceonline.com) to determine your tax liability under certain special circumstances. For example, the payments you receive from your spouse's pension plan or IRA are taxable when you actually withdraw the money, but you may not know this unless you seek the advice of a professional. You can use the same resources to determine whether you receive any tax benefits from the payments you make toward your spouse's medical costs, rent, tuition, life insurance or other expenses. Alimony payments, whether they are rehabilitative (for a limited period of time to help a nonworking spouse upgrade skills) or permanent (usually awarded to a spouse suffering from physical or mental illness), can also impact property distribution, especially if one party is able to exchange property for alimony payments, but this can only be decided in court.