How to Survive a Divorce with Your Heart and Your Bank Account Intact

By Lisa Cohn
www.makingbreadmagazine.com

You’re headed for divorce. You may feel angry, guilty, embarrassed, resentful, hurt, tormented, cheated, abandoned, betrayed—or all of the above. Whatever you do, don’t let these feelings determine how you’re going to handle your financial matters.

As a divorcee, I write from experience. When I was first preparing for divorce, I felt confused, bitter and hurt. I was tempted to wage war on my husband over money, possessions and custody of our child. One of my close friends advised me to find ways to rise above my feelings for the sake of my son. I took her advice, and I’m glad I did. Many years later, my ex-husband is an important and cooperative partner in raising our son. I still feel guilty about my initial inclination to battle with him.

If you’re moving toward divorce, take my friend’s advice. Instead of letting your feelings govern your actions, be reasonable and sensible. Gather up critical financial information, establish credit, hire a lawyer, and find a priest, rabbi or therapist to help you sort out your feelings.

“ Try to make business decisions, not emotional decisions,” says Stacy D. Phillips, a certified family law specialist and managing partner with Phillips, Lerner and Lauzon, a law firm based in Los Angeles.

Sally*, a public-relations professional, agrees that it’s important to behave in a businesslike manner during a divorce. Sally knows the consequences of failing to follow this critical advice. Even though she has a degree in finance, she allowed her heart to rule her decision-making when she got divorced in 1999. And she’s still suffering financially.

“ I wanted out of the marriage, and felt guilty about it. I felt bad about hurting my ex. I bent over backwards, trying to make things right,” she says.

Before she got divorced, Sally was living in Los Angeles with her husband in a home whose value had dropped to $60,000 below its purchase price. Since it didn’t make sense to sell it at that time, Sally agreed to live in the house and pay for the mortgage—nearly $2,000 a month—even though she couldn’t afford it. She also told her husband he could invest their $30,000 in savings in a new business venture. He lost all the money. Looking back, she says she and her husband could have kept the house and rented it out to pay the mortgage—and she should have kept half of their savings. “I ran into trouble trying to pay everything. My credit rating suffered. The repercussions ripple through my current marriage,” she says.

Taking Inventory: What You Need to Know About the Family’s Finances

Rather than follow Sally’s example, women need to step away from their feelings when they find themselves facing divorce proceedings. They should identify what’s rightfully theirs and try to protect themselves without playing financial power games with their husbands. A woman’s first step in this process is to gather critical information about her financial state, advises Bernard Clair, a high-profile matrimonial lawyer in Manhattan. “Since a lawyer will need to divide assets or negotiate a settlement, it’s important to understand the total financial picture of the family,” he says. While this information could be assembled through the courts, women can and should save time and money by doing this as quickly as possibly on their own. Clair suggests they start by locating and copying credit-card statements, canceled checks and tax returns.

“ You don’t necessarily have to tell your husband you’re putting together this data,” notes Violet Woodhouse, a divorce attorney in Newport Beach, California. “Women want to be honest. But being honest doesn’t preclude us from having a right to acquire information when we are entitled to it and the other person may not give it to us,” she says.

In addition to understanding their family’s expenses, women heading for divorce also should create a snapshot of their assets, Clair stresses. “If you don’t already know, find out when your home and other assets were purchased and when and how they were financed. This information will be included in a closing statement about the purchase,” he says. “You need to know the way in which assets and property were acquired, what was spent, and who contributed in what proportion,” he says.

Use It Before You Lose It

Next, women should make sure they have a credit card or cash reserve, especially if they’re worried that their husbands may try to play financial games with them. “To be ready to face the future, you should have your own treasure trove,” says Clair. It’s legal to withdraw money from a joint account, according to both Woodhouse and Clair. “Both have equal access,” he notes. However, neither party should “raid” and empty joint accounts.

If a woman isn’t working, she can establish credit by first taking $1,000 out of a joint account and opening up a savings account. Then she should take out a loan for $1,000, suggests Clair. “The next month, you use the $1,000 in your savings account to pay off that loan. Your credit rating goes sky-high, and soon you’ll begin receiving solicitations from every credit-card company in the U.S.”

Once you’ve created a snapshot of your financial situation, and you have your own line of credit, think hard about the essentials you’ll need to live on your own or with your children, and identify ways to acquire those essentials before you divorce, experts say. “Maintain or upgrade your vehicle; utilize health benefits before you lose them; purchase the things you will need post-separation, while you still have access to community funds,” counsels Kathy Hartin, Vice President and Chief Financial Planning Officer of Kanaly Trust Company, based in Houston.

When Mary Staton divorced in 1989, she needed a new car, so she could transport her children from her home in Charlotte, North Carolina, to Atlanta, Georgia, where her husband had decided to move. “I took out a home-equity loan to pay for the new car,” she says. “My husband and I agreed that we would pay off the loan when we sold our house. The nice thing about paying for my car that way: I could deduct the interest,” says Staton, who, along with second husband Bill Staton, is co-author of “Worry-Free Family Finances” (McGraw-Hill).

Wear a White Hat to Court

While you’re gathering information and preparing yourself for a new life, don’t fall into common traps, advises Phillips. “First of all, don’t use your lawyer as your therapist,” she says. “It’s too expensive, and lawyers don’t have the right skills. Hire a therapist to make the process easier.”
Don’t seek financial advice from your friends or your hairstylist, either, she adds. “People call me up and say, ‘My friend told me so and so’,” she says. “It’s often bad advice.”

Don’t jump into declaring war on your ex-spouse through the courts. Instead, Phillips recommends that husbands and wives try to work things out between themselves as much as possible. It saves money and cuts down on the stress of splitting up for everyone concerned.

“ I am constantly telling clients, ‘Every action has a consequence’,” says Phillips. And Clair agrees: Rather than waging a bitter war, women headed for divorce must try hard to establish themselves as the “good guy” in the eye of the courts, he says. They need to appear rational and dependable. For example, they should not rack up a huge and secret stash of credit-card debt that could be suddenly exposed during divorce proceedings. “The determining factor in how you fare in divorce court is who the judge decides is wearing the white hat. So, by keeping the white hat on and being perceived as the person who is not playing games, you give yourself the best shot to come out of the process with the best settlement,” Clair states. However, women need to strike a balance when they’re playing the good guy. Often, women—like Sally, for instance—give up too much if they feel guilty about the divorce, want to get out of the marriage as soon as possible, or worry that any conflict will hurt their children.

That was true of Staton, who had a tough time predicting how her relationship with her first husband would change as a result of the divorce. “One of the trickiest things about the separation agreement is really trying to get as much as you can from your spouse,” she says. “What you don’t know is how the relationship will change. If it becomes more strained, and you’ve already gone once to the well, it will be hard to go back.”
Staton decided to keep her home for the sake of providing a stable environment for her children. She asked her husband for what she thought were reasonable expenses, but her husband’s attorney cut that amount in half. “I was interested in having peace. I didn’t want a lot of tension with the kids, so I was willing to compromise,” she rationalizes. “But as the primary breadwinner for my kids, I should have asked for more money,” she realizes now.

Haste Makes Waste

Susan Baughman, a professional speaker based in Austin, Texas, who specializes in financial issues, says that in an effort to divorce quickly, she too, failed to look out for herself. Baughman got divorced in 61 days, a process that saved her money, but only in the short run. Two years after her divorce, she was informed that her ex-husband had stopped making payments on a credit card that was still in her name. She was working as a stockbroker at the time, and was told she’d lose her job if she didn’t pay off the debt, which came to $20,000 with interest included.

Her past came back to haunt her a second time in the form of an IRS audit. Her husband had failed to declare some income when she was married to him, and because of “community property” laws, she was liable for payment.

“ I had no children and no reason to speak to my ex again,” she says. “You think you can walk away from your life. But this kind of stuff can follow you.” If she had it to do all over again, she would spend more time looking for an attorney and would have checked out the attorney’s background more thoroughly, she says.
Not only do back IRS payments and credit-card bills follow women after they divorce. The pain follows them, too, says Maria Isbell of Austin, Texas, who recently created a Web site, www.kidsncommon.com, which aims to help divorced parents work together. “I regret my divorce. I understand why we did it. I am still sad and still feel that hurt. I don’t think anyone can look back on divorce and not say, ‘Gee, I wonder if my marriage could have worked out’,” she says.

Don’t Let (Financial) History Repeat Itself

After woman grapple with the initial pain and financial repercussions of divorce, they ought to think twice about how they’ll handle finances in a second marriage, experts say.

Bill and Mary Staton, who founded The Staton Institute, a family financial education and consulting center, recommend that spouses keep two separate checkbooks and no joint account. The Statons, who are both married a second time, suggest that couples divvy up their assets into “hers” and “his” assets.

“ Once you file for divorce, you can’t go back and re-allocate your assets,” says Bill Staton. “If you have joint savings, it’s easy for the other spouse to raid the account. There’s little you can do about it.” The Statons divvy up their own cash and assets on a 50-50 basis. Home ownership goes to Mary, while other assets go to Bill, for example. Even though Bill came into the marriage with more money and more assets, their assets and cash are equally divided. “Mine is hers, and hers is mine, even though the money is separate,” says Bill.

Part of the motivation for the Statons’ financial gymnastics is the desire to stay together. It’s critical, when going into a relationship, to have a clear financial identity, says Mary Staton. And it’s important to be honest and open about finances. Otherwise, a couple’s relationship could suffer, she says. In addition, if people are open and honest with one another about money, it’s easier to communicate about any number of thorny issues, says Mary Staton. The Statons have spent time openly discussing how to pay for her kids’ college education, how much to spend on “his” and “hers” kids’ Christmas presents, and whether to send her children to a private school, because his children attended private schools. “It’s important for couples considering a second marriage to put everything out on the table,” Mary Staton says. Honesty and openness—always the best policy, anyway—are a small price to pay, if they help keep you out of divorce court a second time.

An award-winning writer, Lisa Cohn is co-author of “One Family, Two Family, New Family: Stories And Advice For Stepfamilies” (RiverWood Books). To read other articles by her or to learn more about her book, visit www.stepfamilyadvice.com.

* Some names have been changed to protect privacy.

ANATOMY OF A DIVORCE CASE:
A NOTED ATTORNEY WALKS US THROUGH THE PROCESS

Once a woman finds a lawyer for her divorce case, the parties begin negotiations or file divorce summons, says New York City matrimonial lawyer Bernard Clair.

Sometimes it’s necessary to obtain immediate relief from the court, such as orders of protection against domestic violence or temporary injunctions to prevent one party from transferring marital assets and property. Or the parties could seek interim support awards that would prevent a spouse from canceling credit cards or refusing to pay bills. After obtaining immediate relief, the husband and wife begin gathering information in the form of tax returns, bank statements, canceled checks or paid bills. This could require court subpoenas of credit-card companies or depositions from spouses, Clair notes. “The idea is to obtain the pertinent financial information necessary to value assets, prove earnings, substantiate lifestyle, and otherwise learn the extent and breadth of the marital estate or at least those assets and issues worth negotiating for or litigating over,” he explains. This discovery phase is generally the longest part of a divorce proceeding.

Next, the parties may begin working with experts who can value property or appraise the value of a business. “In a divorce, there is increasing reliance on experts to value property, so there might be a house appraiser who needs access and information to value the home; a business valuator to appraise the husband's or wife's business or entrepreneurial ventures; or a forensic accountant to provide a heads-up on understanding a complicated compensation package that pays not only in cash, but also in stocks and options,” Clair says.

Attorneys then devise their negotiation or trial strategies, and if children are involved, the court may appoint a mental-health professional, who meets with or interviews the parents and people who know the children, with a goal of providing custody recommendations. More and more, courts are quick to appoint a lawyer to represent children’s interests.

How long does the whole process take, from separation to divorce decree? It’s difficult to estimate, says Clair. “Even within states, different courts have different levels of congestion and volume problems distinct to their geographic areas, which affect how fast a case gets to trial or is finally resolved.”
And the cost for all of this? That also varies, depending on a number of factors. See “More Expensive Than the Wedding?” on page tk. —L.C.