25 WAYS TO
DIVORCE WITHOUT GOING BROKE
Wall, CPA, CFPģ, CDS
Divorce is the largest single financial transaction of most
peopleís lives, raising important questions that demand immediate answers.
The following tips are excerpted from Ginita Wallís
booklet "150 Ways to Divorce Without Going Broke". This booklet
contains helpful tips on every aspect of divorce, including: before the
divorce, gathering records, alimony, tax returns, navigating the divorce,
accumulating cash, hiring an attorney, child support, property division, and
life changes after divorce.
Before you separate, use joint funds to repair your
automobile and home, buy clothes for yourself and your children, and other
family expenses. Begin your divorce with these expenses already paid, rather
than arguing with your spouse about who should pay them later.
Learn about the laws of your state. In Arizona, California,
Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin, all
community property states, marital assets are divided equally between the
spouses. In most other states, the judge can divide the assets in any way
that seems fair.
Protect your separate assets. In most states, money you
brought into the marriage, plus gifts and inheritances, are yours, if you
can trace them to assets you now own. Save all the documents you will need
to prove your separate property.
Borrow from a home equity loan or line of credit. Mortgage
interest is tax-deductible and the interest rate is low compared to credit
cards. However, if you would like to keep the house, be sure that you will
be able to handle the higher payments after the divorce.
Withdraw from your IRA only if you have no other option. Youíll
pay a 10% penalty in addition to the regular tax if you withdraw before age
Consider selling unwanted items to raise cash. First, be
sure you both agree to sell the property, and that no restraining order bars
you from doing so.
If you canít find any financial statements, make a copy of
any loan applications. They generally have the same information and are
signed as a true statement of assets and debts.
Write a summary of important facts. Include the date you
married, your childrenís birth dates, the date you separated, property
brought into the marriage, and other events. This list will provide
important information for your attorney, mediator, or paralegal.
Get the records you need before the divorce is final. After
the divorce, if you need records regarding the rental property you are
receiving, the tax basis of the investments you get, or copies of past tax
returns, your ex may not be very motivated to produce them.
Hiring an Attorney
Get the best help you can afford. A "cheap"
attorney is not always the best value. An attorney with low hourly rates may
make irreparable mistakes or end up costing just as much by taking twice as
long to prepare documents. And if you represent yourself, you may make
costly mistakes that could be avoided by adequate representation.
Do some tasks yourself. You can gather documents, file
papers, and do other tasks that secretaries, paralegals, or law clerks are
paid to do, saving yourself the hourly rate of the legal support staff.
Make sure your attorney has not represented your spouse or
your spouseís business, or has any other conflict of interest. To assure
your attorney has your best interests in mind, never use the same lawyer as
Keep a telephone log of every divorce-related conversation
you have with your spouse, attorney, or other advisors. Include the date and
a brief summary of what was discussed. This log will help to avoid any
misunderstandings about what was discussed.
Alimony and Child Support
Identify all income for you and your spouse, both taxable
and non-taxable. Start with your tax return for the taxable items, and then
look in your check register for any deposits that might point to non-taxable
Document your living expenses. Use a budgeting form or
software to create a list of past expenses and a budget for your future
needs. Keep receipts, cancelled checks, and other documentation so that you
can back up your claims in court.
Include a cost of living adjustment clause in your child
support agreement. This will avoid expensive and frustrating trips back to
court to negotiate increases to child support payments.
Include late payment fees in your child support agreement.
These fees provide an incentive for timely payment and may eliminate the
need to go to court to enforce the agreement.
If you have been out of the house for more than three years,
have a written agreement or court order granting your spouse exclusive use
of the residence. The house will still be considered your primary residence
for two of the five years before sale, and you will preserve your ability to
exclude $250,000 of gain when the house is sold.
Donít forget often-overlooked assets. Frequent flyer
miles, vacation and sick pay, season tickets, club memberships, timeshares,
magazine subscriptions, and prepaid insurance all are assets that have value
and should be split.
Retitle real property that is in both of your names. Ask
your spouse to remove your name from the mortgage for property you donít
receive. If your spouse gets the house and doesnít make the payments, the
lender can come after you if your name is still on the mortgage.
Take taxes into account when you divide property. Money in
retirement accounts generally is worth less than money in bank accounts,
since the retirement money will be taxable when you withdraw it. Reduce the
value of such accounts by the taxes you eventually will pay to see if you
are receiving a fair share. Ditto highly appreciated assets or depreciated
Life Changes after Divorce
Store a copy of your final decree in a safe place. You may
need to refer to it in future court proceedings, for Social Security when
you retire, when you write a will, or if you decide to marry again.
Plan ahead financially. Begin a savings and investment plan
to provide for future goals such as college education and retirement. Now
that you are on your own, it is your responsibility and pleasure to take
good care of yourself.
Think of divorce as business transaction. You were involved
with your spouse in a partnership that did not work out, so wrap up the
loose ends cleanly. If you have children together your lives will be
intertwined forever, so work things out and separate on good terms.
Revise your will and name new beneficiaries. Once your
divorce is final, you will probably want to change your heirs. In some
states, previous beneficiary designations are void after the divorce, so
even if you want to designate your ex as your heir, you must do so
affirmatively after the divorce.
how to order
150 Ways To Divorce Without Going Broke
may order a copy of Ginita’s book The
ABCs of Divorce for Women or her booklet 150
Ways to Divorce Without Going Broke at www.WIFE.org,
the website for the Women’s Institute
for Financial Education.