Financial advice for divorce: It’s a business deal, so keep emotions out of it
02/28/2014 4:26 PM
02/28/2014 4:28 PM
Not every love story has a happy ending.
For every two people getting married each year, there is one getting divorced, according to the U.S. Census Bureau.
“You always think when you’re newlyweds that the first few years are the peak of the divorce years, and that after 20 years everything is fine and dandy,” but many divorces happen to longtime couples, said Vielka Burey-Jacas, a certified financial planner and certified divorce financial analyst in Kendall.
In the heat of a breakup, divorcing couples tend to make financial mistakes that will haunt them for years. But money advisors say keeping a cool head can lead not only to a peaceful dissolution, but more money in your pocket.
“People make so many financial mistakes when they divorce. Why? Part of the reason is because divorce is such an emotional time, and no one makes good financial decisions when they’re on what seems like a never-ending emotional rollercoaster,” said Jeff Landers, a New York certified divorce financial analyst and author of Divorce: Think Financially, Not Emotionally — What Women Need To Know About Securing Their Financial Future Before, During, And After Divorce. “People make mistakes because the financial aspects of divorce are more complicated than ever.”
The torrents of rage or injustice you feel towards your ex will do nothing for your bottom line. “The first thing you need to do is remove your emotions,” Burey-Jacas said.
Here are some tips to get started:
IT’S BUSINESS, NOT PERSONAL
“At the risk of sounding terribly unromantic, let me offer this reminder: At its core, marriage is a business contract,” Landers said. “When you’re married, you share things with your partner — things like your income, expenses, assets, liabilities, a stock portfolio ... the list goes on and on.”
FIND PROFESSIONAL SUPPORT
A divorcing person’s first instinct is to surround themselves with friends, but when it comes to financial (and legal) matters, a pro is best, Burey-Jacas said. “Surround yourself with a good team — a divorce attorney, a divorce financial analyst, a mental health counselor. Look for expert advice.”
Make sure you have a divorce financial advisor on your team so you fully understand the short- and long-term financial and tax implications of any decisions that are made during the divorce negotiation process, Landers said.
Collect your financial papers, mortgage and credit card statements, bank accounts, tax returns and year-end statements from everything.
GET A CREDIT REPORT
Especially when you’re planning or going through a divorce, Burey-Jacas said. Not just to see your score, but to see if new accounts have been opened in your name, if your spouse has been running up charges on your joint credit cards, or to look for hidden assets. “It can be an eye-opener,” she said.
ESTABLISH A FINANCIAL IDENTITY
If you are thinking about or are in the middle of dissolving your marriage, open checking and savings accounts and a credit card in your name while you’re still married. “Because chances are your income will not be the same after you go through a divorce,” Burey-Jacas said.
Kathleen Jarvis, a Margate nurse, was married 23 years before her marriage ended in 1998. She said, in hindsight, “I would have had my own bank account sooner during the marriage. I believe that married people should have their individual accounts plus a joint account that covers the bills.”
Go into a marriage thinking about its end, said Charles Sachs, a Miami certified financial planner and host of the radio show Straight Talk on Your Money on WZAB in Miami. Sachs said in hindsight, his divorce taught him many lessons. One was to keep some things separate.
“I learned the hard way not to commingle bank accounts, credit cards and credit reports,” he said. “There are just too many problems that can arise when everything is in one pot.”
KNOW YOUR STATE LAWS
Florida is not a community property state. It’s an equitable distribution state, where both spouses are considered equal owners of assets acquired during marriage. “Whatever is owned or obtained during the marriage is considered co-owned, regardless of whose name is on it,” Burey-Jacas said.
For example, if you each have a 401(k), the portion acquired during the marriage would generally be divided equally, because it is part of marital assets, she said.
However, equitable distribution also can be affected by length of marriage, the age and the health of the person, income and standard of living, Burey-Jacas said.
CREATE A LIFESTYLE ANALYSIS
This is crucial for anyone planning a divorce, Burey-Jacas said. It’s an analysis of the things that you do on a day-to-day basis: eating out, dry cleaning, car washing. That will create an entire picture of your financial lifestyle. Many divorce attorneys require it, because it is an accurate picture of your spending — not just what is on your credit cards.
SHARE MONEY RESPONSIBILITIES
“Women, in particular Latin women, tend to leave the responsibility of money to their husband,” Burey-Jacas said. “But you need to be aware. Sit down with him once a month and review everything.”
Burey-Jacas said ideally money matters should be discussed before you exchange vows. “It should begin when you’re dating someone seriously. You need to start talking about your finances — how much debt you have, how much you owe in student loans, so when you begin a marriage, these conversations flow naturally. You don’t have to force someone to show you something.”
Jarvis said she learned that it creates problems when one spouse controls all of the accounts. “Couples should go into a marriage knowing each other's financial status and having a plan to address any issues,” she said.
Landers said it’s critical to be involved. “Would you enter into a business partnership if your partner was the only one who could make financial decisions?” he said. “The same is true in marriage. There’s too much at stake for anyone to remain on the sidelines.”
Not only does having working knowledge of your family finances make a divorce easier, it makes marriage easier, too, Landers said. “Couples can avoid lots of arguments about money if they communicate regularly about finances and make decisions together,” he said.
Most people don’t know you can go to the courthouse, pay $409, and if you meet the requirements, file for a simplified divorce yourself, Sachs said. There also is a self-help service available.
“Divorce attorneys get paid by the hour and are more than willing to tell you that they will fight for your rights, but the fact remains, things are probably going to get split up equitably anyway and the only difference is that if both of you have attorneys, the amount to be split will be much smaller,” Sachs said.
Draw up your own settlement agreement. “It may be one of the most difficult things you do,” he said. But doing so will “keep more money in both parties’ pockets, and keep at bay a host of professionals who make lots of money from your situation.”
After the divorce, remember to close your joint accounts, retitle other accounts and change the beneficiary on your assets.
DO A PRE-NUP
It sounds unromantic, but pre-nuptials are important: If you are expecting an inheritance from a parent; if you own a business; if you were previously married or have children; if you have expensive jewelry. There are lots of reasons, Burey-Jacas said.
“I did not create a pre-nup, and I paid for this mistake dearly,” Sachs said. “Blame it on your family, attorney and/or financial advisor, but consider drawing up a document that protects what you currently have and may inherit.
“If marriage is the most important contract you’ll ever enter into, why would you not have the same legal counsel to protect you that you would use for any other contract?” he said.
You may have gotten married for love, but treat a breakup like a business deal.
“The key to success is organization and to move your emotions to the side,” Burey-Jacas said.
This article includes comments from the Public Insight Network, an online community of people who have agreed to share their opinions with the Miami Herald and WLRN. Become a source at MiamiHerald.com/insight.
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