Divorce is expensive. It’s not just the costs of hiring attorneys and splitting up assets, although those can be substantial. There’s also the hard fact that living as a single person costs more. Couples enjoy substantial savings from sharing costs — overhead and child care are two examples.
Using averages from the Bureau of Labor Statistics, a single person in his 20s spends about $9,964 on housing where a married couple the same age averages $8,844. Over 60 years this can add up to over $67,200 in savings for a married couple.
Women lose most
Women especially suffer a loss of income after a divorce, professor Nicholas H. Wolfinger of the University of Utah’s Department of Family and Consumer Studies wrote in an email interview.
Despite advances, women still earn less than men, and the costs of rearing children usually fall largely to them. Wolfinger and a colleague have researched the economic effects of divorce on women and children and found that divorced women with children have the greatest declines in standard of living after a divorce.
This is not to say you shouldn’t divorce, only to do it with careful thought to the consequences and make sure that, since your standard of living probably will drop, you do all you can at the outset to minimize the financial damage.
Here are 15 steps to take as soon as possible if you are planning a divorce:
1. Talk to a lawyer
One of the smartest moves you can make to protect your finances is to consult with an attorney immediately, even if you don’t intend to be represented by a lawyer in the divorce. If you and your divorcing spouse are cordial, that’s great. But you need to know your rights and your options.
At the minimum, hire a family law (divorce) specialist for a brief conference to ask:
- What steps should I take to protect myself, financially and otherwise?
- What happens next and what can I expect to encounter in my divorce?
- How can I get through this as quickly and frugally as possible?
- What’s the cost and benefit of using a lawyer for my divorce?
If you don’t have money for an attorney, here are options:
- Legal Services Corp. links low-income people with local Legal Aid offices offering free or low-cost legal assistance for civil (noncriminal) matters.
- StatesideLegal says divorce is different for military families. This nonprofit organization, affiliated with Legal Services Corp., offers legal guidance and advice for service members, veterans and their families. Use this map to find local free and fee-based legal services.
- LawHelp.org connects low-income people with local legal aid and public interest law offices, information about legal rights, court forms and information, self-help guidance, links to social service agencies, and more. Use this map to locate resources in your area.
- Law schools. Some law schools conduct free legal clinics for the public, staffed by law students and supervised by professors. Find one near you in the Association of American Law Schools directory of member law schools.
- Bar associations are professional organizations for lawyers. The American Bar Association map links users to local and state bar associations.
You can call your local bar association’s lawyer referral service to find a licensed, private lawyer who has experience with your type of legal problem and will meet with you for a reduced fee. The lawyer will meet with you for 30 minutes about your case for a fee of less than $50.
Also, ask local or state bar associations about:
- Free legal workshops.
- Self-help clinics.
- Volunteer lawyer projects.
- Pro bono (free) lawyer projects.
2. Be a little paranoid
Even in an amicable divorce, take every possible step to protect yourself. Divorce is an emotionally volatile process, and a spouse possesses valuable personal information, like your Social Security number, birth date and other identifying details. Bitterness can make people do the strangest things.
3. Pull your credit report
You are allowed three free credit reports each year. These show all credit accounts in your name alone and jointly with someone else. Accounts held only in your spouse’s name may not appear. Watch for:
- New accounts opened in your name.
- Changes in your credit accounts. Unexpected changes are a tip-off to possible identity theft.
Your credit score can be damaged if a spouse or ex-spouse fails to pay joint bills. Read “Marriage and Credit: 6 Common Myths” for more information.
4. Close joint accounts
Divorcing spouses have been known to move money from joint accounts to an individual account, making it difficult or impossible to recover, and to run up joint credit cards and take on new debts for which a spouse is also responsible.
When you have a joint account, each account holder is responsible for the full amount of the balance. The card issuer can seek to collect the amount due from either account holder.
Ask your spouse to help close or freeze your shared financial accounts, including credit cards, joint bank accounts and lines of credit. If that’s not possible, see if you can do it on your own. You’ll find the account rules in the contract you signed when opening the account. You can look for a copy on your bank’s website or ask the bank to help.
5. Monitor joint accounts
Some divorcing spouses leave one joint account open to fund shared expenses, especially related to children. However, limit any joint accounts to one if possible and watch its activity regularly by requesting the balance and most recent transactions from an ATM or bank branch or by viewing the account online.
6. Open new accounts in your name
If you don’t have accounts and credit solely in your own name, open them now. To avoid confusion or errors, use different institutions than your spouse uses. (Here’s how to establish credit.)
Obtaining credit before divorcing gives you a higher credit limit based on your joint income. A personal bank account gives you privacy and a way of funding personal expenses, including those related to the divorce.
Having your own accounts doesn’t, however, promise that your spouse won’t be entitled to a share of money you possessed before a divorce.
7. Track down the money — all of it
It may be hard to focus on the future when the present is filled with intensity, but finding every single marital resource is crucial for ensuring your financial future. Write down:
- All accounts and assets held jointly and individually, noting the balance, date, account number, authorized users and contact information for each bank or creditor.
- Incomes, property, retirement plans and all other assets owned jointly and individually, including vehicles, homes, jewelry, furniture, brokerage accounts and insurance policies.
- Ask your spouse for information. Otherwise, comb through bills, bank statements, tax returns and tax preparation documents, checkbooks, brokerage statements and safety deposit boxes.
8. Crank up the copy machine
Download or photocopy statements and documents pertaining to all accounts, assets, bills and debts. Organize everything in a file cabinet. Include 401(k) statements, insurance policies, real estate purchases, mortgages and refinances, house appraisals, brokerage accounts, money market accounts and, of course, tax returns.
The ease or difficulty of this job may depend on your spouse’s cooperation. A CNBC article about divorcing a bullying spouse says:
“I tell women: Go through the drawers and go through the trash,” said Helfend Meyer, who also suggests looking for financial records on the family computer. One client discovered her husband had been shredding the financial documents. She dug through the trash and taped the pieces together to get the information she needed.
This advice may seem extreme but, CNBC says, “Even in fairly amicable divorces, spouses may sink to hiding money or siphoning it out of joint accounts.”
9. Consider hiring a divorce financial analyst
It may be worth it to hire someone who specializes in the finances of divorce. The Institute for Divorce Financial Analysts trains practitioners. It offers articles and a directory of certified practitioners. The Association of Divorce Financial Planners, a membership organization, has links to members.
Interview several specialists, which could include lawyers, accountants, financial planners and other professionals. Ask about their training, experience and expertise, and examples of how they’ve helped clients save money.
Even if you live in a state with laws mandating equal division of property, your spouse can always lie or hide assets, or pressure you into a deal that isn’t equitable. A divorce financial analyst is more adept at uncovering any such assets and is also more knowledgeable about evaluating different investments, comparing them, and projecting how they will affect you in the future.
Here’s how a divorce financial specialist might help with your settlement:
- Locating assets, including hidden assets.
- Ensuring that your information about your family finances is accurate and complete.
- Developing a long-term forecast of the financial consequences of your divorce, including retirement needs, tax liabilities and benefits.
- Developing a realistic household budget including expenses like life insurance, health insurance and cost-of-living increases.
- Appraising or valuing assets.
- Preparing financial affidavits describing financial and tax implications of various divorce settlement options.
- Mediating a financial agreement between ex-spouses.
10. Get your name on the deed
Make certain your name is on titles and deeds of property you own together. This is important for every married person in case of a spouse’s death.
Many states treat property purchased during marriage as marital property. But laws vary, depending on whether you contributed financially to a purchase and how it was used.
Some couples work out property ownership in case of divorce before they marry, with a prenuptial or premarital agreement (postnuptial, postmarital or marital agreements are made after a marriage). These contracts also are used to keep debts separate, provide spousal support and even spell out agreements on behavior during marriage.
11. Change beneficiaries
When you buy insurance or stocks or open a bank account or retirement account, you name beneficiaries who will inherit the asset if you die. These are powerful legal documents that take precedence over your will if there’s a conflict.
If you don’t want your spouse inheriting your assets, change your beneficiary designations.
12. Rewrite your will
Don’t forget to update your will, too.
13. Make a budget
To live on a diminished income you’ll need to know how to budget, if you don’t already. A budget also will help in establishing your needs when negotiating a divorce settlement.
Remember to include items you previously shared with your spouse. Also, plan for college tuition, child care, children’s lessons, sports and activities, and your own retirement, taxes, transportation and housing.
14. Make a financial plan
If your divorce settlement will include lump sums from property sales, alimony, pension rollovers or selling other assets, hire a fee-only financial planner to help make a plan for managing the money. Consumer Reports explains how to shop for a planner and which designations to look for.
Two resources for fee-only advisers:
- The Garrett Planning Network, an association of fee-only planners.
- The Certified Financial Planner Board, which certifies practitioners and sets professional standards.
15. Learn what you’re up against
By now you see what’s at stake for you and your kids. Learn all you can about divorce. Two places to start:
- Public libraries. Ask a librarian for help finding resources.
- Divorcenet.com is hosted by Nolo, the legal publishing company. It has links to each state’s divorce laws, and articles and questions and answers about the legal and financial aspects of divorce. (The National Association of School Psychologists offers guidance on children and divorce.)