Tips for surviving a divorce financially intact

For many, it is easy to avoid the difficult -- especially when the topic is money and the “difficult” is discussing divorce and finances. It’s much easier to think, “Oh, it won’t come to that” or “I’ll cross that bridge when I get to it,” or even, “The lawyers will handle it.”

And that’s understandable—divorce is one of the most stressful things a person can go through in life. However, to ignore it, instead of confronting and planning for it, can be a costly mistake.

Divorces typically involve emotional tornadoes and financial wrecking balls. Difficult as it may be, you need to think logically rather than emotionally when it comes to your finances. Emotions will ebb over time, but the financial decisions made during your divorce can impact you forever.

The best way to remove emotion from the equation is to look at this time as an opportunity to plan for a desired outcome. Establish clear, manageable goals by asking yourself some reasonable questions:

· What do I realistically hope to get out of this?

· What does financial stability look like for me?

· How do I plan to achieve it given my circumstances?

It is also important to focus on what you have and not what you are losing. Planning for the future is much more difficult if you do not have an understanding of what you have currently and how much you need to spend. So you need to:

· Write down and track your expenses, and develop a realistic monthly budget.

· Collect and store any relevant financial documents.

· Open your own bank account and credit card to start to build your own credit.

· Start saving and building an emergency fund.

· Ensure privacy in your communications.

The divorce team

Then, surround yourself with a team who can help you achieve your goals.

You don’t have to muddle your way through divorce by trial and error. Instead, lean on the professionals who specialize in guiding people through this tumultuous life experience. In particular, work with the following:

· A family law attorney who exclusively handles divorce cases or devotes at least 75 percent of their practice to divorce. You want make sure they have sufficient experience in cases similar to yours. You also want to be at ease with them, as their role is to serve as a trusting, supportive and forward-thinking resource for you—before, during and after the divorce.

· A trust and estate attorney (depending upon the complexity of your case) to draft new wills, trusts, etc., as well as work with you to ensure new beneficiary designations are correct and assets are titled properly post-divorce.

· A mediator, provided circumstances are appropriate. This can save you many thousands of dollars in legal and court costs.

· A financial planner with experience in divorce cases, as well as a financial advisor, who will work hand-in-hand with your divorce attorney. They will create the comprehensive financial analysis and projections that you and your attorney need to fully understand the short- and long-term financial and tax implications of each proposed divorce settlement offer. They will also bring in specialists as needed, including a forensic accountant, a valuation expert and/or real estate appraiser.

· A therapist and/or support group who can help you cope with your feelings as you navigate the ups and downs of the emotional and financial rollercoaster of divorce. Don’t neglect your emotional needs.

It is important to be very comfortable with this team. They can and should play an important role in shaping your financial future.

The list of financial priorities

Keep these priorities in mind to avoid costly financial mistakes during divorce discussions:

· Accurately estimate your expenses. Write down and track your expenses, and develop a realistic monthly budget that accounts for future living expenses as well as inflation.

· Make a smart decision about the family home. You must consider the costs of maintenance, taxes, heat and electricity when determining the affordability of taking on the whole mortgage and remaining in your home.

· Protect spousal support and child support with disability and life insurance. This can ensure payments will continue in the event of your spouse’s disability or death.

· Evaluate retirement plan assets correctly. Since this is most likely where a large share of your retirement income will be coming from, you must look at these assets as a future income source rather than a capital source.

· Understand the liability of unsecured debt. If the debt was incurred during the marriage, it’s a shared liability no matter which spouse accrued it.

· Determine a fair—not necessarily equal—division of property. Make sure you are comparing apples to apples when you negotiate assets in a divorce settlement, and pay attention to tax basis, present value and transaction costs.

The goal is not just to prevent yourself from becoming a victim, but also to take charge. Your marriage does not need to be ending in order to do that. Even if one spouse currently handles the family finances, the other spouse needs to stay involved. It can be as minimal as reviewing, copying and storing annual statements for everything that relates to your marital lifestyle (checking accounts, investments statements, credit cards, tax returns, etc.).

The most important thing you should know is that you are your own best advocate. In divorce, anything can and does happen. A little knowledge, responsibility and accountability in your marital financial situation can go a long way in moving you through a divorce financially intact.

Leo Palana manages the Mercer Island branch.