Most couples can’t handle financial side of divorce
It’s not a very romantic thought, but every marriage is a business partnership: making money, budgeting, buying goods, investing for the future. Unfortunately, most people are ill-prepared for the financial implications if the marriage splits up.
Couples should plan how to divide assets at the blissful beginning, not the bitter end.
“ The engagement: Family law attorney Alan Zvibleman handles divorces, lots of them. So, he knows that for happiness to survive the disintegration of love, couples can take one big step before putting on rings: Get a prenuptial agreement. It’s not a perfect document, but it’s generally enforceable in all 50 states.
Don’t know who should get the dog? The prenup guides the way. How much stock should a spouse get at Splitsville? Deal with it now.
With a prenup in place, all your worries are over, right? After all, the person you love would never try to, say, hide a few assets … would she?
“It happens all the time,” said Roy Kramer, an accountant for Brown Smith Wallace of Creve Coeur, Mo.
Indeed, both spouses must understand their household’s finances. “Do not allow your spouse to run all the finances and you know nothing about it,” said Kramer, a certified divorce financial analyst.
Nugget: Average length of a first marriage that ends in divorce: 8.2 years for men, 7.9 years for women, according to the Census Bureau.
“The breakdown: So, you kept track of everything, but the son-of-a-gun who’s been playing around with the grocery checker has broken your heart. Don’t get even, get smart.
This is the time to gather all the financial information you can find — bank statements, mutual funds, pension plans, real estate deeds, stock options, pay stubs, jewelry or any other asset with more than sentimental value. Consider what you want to keep. Write it down.
Nugget: Based on Federal Reserve figures, the median household net worth in 2001 was $86,000, approximately what’s up for grabs in a divorce. About $27,000 was in homes. For the richest 10 percent of Americans, the median net worth was $834,000.
“The break-up: It’s lawyer time, and if you’re not prepared, it’ll cost you. Lawyers charge by the hour. So if you dump a bunch of documents on their laps, they’ll charge you to sort through it.
Keep costs down by negotiating as much as possible with your spouse. Zvibleman recommends a “collaborative law” process to settle issues before filing for divorce. Lawyers represent both sides, but they must be fired if no settlement is reached.
“You can negotiate a far better settlement than you’re going to get from a judge,” said divorce lawyer Daniel Sokol.
Nugget: Ray and Deanna Vinson, founder and chief executive, respectively, of American Equity Mortgage, so far have paid lawyers a total of $2 million in their divorce proceedings.
“ The spoils: Everyone loses in a divorce, if for no other reason than two households must be maintained on incomes that had operated one. The spouse who’s not the primary breadwinner needs to be especially assertive.
Seventeen years after her divorce, Ann Fleming of Kirkwood, Mo., still thinks she is entitled to more of her ex-husband’s company stock. She lost a four-year court battle on that point in June, when the Missouri Supreme Court ruled against her on a technicality.
“The biggest problem I see is the wife almost always wants the house and is willing to give up retirement assets. Those retirement assets will be worth a lot more than home equity,” said Steve Dustmann, vice president, McCourtney-Breckenridge & Co., a St. Louis brokerage.
Nugget: The Social Security Administration says you must be married at least 10 years to be eligible to collect benefits on your ex-spouse’s Social Security record.