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Some things just aren’t built to last, including a marriage. But when couples decide to part ways, the last thing they want to leave behind is a “War of the Roses” crime scene and all their hard-earned money. We tapped AARP money expert Lynette Khalfani-Cox for some useful advice on protecting your finances in a divorce. Here’s what she had to say:
Find the right attorney. Going through the phone book or online will cast too wide a net so you won’t get a feel for the lawyer’s dealings the way you would from somebody else who’s used them, said Khalfani-Cox.
“Definitely get referrals from friends and family if they were satisfied with their attorney,” she said. “Unfortunately more than half of all marriages end in divorce, so chances are you know somebody who’s gone through it.”
Once you find someone you think might be a good fit based on a reference, do a personal interview. “And interview at least three people. It’s almost as if you’re hiring somebody you’ll have to tell personal, intimate details about your life to. You need to trust this person and your instincts. If you don’t feel like they’ve returned your call promptly, listen well and ‘get it,’ don’t hire them.”
Likewise, think about hiring someone who will communicate in the manner you like. “Some people like email, phone, face-to-face, so you need to ask how they prefer to deal with clients,” she said.
Don’t rely on mediation. Khalfani-Cox swears by this one. “Mediation should be an earlier step. Only do it in Phase 1 to see where things are going, and to get a feel for the tone of the divorce,” she said, adding that “women want to make nice, but don’t realise the mediator’s job is to get a resolution, and any resolution. If you think they will represent or protect your finances, you are sadly mistaken.”
While a lawyer’s paid to be on your side (and protect your money), a mediator’s solely there to keep the peace and get a settlement.
“(The settlement) can end up being very one-sided, even if both parties don’t recognise it at the time,” said Khalfani-Cox. “The mentor will say, ‘OK, you both agree to this,’ but the pit bull lawyer will say, ‘Wait a minute.’ A good attorney can tell you what’s reasonable and customary and what to legitimately expect.”
All won’t be lost if you take the mediation route, however. “If your divorce is not acrimonious or difficult, you might do better with other alternatives,” she said.
Set up separate accounts. It’s not uncommon for parties to shut down the cards, so the single best thing you can do is separate them pronto. The last thing you want is for your ex to go on a revenge-seeking shopping spree at your expense.
“If you have a mortgage, you can’t take their name off the deed, but things like savings, credit card accounts and checking accounts should all be split up,” Khalfani-Cox said.
Don’t forget you’re both liable if you co-signed a credit card. “It’s one thing for a couple to have an agreement, even a legal one from the divorce, but it’s a whole other matter when you’re dealing with creditors.” If you both signed up for that card, you’re both liable for any debt.
Know your assets and debts. You’ll definitely want to talk to your ex-spouse to make sure you know where you stand with regards to retirement accounts. They could be up for grabs and considered “marital property,” so it’ll be a huge disadvantage if one party doesn’t know all the assets in a divorce.
Adjust your will. We doubt you’re planning to leave all your worldly possessions to your ex, so before or after your settlement, be sure to change your will. According to AARP, most states exclude former spouses from serving as estate administrators or trustees for your will.