Armchair Millionaire Community Bulletin: Surviving Splitsville

"Happily ever after" just isn't in the cards for some marriages. If you're facing divorce, money may be the last thing you want to think about. However, to ensure your well-being down the road, it should be the first.

New York, NY December 21, 2004 -- Just as money is the top bone of contention in many marriages, it's also the big source of dispute in many divorces. And while everyone is familiar with how painful divorce can be, it's still important to approach its financial aspects as methodically and unemotionally as possible in order to arrive at a settlement that is fair.

Here is just one example from a member of the Armchair Millionaire community about how one financial misstep can wreak havoc long after a divorce:
"I divorced my ex-husband, in large part because his philosophy about money was so different from mine. After our divorce I found myself the object of a lawsuit for a large amount of money, because I had stupidly cosigned a loan. He was judgment proof and I wasn't. I settled for a sum that left me very impoverished." --Mary

If it looks like a marriage is heading for divorce, there are a few steps that will minimize financial disputes later. Couples should avoid going into any more debt together (for example, taking out a home equity loan or running up credit cards), as well as making any large purchases jointly. If divorce is imminent, it also makes sense to freeze joint credit card accounts and to open separate bank accounts.

Given how complex a divorce proceeding can be, as well as how much is at stake, it's essential in all but very simple cases for both parties to have their own legal representation. However, each person should still know the basics steps to take to protect themselves. My checklist provides a starting point.

The Armchair Millionaire's Checklist for Surviving Divorce

Assemble important financial documents. At the end of the day, divorce is about money and splitting it up between each party. You can't do that without good documentation of your financial situation. These are the most important documents you'll need:
State and federal income tax returns
Bank, brokerage, mutual fund and retirement plan statements
Credit card, mortgage and other loan statements
Deeds and titles to real estate and vehicles
Insurance documentation
Wills and trusts

Uncover all assets and liabilities. There can't be a fair division of money and property unless everything is on the table. If you have copies of all the documents listed above, you'll largely accomplish this. However, in some circumstance--like when one spouse owns their own business--it may be necessary to dig deeper to uncover all assets and debts. In these cases, it may be appropriate to hire an investigative accountant.

Protect your credit. Cancel your joint credit card accounts and set up your own. Credit card companies can and will try to collect any unpaid balances from both people on a joint account--regardless of who promised to pay.

Get additional assistance as needed. An attorney is a must, but there often are other professional advisors who can help ensure a good outcome. A certified divorce planner, for example, can help identify a fair division of investments or assist in reaching an agreement on who pays for college for any children. Likewise, a CPA can be critical in determining the real (after-tax) value of a settlement.

The Bottom Line: "Happily ever after" just isn't in the cards for some marriages. If you're facing divorce, money may be the last thing you want to think about. However, to ensure your well-being down the road, it should be the first.

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Lewis Schiff founded the Armchair Millionaire Web site in 1997. His first book, The Armchair Millionaire, was published in 2001. Schiff's newest report, "How to Know When You Are Rich," is now available at www.armchairmillionaire.com.