Saving Dollars & Making Sense of Divorce

Here's how you can part ways without taking the financial plunge

by your lawyers’ rules and that’s not a good thing.”

When you’re compiling information, take inventory. Early on, you’ll need to determine what things you want to take with you when you leave the marriage, unless it’s already been predetermined in a prenuptial or postnuptial agreement (see “Those Wedding Bell…Greens?” October 1998). As pointed out by Edward A. Haman, attorney-at-law and author of How to File Your Own Divorce (Sourcebooks Inc., $19.95), the two basic legal terms for dividing property are equitable distribution and community property. Under equitable distribution, assets, earnings and debts are divided “fairly”-although this doesn’t necessarily mean a 50-50 split. According to Borden, two-thirds of the assets are often given to the spouse with the higher earnings and the remaining one-third to the other spouse, except in community property states. “In Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin, all property of a married person is classified as either community property, owned equally by both spouses, or the separate property of one spouse,” Borden says. “At divorce, community property is generally divided equally between the spouses, while each person keeps his or her separate property.”

Typically, separate property that is combined with community property becomes community property. Check the divorce statutes in your state to find out which factors the courts use to divide marital property.

At some point, you may need to consult with an accountant or some other resource (e.g., to determine your tax liability under certain special circumstances. For example, the payments you receive from your spouse’s pension plan or IRA are taxable when you actually withdraw the money, but you may not know this unless you seek the advice of a professional. You can use the same resources to determine whether you receive any tax benefits from the payments you make toward your spouse’s medical costs, rent, tuition, life insurance or other expenses. Alimony payments, whether they are rehabilitative (for a limited period of time to help a nonworking spouse upgrade skills) or permanent (usually awarded to a spouse suffering from physical or mental illness), can also impact property distribution, especially if one party is able to exchange property for alimony payments, but this can only be decided in court.

In the meantime, make a list of all of the property you and your spouse own, put an “H” or “W” next to the husband’s or wife’s separate property, including debts. Then determine which items you would like to keep after the divorce. In making these assessments, ask yourself (and your lawyer if you decide to have one represent you) these three questions: (1) How much is it worth to me in today’ s dollars? (2) How likely is it that I will win? and (3) What is it costing me to fight about it?

Borden says getting answers to these three questions can help you avoid some pretty costly battles. “Most people don’t know how to ask these questions and their attorneys don’t know how to answer them.” But you shouldn’t make

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