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Protecting Your Money in a Divorce

8 ways to safeguard your assets when a longtime marriage breaks up


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Q. My husband and I are getting divorced after 30 years of marriage. How can I protect myself financially?

A. Unfortunately, you’ve got lots of company. Since 1990, the divorce rate among couples 50 and older has jumped from 8.7 percent of all divorces to 36 percent, and these divorces now account for more than one of every three breakups, according to recent research. The greatest increase in the divorce rate in the past three decades was among those age 65 and older. And after a couple has spent decades of saving and investing together, the stakes — and potential financial fallout — can be higher in these “gray” divorces.

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Here are eight things you can do to prepare:

1. Hire an experienced divorce attorney

Ideally, the attorney you work with will emphasize mediation or collaborative divorce litigation. It’s also important to make sure this person is a good fit for your personality. Both spouses tend to fare better in structured processes where they negotiate solutions to their disputes — financial and otherwise — rather than letting a court decide. Get recommendations from friends or at such websites as DivorceNet.com or the American Academy of Matrimonial Lawyers at aaml.org, which also provide information on state laws.

2. Open accounts in your name only

If you’re a nonworking spouse (say, a longtime stay-at-home mom), it’s important for you to start right away to establish your own credit history, in case you later need a car loan or mortgage. Even if you already have a history on file, many lawyers advise freezing or closing joint bank and credit card accounts to prevent you from being responsible for buying sprees by your soon-to-be former spouse. Car insurance policies and the like should also be changed to reflect your new solo status.

3. Take inventory of assets and debts

With your attorney’s help, ask for a full disclosure of all joint and individually owned financial assets so you know where your money is and where it goes. Make copies for safekeeping of loans and credit card accounts, as well as home equity lines, past tax returns and business debts. You’ll also want to get a handle on “nonmarital assets” — things considered to belong to only one spouse, such as property brought to the marriage, inheritances and gifts given specifically to one person.

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4. Use a financial adviser

Input from a financial adviser during the divorce process can provide a clearer picture of what your financial life will look like after the divorce and help you map out a financial plan. Their advice can help you consider factors such as asset division, alimony or spousal support arrangements, tax implications and the potential impact on long-term financial goals.

5. Sort out mortgage and rent payments

Mortgage companies and landlords expect payments to be made regardless of your personal situation. You may want to move to your own place as soon as possible, even before a divorce, but that might hurt your claim to the home (and you will still be responsible for at least half the mortgage payment). Sometimes the two spouses can reach an arrangement about who keeps the home, but often it makes better financial sense to sell it.

6. Be prepared to share retirement accounts

Just because your name is on a 401(k) or IRA doesn’t mean it’s not up for grabs. These funds may be considered “marital property” and subject to negotiation. The eventual division of 401(k)s, 403(b)s and pensions will be governed by a legal document called a QDRO; the carving up of IRAs is addressed in the divorce decree. And don’t forget to update your beneficiaries on your retirement accounts, since you don’t want to inadvertently leave assets to your ex-spouse after a contentious breakup.

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7. Change your will

As you prepare for a divorce, or immediately upon its settlement, adjust your will accordingly. In most states, former spouses are automatically excluded from serving as trustees or estate administrators or from receiving under your will. It’s also prudent to update other important documents, such power of attorney and health care proxy.

8. Understand community property vs. equitable distribution

Before you and your spouse go your separate ways, you’ll need to divide up marital assets, such as real estate, savings, investment accounts and retirement savings accounts. How your property will be split up depends on what state you live in.

If you reside in a community property state, whatever assets you obtain or accumulate during the marriage will be split equally, roughly 50/50. However, any assets that either you or your spouse brought into the marriage are excluded from this type of settlement. Community property states are Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin.

In contrast, if you live in an equitable distribution state, the court will divide marital property in a manner it considers fair, though that doesn’t necessarily mean equally. Which spouse gets what is based on their overall needs and particular circumstances. The court looks at roughly a dozen factors when deciding how to split assets.

If you’re unable to reach agreement with your spouse as to how the assets should be divided, consider using an objective, third-party mediator, such as a retired judge or an expert in family law, to decide what’s equitable. 

Go to this AARP web page for more tips specific to later-life divorce.

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