BREAKING UP IS HARD TO DO
Michigan Credit Union League - Your Money Matters
SOUTHFIELD, Mich., November 1998 — Divorce is a devastating experience. In terms of stress, it ranks with death at the high end of the scale. In an extra cruelty at such a painful and vulnerable time, one is required to make crucial financial decisions. Money decisions that will impact the rest of our life have to be made at a time when most of us would have a hard time remembering how to make toast.
First there's the divorce itself. Even a friendly, uncontested divorce will cost a minimum of $1,100 and a divorce filled with conflict and hostility could run far, far higher. A T-shirt popular with lawyers reads, "Love is Grand. Divorce is Twenty Grand."
If you can agree on the basic settlement, you might be able to get by with only one lawyer but remember an important fact; a lawyer can have only one client. Even if the two of you agree on what you want the lawyer to do, he can have only one of you as a client and must watch out for his client's interests. As a consequence, it is most common for both parties to each hire a lawyer, so legal bills will likely start at about $2,000 and up.
The better you prepare for your property settlement, the smoother it can go. First gather the financial information on what you both earn, what savings, investments and property you own, including pensions, insurance and so forth. Write down a list of all your property with notations as to what you think of as belonging to one or the other. If he has a gun collection and she has fine crystal, that's a place to begin when dividing. One key thing; furniture and household goods will be evaluated at far less than their cost. Don't be too shocked if that handsome $3,000 couch is valued at $100.
This particularly hurts the partner who leaves the marital home. They have to pay retail for everything from towels to a can opener while the partner who kept the home will have only a fraction of the value of what they kept charged against their share of the property settlement.
There are many more things to consider. Despite the fact that your world may be shattered, you need a clear head to function at this time. Who provides health insurance? If you have kids, who pays for their education? How do you value and divide pension plans, insurance equity or pre-paid property taxes? Who is liable for assessments or liens on your property?
If you reach an agreement, the court will likely accept it but there are factors it will consider before approving the agreement. The better your mutual agreement matches these considerations, the more likely the final judgement will resemble it. The first fact judges consider is the length of the marriage. If you've been married 20 years, property is likely to be divided evenly. If you filed for divorce before your first anniversary, the division of property will be based on what was brought into the marriage. The amount each of you had before marriage is a factor. If you inherited a fortune, you might be able to keep it unless the money came in a long time ago.
Age and health are considerations. If one spouse is too old or too sickly to earn a solid income, the courts are apt to provide them with additional support payments from their partner. Lifestyle -- the famous "in the style to which she has become accustomed" defense -- is a major factor. If someone in the marriage has been making the big bucks, their spouse is more apt to be awarded a bigger judgement.
The relative earning power of the two parties is a factor. If she is a high-paid corporate lawyer while he is a little-known poet, she's apt to be paying support.
Conduct is a key factor as well. If one of the partners has been unfaithful, alcoholic, abusive or a criminal, a greater share of the property could be awarded to the innocent party. However, the courts will look at what may have caused that behavior. If it was a rotten marriage before the problems occurred, the other partner may not gain.
Finally, there are "General Principals of Equity," which is legal talk for judges being able to do just about anything they want.
If you're considering a divorce, stop spending and start saving. Don't charge. Don't sign new legal agreements with your spouse. If you don't already have a credit card in your own name, apply for one immediately. You will need a credit history in your own name.
If you actually reach that bitter moment of filing for divorce, close all joint checking or credit accounts you may share with your spouse and devise a budget. This becomes all the more crucial during a divorce. Expenses are going up and income is going down (at least in the short term). Now more than ever, you need a budget.
Despite the trauma divorce brings into your life, you can recover and go on. The better you keep your wits about you and manage your financial affairs at this critical time, the more easily you can survive and thrive in the future.