Divorce is a painful and emotionally charged process that everyone hopes to avoid, but unfortunately, many of us face. Because divorce can be very daunting, the key to success is planning and preparation.

Our experience suggests that people go through several emotional phases during a divorce. First, you may feel the initial shock and discomfort that life as you knew it has changed forever. During the next phase, shock may evolve into discovery, where you come to grips with the reality of the situation and recognize that you must deal with its repercussions. You will then enter the negotiation phase, which can be tiring, frustrating and require some compromise from both parties. Once the negotiation phase is complete, you will hopefully experience the most rewarding phase, the feeling of empowerment and newfound independence, which allows you to take control of your finances and set a course for you and the future of your family.

Having witnessed several divorces over the past three decades, we have found that, from a financial standpoint, steps can be taken to better prepare and protect yourself and your future. The following are some steps you should consider taking that will allow you to better navigate through this trying time.

1. Consult with a divorce attorney licensed to practice in your state. It is critical that you understand state divorce laws and your rights as this will have a material impact on your financial planning.
2. Find a qualified financial planner to assist in preparing you for managing on your own. Work with this planner to create a realistic budget that includes your mortgage or rent, childcare, insurance, auto, utilities, food, healthcare, taxes, etc.
3. Get a current credit report and monitor your credit throughout the divorce process. Many companies offer this service.
4. Gather financial records and prepare a detailed list of all accounts both individually and with your spouse. This should include bank accounts, brokerage accounts and retirement accounts as well as any debts that are outstanding. Additionally, have copies of the last year’s activity in these accounts, know how they are titled and where they are held. If you are the spouse who does not normally handle these items, the financial planner will be a big help in gathering what you need.
5. Other important documents you might need are your last three years’ tax returns, copies of your estate planning documents, birth certificates, Social Security cards and driver’s license numbers.
6. Have enough funds in your name to cover three to four months of living expenses so you are protected if joint assets are compromised.
7. Get a new cell phone or landline in your name and change all passwords to any account you have.

As with all life-changing events, you should take your time. We have found that it is best to reserve larger decisions, such as selling the house or moving, until after the immediate urgency of the situation calms down. Whether or not you run the family finances, having a strong financial advisor is crucial to avoid difficult issues in the future. With good planning, both parties and their dependents can be well taken care of.

March 2012