Wednesday, April 4, 2018

Divorce: Often a financial disaster for women


"You never really know a man until you have divorced him," Zsa Zsa Gabor, Actress and socialite. (1917-2016)


BY JULIA ANDERSON

At 54, she has been living apart from her husband for more than two years but has yet to initiate a divorce.


“I’ve got to get this over,” she told me with a look of distress. “It’s just so hard to take the next steps.”


For her there are a lot of next steps: With a divorce can she continue to use his health insurance coverage? How does she negotiate a fair division of retirement savings assets? If he gets the house, what does she get? Does she have enough money saved to pay for a divorce attorney? I ached for her.


Divorce is horrible in so many ways…a personal failure, a loss, an emotional nightmare. For women, it also can be financial disaster. Few women are better off financially after a divorce.


According to a report in The Atlantic, women typically see a 20 percent decline in income when their marriages end. The magazine called it “The Divorce Gap.”


Sadly, one in five women fall into poverty after divorce. Why? They likely will have less income from a job (if they have one) than their ex-spouse and they typically have custody of the children.  Meanwhile, few divorced mothers (only 25 percent) receive full child support as spelled out in their divorce agreements.


Advice for my divorcing friend:

Get off the dime and get it done. The longer you dither the more time he has to find a new girlfriend, to decide he deserves more in a settlement or to hide money and assets.


Put together a post-divorce budget for yourself. Add up your livings costs for food, utilities, mortgage/rent, insurance, transportation, retirement savings, health care. This gives you a negotiating position in a divorce settlement.


Gather all financial documents. Savings and checking accounts, retirement accounts. Get an appraisal on your home to determine how much equity is there.


Cancel joint credit cards, immediately. His debt can be your debt and another negotiating tool in the divorce.


Open accounts in your own name – bank, credit cards, savings.


Determine how you will handle health insurance coverage, get your own or stay with his coverage.


Get short-term court-ordered rehabilitation alimony, if you have been out of the work force. The alimony will help cover retraining and a job search costs. Some jobs in demand require little training. Among them, phlebotomist, paralegal, certified nurses’ assistant.


Horde your money. Do you have enough savings to get you through the cost of a divorce? Do you have money to reestablish yourself afterward? Can your family help you?


Consider hiring a divorce team: therapist/counselor, divorce attorney and a Certified Divorce Financial Analyst who can help you set up a post-divorce budget and help negotiate the divorce.


Stay married, if you’re close to 10 years. How long have you been married? If you are close to 10 years, consider waiting until you cross the 10-year mark, which makes you eligible to claim Social Security benefits on your ex-spouse’s work record with no impact on him.


Alimony and the Tax Reform Act ChangesThe Tax Reform Act passed by Congress in 2017 made big changes to alimony tax rules. 

The OLD RULE: Recipients (98 percent women) had to report alimony payments as income and pay taxes on the money. The payer gets a tax deduction.

THE NEW LAW: The spouse receiving the alimony will NOT have to pay taxes on the income. But neither will the payer get to claim a tax deduction. Result: Tax savings for women, increased expense for men. This tax change doesn’t become effective until 2019.
 If you are at the beginning stages of a divorce, take time to do some research on what critical steps you should take. There’s plenty of info on line – see my list below.

Check out WIFE.org web site where founders Ginita Wall and Candace Bahr provide financial planning resources for women, particularly those divorcing or widowed.


They also support Second Saturday workshops throughout the U.S. aimed at helping women through divorce and/or widowhood. Check for a workshop in your area by going to WIFE.org.


WIFE.org home page topics include How to Choose a Divorce Attorney, the Benefits of Being Married 10 Years, A Step-by-Step Guide to Preparing for Divorce and Life Events and Your Finances: Are You in the Know?


They also support Money Clubs for women throughout the country.


Bumper sticker at WIFE.org – “A Man is NOT a Financial Plan.”


For more:

“How to Get Through Your Breakup and Create a New Life you Love,” by Suzanne Riss and Jill Sockwell.
“Divorce: Think Financially, not Emotionally. What Women need to know about security their financial future, before, during and after a divorce,” by Jeff Landers.
Divorce advice for women at WIFE.org.
Second Saturday Divorce Workshops, find a workshop through WIFE.org.


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