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10 Steps to Avoid Losing Your Shirt in a Divorce

Modern divorce is not about who was the meanest or who slept where. It's about the money. Both spouse's income and assets are -- or should be -- on the table. But couples don't always know a lot about each other's finances, or where to look. They might not even realize how much less they're worth, due to the squeeze on incomes and the housing depression.

Divorce rates fall during hard times because couples can't afford the split. But for people quitting anyway, the struggle ramps up. Here are 10 tips for getting the most out of a diminished marital pot:

1. Follow the money. If you don't know much about your spouse's finances, or aren't sure that everything is on the table, snoop. Any financial documents can be a clue to income or property: Online bank and investment accounts, life and homeowners insurance policies, payroll and retirement-plan statements, financial statements filed when you took out a mortgage, a copy of the will or trust, credit card statements, and tax returns (if you don't have copies of them, you can get joint federal returns for the past five years by filing Form 4506-T).

Assuming that you know your spouse's Social Security number, you can also get his or her credit report free online, at Unexpected debts or charge accounts might show up.

2. Dig into your spouse's business. Wholly owned businesses are notorious for shielding income from the IRS or from a spouse. Tax returns might not present a full picture of what the company actually earns. If a lot of money is at stake, hire a forensic accountant -- your divorce lawyer will know one. The accountant will press for documents that show more fully where all the business assets are and how much cash is floating around.

3. Protect your flanks. You'll need personal money to tide yourself over during the months it takes to reach a settlement. If your spouse hit you with the split by surprise, he or she is probably prepared, so you're at a disadvantage. Holding some money separately makes sense in any relationship. So do separate credit cards. Freeze an open, joint home-equity line and joint credit cards immediately, so your ex-to-be won't be tempted to run up extra debt. In "good" divorces, the freeze should occur by mutual agreement. In bad divorces, one spouse could be left without credit or access to cash.

4. Nail down any money you brought to the marriage. You can normally take inheritances and any pre-marital personal savings away with you, even in a community property state, as long as it stayed in your separate name. If you mixed it into the general pot of assets acquired after the marriage, however, it will probably have to be divided when you separate, in amounts depending on state law. You might get a larger settlement if you can show that your money financed the family business or your ex's professional education.

5. Go after the pension and retirement accounts. Individual Retirement Accounts, 401(k)s, and company pensions all have to be divided, although not necessarily in half. If you each have plans, both of them are up for grabs.

You can split an IRA with a written agreement, but you need a court-ordered Qualified Domestic Relations Order, or QDRO, to win part of a company plan. The QDRO should say what you'll get, when you'll get it, and how the value will be figured. The company has to approve the wording, to be sure that it follows all the plan rules. Otherwise you won't be paid, no matter what the divorce agreement says.

You'll need an expert to check the value of a traditional pension. If you can get only a future payout from the plan, you might want to trade it for more cash or property now. If your spouse has stock options, an excess benefits plan, or any other type of deferred compensation, negotiate for a piece of this, too.

6. Don't expect permanent alimony. A spouse with low or no income might get alimony, but awards are often not enough to support your current standard of living and are often for a limited time period. Judges expect dependent spouses who can do so to go out and get a job

Homemakers -- male or female -- sometimes think they'll do better coming into court looking "poor," says family law attorney Linda Ravdin of the Bethesda, Maryland, law firm, Pasternak & Fidis. All that does, she says, is to leave your ex free to argue that your potential earning power is, say, $80,000 -- and what does a judge know about it? You should get a better settlement if you can show that you've applied for jobs and will probably earn much less.

7. Fight for health benefits, when you don't have your own group plan. If your spouse carried the family coverage, you can usually stay in that plan, at your expense (or your ex's expense, depending on the agreement), for up to three years. Don't let these benefits (called COBRA benefits) slip away. You have to apply within 60 days of your legal separation or divorce.

8. Get tax advice right from the start, if there's a lot of money at stake. You'll want to know what any proposed settlement is worth after tax. There are lots of tricks. For example, say that the child lives with the wife, who takes the child to day care so that she can work. The husband might pay her an amount equal to the day-care cost in the form of temporary alimony. That way, he can deduct the payments on his tax return. The alimony is taxable income to the wife, but she can offset it by taking the child-care tax credit on her return.

9. Get financial planning advice right from the start. How much will you need to support yourself? Can you cover the cost of the house, if you take it as part of the settlement, or should it be sold and the proceeds divided? Is your spouse proposing to give you the risky investments while he or she keeps the safer ones? A good planner will help you think through these issues during the negotiation. One source of advice: The Institute for Divorce Financial Analysts.

10. Put $$$ in your pocket by avoiding a battle with your spouse. In hard times, divorcing couples struggle for every dime. But the more you fight, the more of those dimes vanish in lawyer's fees. If there are no children and few assets, you can usually do the divorce yourselves, even if you're only speaking by email. Otherwise, try to reach a preliminary agreement before a lawyer comes into the picture. Consider a divorce mediation professional, or a collaborative divorce where couples and their lawyers agree in advance to bargain instead of going to court. For more information, check the International Academy of Collaborative Professionals or

Divorce, unlike marriage, lasts until death you do part. It's important to get the agreement right.

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