If your marriage is in turmoil and you fear that the end is in sight, heed this divorce consultation we had with Molly McCormack, senior wealth management advisor at TIAA-CREF Financial Services. She offered the following women and divorce guide for managing your money and setting yourself up for the brightest possible future.
Step 1: Get your ducks in a row. McCormack advises doing some homework before you hire a financial advisor. "It can be eye-popping," she says. Get copies of all your financial records – bank statements, credit card statements, loan applications, mortgage records, retirement account statements and tax returns for the past three to five years. "You can get a free credit report every 12 months, and there's a lot of good info in that," McCormack says. "Clients are surprised to learn that assets aren't titled jointly. Maybe they're not building credit on their credit cards; they're just authorized users."
Step 2: Get the support you need. "Divorce is not easy, and you'll need all kinds of support emotionally and financially," McCormack says. In addition to an attorney or mediator, you'll want a financial professional too. "You need to understand your financial picture and you should get a clear sense of how much you will need to live on your own." She goes on to say that "I've had clients where we've had a trusting relationship and I've worked with both parties. But women often feel marginalized, and it's vital to have someone you trust and takes you seriously. If your current advisor isn't doing that, find one you're comfortable with."
What should you looking for in a financial planner beyond someone trustworthy who listens to your needs? Find out whether the advisor works on a fee-based schedule or on commission. Ask yourself, are there conflicts of interest? Will he/she act in your best interest in every instance? Also find out whether the planner does asset management (Will he/she give you the road map and implement it with actionable advice on investments?). What kind of expertise does he/she have?
Do some research on various divorce options in your state before you hire an attorney. Could you use a mediator instead of lawyers? Could you take advantage of other lower-cost options like collaborative divorce?
Step 3: Build a cash reserve. Work with your financial planner to understand your individual expenses, and what assets you have to support you. "Often overlooked in the expense column is health insurance. If you're covered by a spouse's plan, you may pay higher payments under COBRA or using your own company's program or an individual policy," she says. Before you start a split, make sure you have enough money to cover your expenses. "That's vital. Some attorneys won't work with you without a substantial down payment. Be ready to move forward and have the resources."
The Woman to Woman Financial Empowerment Program at TIAA-CREF offers advice on preparing for divorce and other topics concerned with managing your money.