by Caryn S. Lennon, JD

The second step for couples who are separating, after they get the emotional divorce, is the financial divorce. At some point the couple has to begin dividing up their financial lives. There are some important points to remember about this process:

• Everyone’s situation is different. A plan that works for one couple could be totally wrong for another.
• Financial decisions should be made based on needs and interests, with a focus on the future. Anger, fear and guilt should be kept out of the decisions on money and property.

The first step in the financial divorce is an inventory of the couple’s current financial situation. Before they can make choices about the future they should have a clear understanding of where they are in the present. The financial inventory has to include all the information available on assets, debts, income and expenses.

Copies of statements from bank and brokerage accounts, credit cards and employers, plus tax returns, deeds, mortgages and car titles will be needed to determine two critical factors:

• Cashflow Take monthly income and subtract monthly expenses to determine cashflow.
• Net Worth Take the value of all assets and subtract the total amount of debt to determine net worth.

A fair financial agreement depends upon a complete and accurate assessment of these factors. Child and spousal support needs are directly related to the monthly cashflow of the spouses. A couple with a positive net worth will have assets to divide; a couple with a negative net worth has to figure out who will be responsible for the debts.

Valuation and division of assets such as stock options, pensions, businesses and real estate is a complex process. The correct calculation of child and spousal support can mean the difference between a secure financial future and a life of near poverty. Most lawyers don’t have the expertise required. The best person to help with the financial divorce is someone trained in finances, such as a Certified Divorce Planner, a Certified Financial Planner, or a Certified Public Accountant.

© 2004 The Divorce Resource Network, LLC