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Getting a divorce? Protect yourself financially -- Page 2

You need to decide which spouse gets which car. The actual transfer of one spouse's name off the deed to a car is shown on the divorce decree, according to Sember, so you just need to file those papers with your state's Department of Motor Vehicles. The decree also assigns responsibility for paying off the loan for each car to a particular spouse, but if the loan was taken out in both names, they will stay there unless it is refinanced in one name.

As far as any other joint loans that you have -- including home equity lines of credit, home improvement loans, boat and RV loans, etc. -- unless it is refinanced in one person's name, you could still be on the hook for payments even if the divorce decree states otherwise.

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If your ex-spouse defaults and violates the decree, you can haul him or her back to court. "However, if he doesn't have money to pay the loan, it's unlikely he'll have the money to pay you," Sember notes. So it's important to get as much of the debt as possible refinanced in the person's name that is responsible for it in the divorce decree, but this can be a problem if one spouse has credit problems.

While the divorce is still pending, give your lawyer a list of all outstanding loans and credit cards and he or she will get temporary orders from the court specifying who will pay what amounts to keep all these accounts current until the divorce is final, Sember says. If this doesn't happen and the loans and bills aren't paid, both parties could end up with bad credit.

Bank and investment accounts
Along with a list of loans and other joint obligations, make a list of all bank and investment accounts that are held jointly. Don't forget any custodial accounts, such as Uniform Gifts to Minors, Coverdell college savings accounts and Section 529 plans that you and your spouse have.

Remember, each spouse has access to all joint bank and investment accounts and can take money out without the other spouse's permission. You can freeze all the accounts so that your spouse can't remove money from these accounts until the divorce is over or you can agree to split the money in the accounts (except for the custodial accounts) and open new single accounts right away.

"You might want to keep one joint account open to pay household bills until the divorce is final," Sember says. "You'll need to agree on how much each person will deposit and trust that your spouse won't do something else with the money."

If you and your spouse can't agree, the question of who gets which investments and cash amounts will be settled in the divorce decree. "When you have the decree, prepare one stock letter of instruction that you can send out to all the bank and investment accounts that says how the money or investments are to be split," says Maton. "Be sure to include the first page of the divorce decree, the page that specifically deals with that account and the signature page. Some banks and companies will want your signature on the letter to be guaranteed and some won't."

When the divorce process is started, open a checking account in your own name if you don't already have one. It's important that you have access to cash going forward, especially if all joint accounts are frozen. If you're really worried that your spouse will drain the accounts before you can get them frozen, consider removing half of the money and placing it in a separate account and make sure to talk to your lawyer about what you're doing, Sember says.

Other matters
When both parties are signing the final settlement, Maton recommends that they also make sure that all monies are transferred to new accounts. "This final settlement meeting is a good place to make sure that all retirement assets and any other assets are placed where they should be," she says. "Everyone is signing documents, so what's a couple more? If you wait, you can end up chasing your ex-spouse around for months trying to get a signature that you need."

Right after the final settlement is a good time to make sure that you change your will, durable power of attorney, insurance beneficiaries, retirement account beneficiaries and get new insurance policies in your name only. "I get people in for financial planning and sometimes I find out that an ex-spouse from years ago is still the beneficiary of a retirement plan or insurance policy, even after a new marriage, so it's important to take care of all these details right away," she says.

And what about everyday bills and taxes? If they are related to the house, make sure they are in the name of the person who is getting the house. Notify the various companies -- electric, cable, gas, phone, etc. -- that you aren't responsible for the bills going forward. Consult your accountant or tax adviser on how you should file your taxes for the year the divorce occurred.

Continue to periodically look at your credit report to make sure your ex-spouse isn't getting new credit using your name. If your ex-spouse isn't paying off bills like he or she is supposed to, Sember recommends that you write to the credit reporting agencies. "Ask to have a personal statement included on your report," she says. "In this statement you should indicate the date of your divorce and the terms of your decree that deal with your debt -- that explain that your ex is legally responsible for the debt."

And what about remarriage? Delia, who asked that her last name not be used, is going through a divorce and periodically thinks about how she would handle credit, property and financial issues going forward if she marries again.

"When you get married, no one talks to you about the practical aspects like money and credit," she says. "I really believe in marriage and never thought I would get divorced, so everything was joint. But now I'm thinking that if I ever did get married again, I'd have a prenuptial agreement that would set out what would happen in a divorce and it might be better to keep the money separate."

-- Posted: Oct. 22, 2004




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