In 23 years of marriage, Suzanne Bryson cooked dinners, planted flowers, remodeled rooms, repaired sprinklers, attended school meetings and made sure the furnace got fixed.
She rarely thought about money. Her husband worked and took care of the finances. “My job was to be a good corporate wife,” says Bryson, a mother of two college-age children.
When the couple separated a little more than two years ago, besides facing the pain of a broken marriage, she was filled with fear and uncertainty over how she would get by.
“I didn’t know what investments we had. I didn’t know what the electric bill or gas bill was. I had no idea where the money was going to come from,” she says.
Bryson, 47, got help. She sat down with a financial planner and figured out her long-term needs before agreeing to a settlement. She now works in an art gallery, and believes that planning helped her get a better deal.
Financial planners and accountants say they see many women like Bryson-after it’s too late to be of real help. Many women “come to me with their divorce settlement, and I feel like saying, `Why didn’t you come to me before this was finalized,”‘ says Peggy Ruhlin, a financial planner in Columbus, Ohio.
Predivorce financial planning probably makes sense for just about anybody (couples who have done such planning often take less time to reach a settlement, thereby cutting down on legal fees), but it can be especially important for homemakers confronting a midlife divorce.
These women-often people in their 40s, 50s and 60s who left the work force to raise families and relied on their husbands to be breadwinners-frequently have a weak grasp of their financial situation and can end up with the short end of a settlement, divorce specialists say.
Here are some tips that can help “traditional” wives-and others who feel lost in a financial maze-even the odds:
– Think twice about the house. Perhaps the most common mistake women make is insisting they get the house. Many husbands are only too happy to give it up while hanging onto some other valuable asset, such as their pension plans.
“The house is familiar, it’s security,” Ruhlin says. But even if the mortgage has been paid off, a house can generate thousands of dollars in property-tax bills and maintenance costs, and it generates zero income. And if you end up having to sell and move to a less expensive home, you can be hit with a whopping capital gains tax.
Many financial planners recommend spouses agree to sell the house as part of the settlement. They can share the proceeds and the tax liability.
– Beware of second-rate investments. Suppose your estranged spouse offers you a 50 percent, or greater share, of the investment portfolio. Sounds fair, right?
Not necessarily. “Often, men use settlements to dump assets they don’t want,” says Janet Briaud, a financial planner in Bryan, Texas.
Topping the list of investments to avoid: limited partnerships. They’re difficult to value accurately, hard to sell and often saddled with tax liabilities. Many are nearly worthless.
Real estate is also tricky. While rental property can produce valuable income, it may be subject to stiff taxes in the event you need to sell.
Before accepting real estate as part of any settlement, get an outside appraisal and have your CPA or financial planner check out tax issues. Also, ask yourself if you’re prepared to be a landlord. In general, the best investments are the most liquid: stocks, bonds and mutual funds.
– Don’t overlook retirement plans. Pensions, 401(k)s and individual retirement accounts can be among the most valuable assets a homemaker spouse can have.
These plans are especially important for spouses who have no retirement investments of their own and may be hard-pressed to save in the years following a divorce, says Robert Stephan Cohen, a New York divorce attorney.
“Most people in the divorce process think about what they’re getting now,” Cohen says. “How are they going to survive in their senior years?”
Alton L. Abramowitz, a New York divorce attorney, offers this warning: “Don’t tie up too much of the settlement in retirement assets if you need the money to live on.”
– Plan for training and child-rearing expenses. Many women who have been homemakers will need to go back to school or get other training to re-enter the work force. Be sure to include a provision for such costs in the settlement.
If there are children staying with you, you’ll need to plan for those costs as well. Child support will pay for some of those expenses, but typically won’t be enough to pay for child care if you return to work.
– Other considerations. In general a lump-sum settlement is preferable to alimony because you don’t have to rely for continued payments from your ex. But few people have the financial resources to provide for an equitable settlement in a lump sum.
Be sure your former spouse has life insurance to cover any payments he’s supposed to make to you in future years. If you’re covered by your spouse’s employer-based health plan, and his company has 20 or more employees, you should be able to keep that coverage for up to 36 months under COBRA, the Consolidated Omnibus Budget Reconciliation Act of 1985. But premiums could run several thousand dollars a year; you may want to get your spouse to agree to cover those costs.
If you need to establish a personal credit history, you might get your spouse to agree to co-sign applications for credit cards and loans for several years.
