Article:7 mistakes women make in divorce

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Registered: 01-30-2004
Article:7 mistakes women make in divorce
Thu, 08-25-2005 - 9:15pm
BY JOANNA KROTZ

Whether you're now facing divorce or think you might be in the future, here are seven financial missteps to avoid.
1. Confusing ignorance with bliss. "Too many women let their husbands handle all the bills and don't know their marital cost of living," says Bill Zabel, the New York family attorney who is representing Jane Welch in her much-publicized divorce from General Electric titan Jack Welch. Ignoring finances is the number-one mistake women make, experts say. Many otherwise sophisticated women haven't a clue how much money they need for living expenses.

2. Owning everything jointly. Keep some assets and bank accounts in your own name. You'll need established credit if you're ever on your own. Plus, you'll be able to hire a divorce attorney without tipping off your husband. And you'll need your own money to fund the war chest it takes to hire all the financial analysts, forensic accountants, certified divorce planners and others who calculate the real and future worth of complicated or hidden assets.

If you enter into a marriage with children or assets, draft a prenuptial agreement that spells out the specifics of ownership and what happens in the event of divorce. Even if you're the less wealthy spouse, a prenup may be pertinent. "Jane Welch, who was a lawyer before marrying Jack, put a clause in their 1989 prenup that said it expired in ten years," says Zabel. Jack Welch sued for divorce in March 2002.

3. Crying on the lawyer's shoulder. Many women rely on divorce attorneys for psychological advice. But the more a lawyer talks to you, the higher the fee. It's likely that you will be billed in quarter- or half-hour increments, so every five-minute call costs the same as a 15- or 30-minute one (it's worth learning the fee structure at the outset). "Some clients phone me three or four times a day," says Alter. "It's not a wise way to spend money." For routine information, contact the paralegal staff. If you're feeling angry or blue, call a friend.

4. Demanding money as reparation. Most courts won't award additional assets or income for run-of-the-mill bad behavior, like infidelity. "Alimony is for people who can't support themselves," notes Alter. "It's not punishment." Some women prolong negotiations because they want payback, but all they'll get is a more expensive divorce.

5. Ceding control to pros. "It's your responsibility to manage the process," says Lorna Wendt, who refused to accept the usual 10 percent settlement given to spouses in her 1998 divorce from former GE Capital CEO Gary Wendt. That "enough is enough" standard was what judges deemed appropriate for less wealthy spouses (i.e., affluent, stay-at-home wives). Wendt turned down a $10 million settlement and won more than $20 million, earmarking $2 million to fund the nonprofit Equality in Marriage Institute (equalityinmarriage.org). "If you don't take control, you have no right to say 'I didn't realize what I signed,'" she says.

6. Acting on advice from friends. When friends urge you to secretly empty bank accounts or quit your job in order to qualify for more alimony, thank them and walk away. "Sometimes such advice may be valid," says Alter, "but as a first strike, it will infuriate your husband, and it might make the judge look at you askance."

7. Letting estate plans trump self-preservation. Be careful how you tie up money. Most people with sizable assets shelter some of them in investment vehicles or irrevocable trusts to avoid income and estate taxes. Few couples consider the prospect of divorce at such times. But many tax-deferred assets cannot be divided. And, after divorce, if life-insurance benefits go to the children, you may not have enough to live on. Consider the liquid assets you may need.

Lawyers also caution against using children as a weapon in divorce. In addition to damaging them, of course, that tactic ultimately influences the settlement. "Don't get into a place where the judge hates you and your spouse is terrified of you," says Alter. The better bet is to hire a smart forensic accountant and figure out what's fair.

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