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Prism Family

How to afford that divorce you both want

WASHINGTON (Reuters) - You can say one thing about celebrity train wreck marriages: Those famous can afford to make big fat divorce settlements and move on.

That’s not so true for most everyday people. In fact, tough economic times are making it difficult for some troubled couples to split up at all. More couples are continuing to cohabitate even as they break up their marriages, because they can’t dump their houses. Spouses worried about the weak job market don’t want to sign on to costly alimony agreements and can’t see paying lawyers tens of thousands of dollars either. They can’t even bring themselves to talk about paying for braces and tuition bills that may be a decade or more in the future and seem insurmountably high.

Yet staying together for the sake of the MasterCard bill probably isn’t the best way to go either. The relationship deteriorates, the kids suffer, and the finances don’t improve enough to make a difference. There are new specialists, including mediators, divorce financial planners and forensic accountants who can make the financial piece of divorce easier. Here’s how to use them, and how to equitably split the cash after the relationship has been ripped asunder.

Get info. A clear picture of where each spouse stands is critical. Find out how much the house is really worth in today’s market. Add up all of the credit card bills. If there’s reason to believe a spouse may be hiding money, hire a certified public accountant who specializes in forensics - finding hidden money - to make sure that all of the assets remain on the table.

Get tax and financial advice. This isn't the same thing as legal advice. The way that you structure alimony, retirement transfers and home sales can make a huge difference in how much money is left at the end of the day. Financial advisors who specialize in divorce know all about how to divide homes, 401(k) plans and other assets so that taxes are reduced and more money stays with the couple. To find a specialist, check the Institute of Divorce Financial Analysts (www.institutedfa.com) and the Academy of Financial Divorce Practitioners (www.academyfdp.org.)

Dump the house, if you can. It is very typical for the wife to want to keep the house, particularly if there are children involved. But often she can’t really afford to keep it up, and trades valuable assets such as retirement savings just to hold on to the home. If one spouse stays in the house but depends on the other to keep up mortgage payments, that can compromise the credit rating and financial health of both of them, and keep them tied together financially long after they’d like to move on. In today’s tough real estate market, some couples are finding they have to negotiate short sales - selling the home at a price below what’s owed on the mortgage and getting the bank to accept the lower payment as payment in full. If you’re upside down on your home loan - owing more than you own - look for an attorney who is a short sale specialist.

Talk about college. Children of divorce are less successful at completing college than children of intact marriages, and that’s often because the parents split without coming to terms with who will pay those whopping tuition bills. The more specific the agreement on this, the better. Decide early on what percentage each spouse will pay, and also discuss amounts. For example, parents might agree on a college budget based on what schools are charging today, and then agree to adjust it upwards by the rate of inflation until the child is of college age.

Consider kick-out clauses. Some spouses are reluctant to agree to pay alimony because they worry that their job might disappear, so they write emergency clauses into their agreement that allow them to trim the alimony if they suffer a financial setback. That’s fine, says Stacy Francis, a New York divorce financial analyst, as long as it goes both ways. What is the alimony-paying spouse wins the lottery? In general, emergency clauses should be temporary.

Mediate. It’s only the minority of divorces that go to court. More couples are realizing that if they can negotiate the finances, the house and the custody themselves, they can save big bucks on lawyers. You’ll still want a lawyer to look over the agreement.

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