If divorce is heading your way, and there's money to divide, don't assume that a lawyer can tell you everything you need to know.
Lawyers know the law and the likely size of the financial settlement. But it's not their job to forecast whether you're going to have enough money to live on.
Lawyers also may not analyze the value to you of the property that you want from the marriage. Maybe you've chosen wisely, but then again, maybe not.
For advice on dividing up property, financial planners are increasingly part of the team. But it must be a trusted financial planner, working for an hourly fee. You want analysis and financial projections, not salesmanship. Run away from a planner whose advice centers on all the nifty financial products you ought to buy.
The planner is your personal reality check. You need to figure out how much money you'll need to live on, and where it will come from. How will you manage on the settlement under discussion?
The planner can also supply your lawyer with data to use in the divorce negotiation. The budgets he or she draws up may help a wife get more support or, conversely, help a husband minimize his spousal support.
If there are stocks and bonds to divide, you'll need an investment evaluation. Some securities will be riskier bets than others. Which ones do you want?
If you leave the marriage with highly appreciated stock, you'll pay a lot of taxes when you sell. So it's not worth as much as you thought it was. You'll need an after-tax evaluation of what the settlement is worth.
If there's a house, the wife often wants it so that she and the children won't have to move. But that's sometimes a questionable choice. The mortgage and upkeep may be more than she can pay unless her ex-husband helps. (Housing shouldn't cost more than 30 percent of your income.)
If the wife takes the house, then finds she has to sell it and move to a smaller house or apartment, she'll owe taxes on part or all of the profits. That will reduce the value of her settlement. You'll also need good advice on the tax implications of dividing the home. If your planner isn't a tax-law specialist, your lawyer should urge you to add a tax lawyer or accountant to the team.
If you both own the house, and one spouse moves out, that spouse risks losing the house as a principal residence. When the house is sold, the departing spouse may not be able to defer the tax on the capital gain.
Many lawyers have been advising their clients that they have two years to sell the house and take the tax deferral.
But a recent decision by a U.S. Court of Appeals (9th Circuit, covering part of the West) says that's not so. Departing spouses lose the tax deferral when, pursuant to a divorce settlement, they give the in-home spouse the right to exclusive occupancy, says divorce attorney Jan White of Pasternak & Fidis in Bethesda, Md. When the house is sold, they'll owe a capital-gains tax on their share of the profits.
If you're 55 or older, headed for divorce and sell a jointly owned house, you've got another potential problem on your hands.
You have a one-time option to exclude up to $125,000 in profits from the capital-gains tax. But both spouses have to agree. If you want the exclusion now, but your spouse wants to roll over his or her share into another house, you're out of luck.
Solution: Sell the house after you divorce. Then each of you gets a $125,000 exclusion, usable whenever you want.
If you work for the federal government, get a planner and attorney familiar with its benefits. Military, foreign service, and civil service spouses qualify for a variety of benefits, depending on how their divorce is structured.
Hire an investigative accountant if you think that your spouse is hiding assets. Wholly owned businesses are especially notorious for shielding income and assets from public view. One accountant who specializes in divorce cases says that underreporting deprives spouses (usually wives) of 20 percent to 50 percent of their rightful share of property and support.
You've nothing to gain by vindictively calling the IRS. If your spouse underreported personal income, and you signed the joint income-tax return and benefited from the tax evasion, the IRS generally holds you equally liable for the taxes owed.