Dear Carrie, My sister is contemplating a divorce. She's always worked part-time but has pretty much let her husband handle the money. She also has two kids under 10. I'm worried and want to help. Do you have suggestions for how she can protect herself financially? --A ReaderDear Reader, When facing a divorce, emotions often cloud financial judgment, so your sister is lucky to have someone like you to help her think clearly. She could have to deal with some potentially contentious issues, such as division of assets, payment of outstanding debts, spousal and child support -- all of which can seem overwhelming, especially to someone who's not used to handling financial matters.
Preparation is your sister's best protection. There are a number of things she should think about -- and do -- whether or not she ultimately decides to divorce. And while she'll have to handle many of the details herself, you may be able to lend a hand by helping her prioritize and take things step by step.
Collect financial information
To me, no matter what the circumstances, each partner in a marriage should be aware of overall household finances and have access to financial information. For your sister, gathering this information will be the first step toward feeling more secure. Records she should have on hand include:
--Property owned (i.e., house, car) and how it's titled
--Outstanding mortgage or home equity loans
--Bank and investment accounts, including account numbers and balances
--Consumer debt such as credit card balances and auto loans
--Types of insurance (homeowners, auto, life, health) and where the policies are kept
--Retirement accounts, both her own and her husband's
--Estate planning documents (wills, trusts, etc.)
It would also be wise to take an inventory of household goods and personal property. All of these things can factor into a divorce settlement.
Establish individual credit
If she doesn't already have at least one major credit card in her name only, urge your sister to open one immediately and use it. This will help her establish a personal credit history, which will be essential should she decide to be on her own.
Once she has her own credit in place -- and she's started divorce proceedings -- it would be a good idea to close old joint credit card accounts. It's best to do it in writing, clearly stating that she's no longer responsible for new charges. Letters should be dated and copies kept.
Figure out short- and long-term financial needs