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Divorcing? Protect Your Finances, Personal Data

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No doubt you've seen many warnings against sharing personal or financial information with strangers, but what about your spouse -- or ex-spouse? A recent study by McAfee revealed some unsettling findingss:
  • Although 96 percent of adults surveyed trust their significant other with passwords, intimate photos and other personal content they've shared via mobile devices, only 32 percent have asked their ex to delete the information when ending the relationship.
  • One in five people said they're likely to log into their spouse's Facebook account at least once a month.
  • Some 30 percent admitted they'd "cyber-stalked" their significant other's ex on social media.

Given the high rate of divorce and how frequently marriages and other relationships end acrimoniously, it's not a big leap to think that a scorned lover could cause just as much damage to your credit and reputation as an identity thief halfway across the world.

If you're getting divorced, here are some important legal, financial and privacy considerations:

Get good advice. If you and your spouse are in complete agreement on how you wish to divide assets and settle debts, you may be able get by with a do-it-yourself divorce kit. Laws vary by state, so make sure to get one that applies where you live. It's still wise to have a divorce attorney review the forms to make sure you haven't overlooked anything you'll later regret.

If your separation is more complicated but relatively amicable, you may also want to try collaborative divorce, mediation or arbitration:
  • Collaborative divorce. Both parties retain a lawyer and the four of you hash out an agreement at a conference table, rather in a courtroom. You each control the final agreement instead of having to abide by a judge's decision.
  • Mediation. You each have lawyers but hire a third-party mediator to work through differences on critical issues. Although mediators are often attorneys themselves, they don't have the legal authority to impose final decisions.
  • Arbitration. Like mediation, except that the arbiter hands down a binding agreement by which you each must abide.

If you can't settle out of court, be prepared to possibly pay many thousands of dollars in attorney and court fees. Ask around for referrals to lawyers who specialize in divorce. Another resource is the American Bar Association, which has a state-by-state search engine for finding legal help.

You may also want to consult a financial planning professional for advice on how to fairly divide property, calculate child support and ensure you're sufficiently insured, as well as explain Social Security and retirement plan implications. If you don't know one, good resources are the Financial Planning Association and the Institute for Divorce Financial Analysts.

Safeguard your credit. To protect your credit status, close joint bank and credit card accounts and open new ones in your own name; otherwise, an economically struggling or vindictive ex-spouse could amass debt in your name and ruin your credit. If your ex retains the house or car, make sure your name is taken off the loan (and deed or pink slip) so you won't be responsible if they flake on payments.

Be sure all closed accounts are paid off, even if you must transfer balances to your new account and pay them off yourself. That's because late or unmade payments by either party on a joint account -- open or closed -- will damage both of your credit scores.

Check your credit reports before, during and after the divorce to make sure you're aware of all outstanding debts and to ensure that all joint accounts were properly closed. The three major credit bureaus, Equifax, Experian and TransUnion, don't always list the same accounts, so to be safe, order credit reports from each. You can order one free credit report annually from each through AnnualCreditReport.com or more frequently for a small fee directly from each bureau.

Protect your reputation. Be sure to change all passwords, PINs, security questions/answers and any other information your ex could use to access your electronic devices and financial, email and social media accounts. Also, resist the temptation to email or post malicious, salacious or revealing information that could be damaging if presented in court by opposing counsel.

A few additional tips:
  • If your ex knows the answers to common security questions (mother's maiden name, first pet, etc.), you can always change them to something fictitious that only you know. Just make sure you keep track of all your fabricated answers so you're not locked out as well.
  • Before hiring an attorney or financial advisor to oversee your divorce, make sure you fully understand how they will bill their time -- whether hourly, fixed fee, or some combination, depending on the case's complexity.
  • To simplify their task (and thereby lower fees), gather copies of important financial paperwork including: tax returns; retirement accounts; pay stubs; employee benefit statements; life, health, homeowners and auto insurance policies; bank, brokerage, mortgage and credit card account statements; home deed or lease; and wills, trusts and other legal documents.
  • Your attorney may need to file a Qualified Domestic Relations Order (QDRO), which establishes your right to receive a portion of your former spouse's pension or other retirement plans. Be sure to consider the accounts' future value, especially if an IRA or 401(k) suffered recent investment losses.
  • Appraise real estate, artwork and collectibles to determine their value before dividing. The same goes if you co-own a business and one spouse will be buying out the other.
  • If alimony or child support is included in the settlement, take out a life insurance policy on the person paying it, which names the receiving ex-spouse as beneficiary.

Bottom line: Divorce can be a painful experience to live through. Don't make it worse by not protecting your own financial interests.

This article is intended to provide general information and should not be considered legal, tax or financial advice. It's always a good idea to consult a legal, tax or financial advisor for specific information on how certain laws apply to you and about your individual financial situation.