10 steps to a money-smart divorce

By Bankrate.com

When your marriage breaks up, the last thing you feel like doing is crunching numbers. You're hurt, perhaps angry, and possibly overwhelmed with anxiety, fear and despair. You're focused on the past and present, not the future.

But as many divorced couples learn the hard way, this is precisely the time you need to get a grip and pay close attention to your assets and your financial future, lest both slip away in the flood of emotion.

"First and foremost, it's a business deal," says Gayle Rosenwald Smith, a Philadelphia family lawyer and author of "Divorce and Money: Everything You Need to Know." "That means you've got to get rid of your emotion any way you need to, whether through therapy or going to a gym. Because your divorce should be based on one thing: your property settlement. It's a matter of numbers, that's all it is."

Financial educator Ruth Hayden, author of "For Richer, Not Poorer: The Money Book for Couples," agrees, but admits that's easier said than done.

"At least 80% of money is about self-management, about emotions, and 20% is about quantifying and computing," she says. "The counting part is easy; it's the emotional part that's hard."

Clear the decks and set sail

Since money is the No. 1 cause of divorce, it's safe to assume that splitting the financial sheets won't be easy. Here are 10 steps to help you cast off, steady your financial ship and set sail for the solo voyage ahead.

• 1. Pull your credit report.

• 2. Open individual bank, credit card and brokerage accounts.

• 3. Close all joint accounts.

• 4. Keep separate property separate.

• 5. Consider selling the house.

• 6. Change those beneficiaries.

• 7. Reclaim your name.

• 8. Check your retirement.

• 9. Guard your health coverage.

• 10. Dust yourself off and start living.

Pull your credit report. "Pull your credit report before the divorce so that anything in dispute can be resolved before the divorce is final," says Hayden. There are three major credit reporting agencies: Experian, TransUnion and Equifax. Be sure to get a copy of your report from each of them. The reports are the quickest and easiest way to get an overview of the outstanding loan balances, mortgages and credit card debt that you and your spouse will eventually divvy up. (Also see "How to get a credit report for free.")

Open individual bank, credit card and brokerage accounts. You also need to do this before the breakup is official. It will be easier to get a credit card and bank account in your own name while you are still married and share joint assets and debt on credit cards, mortgages and loans. Hayden says this is especially important for a woman who has never established credit in her own name. "It's easier for a 15-year-old to get a credit card than it is for a 50-year-old divorced woman. She just gets deleted," Hayden says. (For more, see "Your 5-minute guide to credit scores.")

Close all joint accounts. A divorce can take time. To avoid acquiring additional joint debt (or suddenly losing shared bank assets) during the legal process, close your joint credit card and bank accounts. You will, however, still be jointly responsible for paying off the balance of the closed accounts. Cancel the accounts in writing and be sure to request that they report each account as "closed by customer" to the credit bureaus.

Closing shared accounts is a critical step and one that is too often overlooked, says Smith. The more you remain connected to your ex-spouse financially, the more you are at risk. If possible, pay off joint credit card balances by check from your individual bank accounts or through balance transfers to your individual credit card accounts.

"In a property-settlement agreement, couples often split their debt. One person takes the MasterCard and another, the American Express. Well, that's an agreement between the two of you, not between you and the credit card company," says Smith. "What will happen is, one person declares bankruptcy down the road and the credit card companies come after the other. You might be better off each borrowing in your own name and each paying off the credit cards so that you come out of the marriage without any joint debt." (For more, see "Don't let your ex trash your credit.")

Continued: Covering your assets

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