ost fights in a marriage are about money, and things don't change one bit when it comes to divorce. In fact, things often get worse. Way worse. Who gets what, who pays for what, who earns what—it can be a real mess, both before and after the final hearing.

Getting the right information ahead of time can save you time, aggravation, and money. Although it's impossible to cover every situation, here are a few basics both sides should pay attention to when they start divorce proceedings.

Differences in
tax treatment
make it critical
for couples
to work with lawyers
and professional
financial advisers.
Door one or two—the house or the pension
Linda quit her job eight years ago to stay home and raise the kids; Jim kept working his way up the corporate ladder. When they decided to divorce, Linda wanted to keep the house for the children. Because his 401(k) balance was equal to the equity in the home, it seemed fair that she could keep the house and he could keep his 401(k).

What's wrong with this picture? "Things may look equal at the start, but the spouse that remains in the house, often the wife, finds that she failed to carefully consider the scope of additional expenses," says Steve Bach, Madison, Wis., a member of the American Academy of Matrimonial Lawyers. "On top of upkeep expenses, she may find that she can't easily afford to make the mortgage payments and pay the property taxes. If she later decides to sell the house during a market downturn, she may end up losing money after figuring in all sales and relocation expenses. What looks like a great and equitable idea on paper can end up to be a situation that doesn't work in real life."

Bach says it may be a better idea to sell the house and split the equity. The couple also can split the retirement account, arranging to have a separate account created and maintained in the other spouse's name.

One potato, two potato—maintenance or child support
Avery and Lillian had two elementary-school-age kids. Avery worked part time for a delivery service and was home with the kids after school and during breaks. Lillian worked full time in a high-paying job. Lillian realized she'd have to pay some kind of support, but couldn't decide whether to pay Avery maintenance (alimony) or child support.

What's the difference? Tax consequences, says Karen Grothman, Certified Divorce Planner with Suby Von Haden, Madison, Wis. Child support is not deductible by the spouse (Lillian) paying the money, and the spouse on the receiving end (Avery) doesn't have to include it as income for tax purposes. Maintenance payments, however, are deductible for Lillian, and Avery must report the payments as taxable income. Grothman says these differences make it critical for divorcing couples to work with their lawyers and with professional financial advisers.

For example, let's say Lillian's income puts her in the 43% marginal tax bracket. Based on her income and number of children, her options may include making monthly payments of either $7,750 in child support or $12,500 in maintenance. Given the tax consequences, says Grothman, these numbers mean the same cash flow after taxes. So, depending on the financial situation of both spouses, maintenance might be a better deal if one spouse is in a high income tax bracket and the other needs additional cash. However, if you set up a family support agreement, make sure there aren't any changes in payments that coincide with any of the children reaching the age of majority, Grothman cautions. This could cause the Internal Revenue Service to review your file, reclassify part of your payments as child support, and tax accordingly.

A divorce decree
does not supersede
an original contract
with a creditor,
and doesn't
release you from
legal responsibility
on any accounts.
Rock, scissors, paper—remember health coverage
All of Sally's insurance benefits came under her husband's work policy. When they separated, she was worried about how she'd get insurance coverage because her employer didn't have a health insurance plan. She was concerned because her husband said he didn't think she'd qualify for his insurer's COBRA (Consolidated Omnibus Budget Reconciliation Act) benefit plan.

According to the International Foundation of Employee Benefit Plans, Brookfield, Wis., spouses and dependent children of covered employees facing divorce or legal separation are entitled to a maximum of 36 months of COBRA benefits coverage, allowing them to buy certain insurance at group rates. Under federal law, in general, the covered employee or his/her spouse is responsible for informing the health insurance plan administrators within 60 days of the "qualifying event," in this case the divorce or legal separation. The plan administrator must in turn notify the qualified spouse in writing, usually within 14 days, of his or her COBRA rights. It's a good idea to find out as much as possible about the availability, cost, and scope of any COBRA benefits as soon as possible—especially before finalizing any financial settlement with your spouse.

Eeny, meeny, miney mo—you owe me or IOU
When Tess and Mickey divorced, they split their joint debt down the middle. After one year, Tess had paid off her share, but Mickey had made only a dent in his balance. Creditors started calling Tess to pay bills the judge had assigned to Mickey, threatening her credit record if she didn't make the payments.

Ouch! Unfortunately, what the court rules doesn't make its way into your creditors' files. According to Equifax, a national credit reporting agency, a divorce decree does not supersede the original contract with the creditor, and doesn't release either partner from legal responsibility on any accounts. If you want out of the debt, you have to contact each creditor individually and seek their binding release of your obligation.

And good luck trying to get that, says Paul Richard, executive vice president for the National Center for Financial Education, San Diego. He says creditors are loath to take the name of a spouse off a joint loan, especially on unsecured credit cards. Forget good intentions and unenforceable promises. He advises couples experiencing "domestic meltdown" to cancel every joint credit card and pay all joint bills in full before the divorce is finalized—even if it means delaying the final court date.

If one spouse keeps the house as part of the settlement, the other spouse should be aware that his or her name will stay on the mortgage even though he or she has forfeited all interest in the house and his or her name is off the title. If the mortgage lender won't release the departing spouse from the loan, any late or defaulted payments will show up on his or her credit report. So, encourage the spouse keeping the house to refinance the loan in his or her name.

Spouses and
dependent children
of covered employees
are entitled to
a maximum of
36 months
benefits coverage.
Duck, duck, goose—you've earned Social Security After 34 years of marriage, Lucille and Henry got divorced. She'd stayed home and raised the family and now was worried that because she hadn't worked, she wouldn't qualify for any Social Security benefits.

According to the Social Security Administration (SSA), a woman can receive spousal benefits on her ex-husband's Social Security record if he is receiving Social Security benefits (or is deceased), and the marriage lasted 10 years or longer; she is presently unmarried, and age 62 or older, or caring for their child who is eligible for benefits. If he is deceased, the ex-wife can collect benefits at age 60, or at age 50 if she becomes disabled.

In this case, if Henry hasn't yet applied for benefits, but can qualify for them and is age 62 or older, Lucille can receive benefits on his record if they've been divorced at least two years and meet the above requirements. The amount Lucille receives is not deducted from Henry's benefits, nor from his new wife's or widow's benefits.

Many women get a higher benefit based on their ex-husband's work record than on their own, especially if he is deceased. If you've never asked SSA about receiving benefits on your former husband's work record, you should. Note: The same conditions apply to a divorced husband whose eligibility for benefits is based on his ex-wife's Social Security record.

©1999 Credit Union National Association Inc.