If divorce looms, getting your financial house in order before the split makes sense.

Amy Barrett, 47, a certified divorce financial analyst for Savant Capital Management Inc., says that you must understand how the division of assets will affect your lifestyle post divorce.

Amy Barrett, a Certified Divorce Financial Analyst for Savant Capital Management, Inc. in Rockford.

She says that there are five main financial issues to consider before a divorce.

Make sure that you have all the documentation necessary to make an informed decision. This includes having information on everything from basic checking accounts and pensions to real estate and IRAs. If you forget one area, it can really affect you, Barrett cautions.

Understand the tax implications of the division and what can happen if people make a division that may seem equitable until one person ends up with a big pile of taxes and the other with few. Tax obligations can make that division no longer fair and equitable.

Understand the implications of a pension. For example, if a husband, who worked his whole life for a private or a government entity, has a pension, look seriously at the current amount. You might make the split without realizing what the present valuation of the pension is.

Inflation is a really important factor. It can have a negative impact on the division of assets. If only a set amount of maintenance is agreed upon and seems reasonable at the time, inflation can make a change in that. Because of inflation, if expenses go up but not the maintenance, your lifestyle can be affected.

The IRS has many regulations dealing with divorce issues. “You need to talk with a certified divorce analyst,” Barrett says. “You need to have a team (an attorney, financial expert, etc.) to help you.” 

For those without the means to have a team, Barrett says that if the assumption is that there are enough assets not to be destitute, “take those assets and make them work for you. You want to provide money for the lifestyle you optimally would want to live.

“Once (you) have the divorce, your assets need to be properly invested and allocated so that they provide the lifestyle that you would like,” Barrett says.

For those with forethought, pre-nuptial agreements can take some of the financial sting out of a divorce.

“It delineates the fact that you have value prior to marriage and that value is still your property,” Barrett says.

“It also makes couples think twice about the happily-ever-after part. It allows them to say, ‘Let’s think about this realistically,’ ” she says.

“Women often get burned out throughout the process (of divorce),” Barrett says. “But despite the exhaustion in the long term, you want to get the financial (outcome) that you need.”