Is the end of a marriage the start a financial showdown? Not if you follow these steps.

January is ‘divorce month.’

Wedged between the New Year’s Eve kiss and Valentine’s Day roses, January is arguably the toughest month for marriage. Perhaps it’s the stress of the holidays or just good old winter blues, but January has the well-earned nickname of “divorce month” because of the well-documented spike in marital splits. Property gets divided, kids bounce between parents and partners in life and finance go their separate ways. Here are some tips to protect your long-term financial future during a divorce.

Chart your own path to retirement.

If you felt squeamish about the way your spouse handled your retirement strategy, something more than a portfolio tweak is in order. “The portfolio mix you shared with your spouse may prove to be too aggressive or too risky for your solo savings goals and risk tolerance,” says Stephanie King, regional branch executive at Charles Schwab in Bellevue, Washington.

Beware your tax liability.

Even if you played by the rules with federal and state taxes, it’s possible you spouse did not, says Russell Luna, owner of Luna Financial Advisors in Denver. He recalls the story of a client whose husband lost his partnership in an oil company. “She was told that they owed the IRS approximately $300,000 and that she signed the tax returns and had knowledge of the deficit. As a result, she was equally liable.”

Separate your everyday finances.

You can’t afford to wait until the thick of divorce proceedings to learn you’re enmeshed in a financial tangle. “Before divorcing spouses start any legal process, they need to have access to credit and cash: a credit card and checking account in your own name,” says Pam Friedman, a certified divorce financial analyst in Austin, Texas. “After that, gather any financial documents – including payroll statements, investment and retirement account statements, mortgage and credit card statements, and tax returns.” These will help determine a spouse’s assets owned before marriage – and liabilities.

Hire a forensic accountant.

As the name implies, these professionals work out and uncover the sticky details of investment and finance that might precede litigation. “If deception is uncovered, this could prove to be a financial benefit to you,” says Shomari Hearn, vice president of Palisades Hudson Financial Group in Fort Lauderdale, Florida. “The judge may decide to reward you with most, or all, of the hidden assets.”

Separate financial and emotional investment.

This is especially true when marriages of the wealthy fall apart – and cool heads fail to prevail. “My experience has been that when millions of dollars are at stake, the less affluent spouse may be coming from a position of mistrust,” says Joan Antoniello, principal at WeiserMazars Wealth Advisors in New York. “They may not clearly understand marital and nonmarital assets – or may not have paid attention to investment planning during the marriage.”

Pull up the prenup.

Remarkably, some spouses who can tell you the sauce on the chicken at their wedding reception can’t recall where they stashed the prenuptial agreement. In particular, the spouse at the most financial peril “needs to know if there’s a prenup,” says Jaki Boyer, a senior wealth planner at PNC Wealth Management in Wayne, Pennsylvania. “I’ve seen a situation where the individual remembered a prenup, but also remembered that her husband controlled the process and she didn’t even have a copy of it.”

Learn your state’s laws.

Practically no one reads up on how states dictate divorce proceedings from the investment side, so make sure you determine how to navigate those legal waters. “In Florida, if the investments are in one name, but the funds that went in there were acquired during the marriage – such as from earnings – then title is irrelevant,” says Mitchell Karpf, a partner at Young, Berman, Karpf & Karpf, a South Florida law firm. As a result, he says, “the other spouse would still be entitled to their share, usually 50 percent.”

Equal dollars don’t mean equal investments.

Don’t mistake the dollar amount of an asset for its potential worth. “For instance, two assets worth $100 are not equal,” says Daniel E. Clement, a family law and divorce attorney in New York. “One may have a higher basis, resulting in a lower tax, or an investment in real estate such as the marital home may be treated differently than a stock or a collectible.” The lesson: “Knowledge is power. Informing yourself of the extent, value and breadth of assets is essential – and the same holds true for liabilities,” he says.

Don’t let capital gains become your loss.

Where there are equally valuable securities – but one set has recently risen in value – take care that the scales aren’t tipped against you. “Some assets that have appreciated in value will have capital gains income upon liquidation,” says Tate Sterrett of the Horack Talley law firm in Charlotte, North Carolina. “One spouse may try to structure the division so that the other spouse gets all the appreciated assets with their built-in taxable gain. That spouse will then net less value than the spouse who does not get the appreciated assets.”

Make sure you’re on equal footing.

Spouses need to realize when they’re at a disadvantage as divorce proceedings begin. “Women sometimes handle a lot of the day-to-day affairs but are either reluctant or unwilling to manage the larger, more lucrative parts of the budget,” says Karen D. Sparks, owner and founder of Divorce Financial Strategists in Santa Clara, California. “So look before you jump. Definitely consider consulting with a [certified divorce financial analyst] to work through the issues before filing a divorce petition so that you have a better idea where you stand.”

via money.usnews.com