When a couple separates, money is often the last thing on their minds.
It's understandable. Spouses can be more worried about the kids, and figuring out if the marriage will be salvaged or end in divorce. Dealing with finances seems like it can wait until the final split.
But smart financial planning can smooth the separation processwhether or not a couple reconciles. And a sensible plan can be the road map for a divorce agreement, taking a lot of the sting out of a potentially nasty process.
On the other hand, if spouses separate without a clear-cut financial plan, it can make the divorce that much longeror make it tougher to rejoin finances during a reconciliation.
How can you get your financial houses in order during a separation? Here are some strategies to follow, and some vital facts to keep in mind.
1. "Apart-together" could save you money.
For some couples, there's a strong financial advantage to delaying divorce, even if they're separating.
For example, one spouse may want to retain coverage under the other's health insurance. Couples may also want to get the advantages of filing a joint tax return, or simply avoid the legal fees and hassles of a divorce.
Given the economy, some couples even live together after a split, though many states require separate residences as a prerequisite for a divorce. Lorraine Salvo, a certified financial planner in Morristown, N.J., calls it "apart-togethersharing a residence while living their own lives otherwise."
2. When it comes to debts, you're still married.
The first thing to remember is that a separation is not legally the same as a divorce. The rules vary by state, but at the very least you can assume that you're responsible for covering bills on joint accounts.
"This could become especially problematic if you are getting separated from someone with spendthrift tendencies," says Ms. Salvo.
Vickie Adams, a certified divorce financial analyst in San Pedro, Calif., recommends that spouses run regular credit checks on each other during a separation to ensure that spouses are keeping up on payments and not incurring additional debts for joint accounts.
"You are still tied to the other person, so I'd want to invest in a credit-reporting service," Ms. Adams says. "Make sure the other person pays the bills they say they will pay."
Spouses should also establish separate credit and checking accounts to limit exposure to each other's financial behavior. If unethical behavior is discovered, spouses should take steps to contain the damage.
For instance, a lawyer can ask a court to freeze accounts if it's believed that a spouse is wasting marital assets. When dividing property, courts can consider whether there was a dissipation of assets, and then award less property to the wasteful spouse.
3. Get ready for your expenses to soar.
It can be an unwelcome surprise to learn that you're still responsible for your spouse's spending sprees. But many people aren't prepared for the bills they'll run up on their own, either.
Everybody expects that a divorce will bring all sorts of new living expenses. But a separation brings similar costsespecially since, in many states, maintaining a separate residence is a prerequisite for a divorce.
"Household overhead costs are no longer shared," says Eleanor Blayney, consumer advocate for Certified Financial Planner Board of Standards, a Washington-based certification nonprofit. "Whenever a separation is involved, the combined wealth of the couple drops. It never increases."
In addition to maintaining an additional household in many cases and maybe a new car, separated couples also have to maintain two lifestyles, with substantial kid-related costs.
"Expenses tend to be doubled on many items for what happens with children," says J.J. Burns, a certified financial planner in Melville, N.Y. "Mom wants to do something with a child and so does Dad. They both want to go to Disney World, but not together."
4. Put everything in writing.
Many experts advise spelling out as much as you can in a separation agreementalmost as much as you would in a divorce.
They say it's best for couples to detail income, property and custody arrangements, among other issues. Coming to terms with all that can create a sense of independence, without drawing a line in the sand that prevents couples from reuniting.
A well-drafted agreement can also simplify the divorce process. "Both parties have a head start at dealing with budget issues," Ms. Salvo says. "If nothing else, it improves communication because it eliminates guesswork and takes another issue out of the mix for couples to disagree about."
For spouses who stayed at home while their partner worked, it's particularly important to reach an agreement on budgets, bills and access to credit and checking accounts, as well as other assets. Each spouse should have a checking account, credit account, access to investments and be aware of all financial transactions, says Ric Edelman, a financial adviser based in Fairfax, Va.
"The stay-at-home spouse needs to get very aggressive in demanding a new set of rules," Mr. Edelman says. "If it appears that there is a lack of cooperation from the wage earner or a lack of follow-through, then you immediately go to divorce proceedings because the stay-at-home spouse is at maximum risk. A disgruntled spouse can act pretty quickly to imperil your financial stability."
5. Take a hard look at your portfolio.
Separation can bring a lot of new financial burdensand that may mean changing how your assets are allocated.
A major issue during separation is liquidityhaving access to cash to meet the needs of setting up and running two households. So couples may need to agree on selling holdings, or changing the investment mix to boost short-term gains.
Additionally, spouses also need to think about longer-term goals. For instance, can they still afford to put away cash for the kids' college tuition while they're covering two sets of household expenses?
Separated spouses should also be aware that frequently property will be divided during a divorce the same way that it was held during a separation.
Ms. Mantell is a reporter for MarketWatch in Washington, D.C. She can be reached at ruth.mantell@dowjones.com.
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