Divorce is one of life’s most challenging transitions. If you are recently divorced, currently going through a divorce or considering one, are you prepared financially? Unfortunately, divorce can bring many unpleasant financial surprises, particularly for women. Here are some items to consider:
- Do you have children?
- Think about updating your Will to include a Trust. You can make arrangements with your attorney to have these papers drawn up prior to the completion of the divorce process.
- If you already have a will or living trust, your spouse may be the executor/trustee and may also be the sole or primary beneficiary of your estate. You can work with your attorney to get this updated.
- Do you have any Power of Attorney documents? Does your spouse have a Durable Power of Attorney?
- Think about revoking it so that it cannot be misused.
- Do you have any retirement accounts?
- You may need to complete a QDRO (Qualified Domestic Relations Order) as part of your separation agreement or divorce decree to divide any 401(k) or 403(b) plans. This is a court order that divides pension rights between divorcing spouses.
- If you have any IRA’s or Roth IRA’s, it is best to confirm with the custodian on what paperwork will be required to split your accounts per the separation agreement or divorce decree.
- You may want to change your beneficiaries on your retirement accounts if you are able to. Check your separation agreement and divorce decree to make sure it does not have any stipulations on keeping your spouse as a beneficiary for a certain period of time.
- See that titles and deeds are appropriately transferred per the separation agreement and divorce decree.
- Cars, boats, campers, motorcycles, and other vehicles
- Homes, rental property, vacation cabins, other real property types
- Don’t forget bank accounts and credit cards.
- Change joint accounts to individual accounts.
- Remove your name from your spouse’s accounts.
Life Insurance Policies
- Change the primary beneficiary to a trust or another individual if you can. Check your separation agreement and divorce decree to make sure it does not have any stipulations on keeping your spouse as a beneficiary for a period amount of time.
- You may want to purchase more coverage if it is needed, and a financial plan can help you determine this.
Alimony, Child Support, and Expenses
- Depending on your separation agreement and divorce decree, you may either need to begin paying or receiving alimony or child support payments.
- Consider how potential future joint expenses (especially if children are involved) might be split. This will prevent one person from taking on more of the expenses which might have a negative long-term financial impact on your financial plan.
While this checklist provides a starting point for thinking through some of the critical components of this process, every situation is unique. Our financial advisors can help guide you during this time and help you develop a specific action plan to preserve your financial health through this transition. Please contact us to discuss your situation in more detail.