Ending a Marriage – What You Need to Know
Ending a marriage is difficult. Rushing through the process may lead to mistakes that can make it hard to get back on track financially after a divorce.
Marriage is supposed to last forever. Unfortunately, that’s not always what happens. Today, 41 percent of first marriages end in a split according to the Census Bureau. The story behind each divorce is unique, but for women, the ultimate financial effect is often the same—less money and more stress.
It doesn’t have to be this way…
Divorce can be painful, but the financial aftermath doesn’t have to be. When it comes to ending a marriage, a little planning can go a long way. Women who take stock of their finances before their divorce is final will likely be in a stronger position when the dust settles.
If you’re convinced that divorce is inevitable, here is a step-by-step list of things you may need to do, depending on your situation.
Pre-Divorce Action Plan…
Your new life is full of wonderful possibilities. Remember to relax and breathe.
CONSULT A FAMILY LAW ATTORNEY
Before you take drastic action, make sure you are informed about your legal rights and responsibilities.
Don’t let lost paperwork or a missed deadline negatively affect your situation. Stay organized, and consider keeping a “divorce calendar” that will help you track appointments with your attorney and advisors, deadlines, meetings with your spouse and other important dates.
ASSEMBLE A PROFESSIONAL DIVORCE TEAM
Gone are the days when, if you or your husband wanted a divorce, the only thing to do was for each of you to retain lawyers, who would then work through all the legal matters. Today, financial portfolios—and the regulations that govern them—are much more complex. Many women find they need professional help to navigate all the legal and financial details. A financial planner who has experience managing the challenges of a couple divorcing can be a valuable addition to your divorce team. In addition to a divorce attorney and a financial planner, we recommend you consider starting with a therapist or counselor. Gather and compare information and schedule interviews before deciding on the members of your professional divorce team.
MAKE COPIES OF ALL FINANCIAL DOCUMENTS
You need copies of tax returns, investment statements, employee benefit handbooks and all insurance documents (including life, property and casualty, disability and long-term care). Also get a copy of your and your spouse’s Social Security, credit card and bank statements. If you or your spouse own a business, gather as much information as possible about the business finances.
If you do not already, make sure you have access to money of your own. If your spouse moves out and stops paying bills, you will need to pay them until temporary support orders can be entered. If you are the one who is going to file for divorce, you’ll need money for a retainer. Start saving now and plan to initiate divorce proceedings when you have built up a nest egg of your own.
ASSESS YOUR CREDIT
Request copies of your credit reports, and correct any misinformation they contain. Good credit is the foundation of your financial future, so watch those reports carefully! If you haven’t done so already, now is also the time to start establishing your own credit history—get a credit card in your name only. Also, make sure you cancel all joint credit cards after the divorce.
CONSIDER HEALTH INSURANCE
If you were covered by your husband’s policy, you’ll need health insurance. Consider getting coverage through your employer, COBRA or private insurance. This can be expensive, so know the costs before you settle.
INVENTORY YOUR MARITAL ASSETS
Make a list of all your household items, including artwork, cars, furniture, jewelry and items in your safe deposit box. Bring this information when you meet with your family law attorney.
UNDERSTAND ALL OF YOUR LIABILITIES
Know what the payments are on any loans that you may be responsible for, including but not limited to the home mortgage, vacation home mortgage and car loans.
UNDERSTAND YOUR FAMILY’S INCOME AND EXPENSES
Your tax returns will show your income. Write down each utility, mortgage and other household expense for each month. Keep track of the cash you spend as well.
BE OPEN TO CHANGE
Consider a career if you’re not already working, or go back to school to gain new skills. Perhaps you have been out of the workforce for a while and have been devoting yourself to child rearing. Assess what your current employability is and whether furthering your education prior to divorce would benefit you in the long run.
RELY ON YOUR SUPPORT SYSTEM
Friends are more important now than ever. You may have one or two who have been through the same experience as you. Ask a friend to go with you to your attorney’s office. Sometimes two sets of ears are better to remember everything that was said.
Post-Divorce Action Plan…
Stay on the right track by taking these financial actions after your divorce.
SET UP BANK ACCOUNTS
Cancel all joint checking and savings accounts. Then, if you haven’t already, open individual bank accounts and change any direct deposits to your new accounts.
UPDATE YOUR ESTATE PLAN
Update your estate plan, including your will, medical directive and general power of attorney.
REVIEW YOUR BENEFICIARY DESIGNATIONS
Change beneficiary designations on all your accounts, including 401(k)s, IRAs, deferred compensation plans, stock option plans, life insurance policies, disability insurance and any other accounts that are payable on death to your spouse. If necessary, remove your spouse from your workplace benefit plan. Even after you are legally divorced, if your ex-husband was named as a beneficiary, he will get those assets.
REVIEW YOUR INSURANCE COVERAGE
Update your property and casualty coverage and long-term-care insurance if appropriate.
Transfer titles for real estate, investment accounts, cars and life insurance. Sometimes, after the divorce is finally done, these details can fall by the wayside. Don’t let them!
CHANGE YOUR PASSWORDS
Change the passwords on all of your accounts, including checking accounts, frequent flier accounts, ATM cards and credit cards.
By Page Harty, a Certified Financial Planner™, CDFA, Partner-SignatureFD LLC, Director of SignatureWOMEN
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