Recently, I found myself suddenly single, going through a divorce, and dealing with a pandemic. I was sad, scared, and overwhelmed. Fortunately for me, my children are grown and living their own lives. Even though I didn't want the divorce, I had to learn to accept it and start protecting myself. I had to put emotion aside to begin planning for my new future.
Divorce is a huge step and not taken lightly due in part to its enormous emotional and financial ramifications. Most women face a 40 percent decline in their standard of living after divorce. As a woman going through a divorce, you may wonder how you can make it on your own. Let's face it; losing your husband's income can seriously change the way you do things. The sooner you take steps to adjust to your new situation, the better for your financial survival. You are now in the driver's seat of your financial future.
This checklist can help you transition from "ours" to "mine" and "yours."
Day-to-day transactions and financial accounts
- Divide all bank account balances as called for in the divorce agreement.
- Cancel joint checking, savings, and revolving credit accounts, such as credit cards.
- Establish individual accounts in your name for ATMs, checking, savings, and credit cards.
- Let your utility companies know if you're assuming responsibility for the bills or if your name should be removed from the accounts. Make sure to update the accounts for gas, electric, heating oil, water, sewer, cable/satellite television, telephone, and broadband Internet.
- Notify all your creditors of your changed circumstances and responsibilities, including change of address if applicable.
The divorce agreement negotiated during your proceedings should spell out who owes what to whom and who is assuming which obligations. You should make suitable arrangements for your responsibilities and remove yourself from things for which you are no longer responsible.
Other financial assets
- Revoke any joint authorizations or powers of attorney you gave to your ex-spouse over investment accounts and assets.
- Remove yourself from any joint accounts your spouse intends to maintain independently. You may have to explicitly notify the institutions that you will claim no future interest in the account.
- Remove your ex-spouse from any accounts you intend to maintain individually.
Retirement plan issues
- Update the beneficiary designations of your existing retirement accounts and insurance policies.
- Seek a qualified domestic relations order (QDRO) for any retirement assets you are entitled to in your spouse's employer-sponsored plans. The QDRO is a tax-efficient way to preserve and enforce your financial interests in your ex-spouse's pensions and defined contribution plan assets.
- Create rollover IRAs in your name to receive any assets you might be due immediately from your ex-spouse's IRAs under the terms of your divorce settlement. Taking those transfers as cash distributions could trigger immediate and costly tax consequences.
Property and other resources
- Update the deeds and title papers to reflect any changes in property ownership conditions specified in your divorce agreement. Notify any mortgage holders and lienholders of the changes.
- Notify all taxing authorities (city, country, school district, etc.) of any changes in responsibility for real estate tax payments.
- Update motor vehicle title, tax, insurance, and lease arrangements.
Moving forward on your own
Take a fresh look at your plans to determine whether your divorce will affect your financial needs, risk tolerance, and time frames. Among the things to reevaluate are:
- Life insurance and disability insurance needs
- Investment allocations
- Retirement savings rates
- Review your estate planning documents to be sure that its provisions reflect your new circumstances. If you have don't have any documents, create them.
- Evaluate your Social Security status. A divorced person may be eligible for Social Security benefits based on his or her ex-spouse's earnings record if he or she is at least 62 years old, was married for at least ten years, and does not remarry before age 60.
I am dedicated to walking you through the steps you need to take to control your financial future and prepare you for a secure retirement. Now is the time to start focusing on your finances. Call to schedule a consultation today.