Post Divorce Next Steps
Your divorce is final. It’s time to take charge, tie up the loose ends and move forward with a clear head. Before you start on any of the steps below make sure you have a certified copy of your divorce decree. Quickly making these a priority will set your new life off in the right direction. You have a lot on your plate, so consider working with someone or a team to help you through this.
Make a checklist. Get organized!
Carefully review and summarize all aspects of your agreement. Identify key dates and to-do’s in your settlement. Be sure to make a list of everything you are responsible for completing. It’s beneficial to make a spreadsheet with each account-item, amount, and any forms required to receive your portion.
Separating finances can be time consuming and require a lot of organization. Ensure you have a filing system for all important financial and life documents, as well as any statements that need to be retained for tax information. A digital system with cloud back-up is recommended, but make sure someone knows how to access it in the event you are unable to.
Child Support/Spousal Support Payments
Carefully review and summarize all aspects of your agreement. Identify key dates and to-do’s in your settlement. Be sure to make a list of everything you are responsible for completing. It’s beneficial to make a spreadsheet with each account-item, amount, and any forms required to receive your portion.
Separating finances can be time consuming and require a lot of organization. Ensure you have a filing system for all important financial and life documents, as well as any statements that need to be retained for tax information. A digital system with cloud back-up is recommended, but make sure someone knows how to access it in the event you are unable to.
Establish your own Financial Identity, Foundation & Budget
Set your own financial goals and path based on your newly independent status. You will find it empowering and a satisfying first step to redefining your future.
Set up your foundation with a new realistic household budget, including all income and expenses, before the divorce is final, this way you can start on day one. It’s essential to understand your new cash flow to make smart decisions and avoid financial mistakes from the start. There will also be things you feel you need to spend on right away – maybe a new wardrobe or items for your home, but it is important you take it slow and stick to what you need. Track your expenses carefully, so you have an idea if you need to cut or adjust your habits. This is a great place to use a free service like mint.com or hire a financial planner to help you during this transition.
Check your credit score, if you haven’t already. Make sure you have at least one credit card in your name and use it regularly but make sure to pay it off each month. This will help build your individual credit score. It’s also a good habit to continue checking your score and report regularly.
Complete Qualified Domestic Relations Order (QDRO) if required
A Qualified Domestic Relations Order (QDRO) is a legal document that reflects how you and your spouse have decided to divide retirement assets such as a defined contribution plan (401(k), 403(b), and 457 plans) or a pension plan. A QDRO essentially orders the plan administrator to pay the non-employee spouse his/her share. It is crucial that the QDRO is filed exactly as the agreement stipulates or you risk losing important rights. This process can take several months, so we advise getting started immediately upon the divorce being finalized. The longer it takes also delays each party being able to invest the funds according to their own goals and risk tolerance.
Re-title accounts & property
Go through your accounts and be sure to change the registrations to separate accounts upon divorce. This includes cell phone plans, streaming video services, etc. You will want to update personal insurance such as homeowners/renters and auto insurance including reviewing the amount of coverage.
Pay special attention to any accounts that report to credit bureaus. If you have joint accounts with your ex-spouse, be sure to close them. If your spouse continues to use a joint account, his/her payment history (good or bad) will be reflected on your credit report, and if they do not pay, you could be held liable for that debt. If you are dividing taxable investments, be sure the cost basis of each investment comes over to your side.
When changing the deed to a home, a Quit Claim Deed or Interspousal Transfer Deed will need to be signed. This will relinquish ownership to the spouse that’s keeping the home. The mortgage may also need to be refinanced to satisfy the lender since the new deed is only in one person’s name. The deed and mortgage typically need to match.
Notify Your Employer
Your employer may need to change HR records and benefit plans. You also may need to fill out a new W-4 and update your tax filing status.
If you were covered on your ex’s medical insurance, it’s time to start researching your health insurance options right away. Look into a private insurance policy coverage through your own employer, or you can go on COBRA health coverage through your ex-spouse’s employer for up to 36 months after divorce. If you’re going to be using COBRA, you must apply within 60 days. However, be sure to evaluate and compare other options available to you through an individual plan or your own employer.
Create a new estate plan and update documents (including beneficiaries)
Often, spouses involved in a divorce – especially parents – forget to update beneficiaries on key documents like wills, trusts, insurance plans, retirement accounts, and charitable plans. Estate planning is one of the more difficult items to address in general, but especially post-divorce. You will need to get an updated will, health-care directive, and power of attorney.
It’s best to begin the conversation with your team, work though the scenarios, and have this paperwork prepared before you sign off on any divorce papers. You also want to carefully consider how you protect your assets should you get remarried or if you have younger children.
It’s also important to update the beneficiaries of any company retirement plans, IRA accounts, and life insurance policies. However, a portion or all of a life insurance policy will be required to go to your ex-spouse if there are child or spousal support payments.
Build your new team & continue to educate yourself
If you don’t have a post-divorce financial expert or team in place, now is the time to do so. You may need a new CPA, financial advisor, real estate, or estate attorney. Seek professionals who have experience working with divorced clients. When making these crucial decisions, it’s important to find someone you feel comfortable with and can envision building a long-term relationship.
Many also find themselves in a situation where they’re responsible for financial tasks they didn’t handle in their marriage. Take time to educate yourself and understand your financial options. You don’t want to jump into major financial decisions before fully understanding the landscape.