A divorce changes nearly every aspect of your life, including your finances.
The money moves you make during this crucial time can have long-lasting effects. These six tips can help you exit your marriage on solid financial ground.
1. Stay informed. During the marriage, each spouse should understand his or her overall financial situation. During a divorce, pay special attention to these details:
- How your house or other joint property is titled
- Your account passwords
- Where to find your financial documents
- Details of your assets, debts and future retirement benefits
Work with your attorney to gather any missing information.
2. Think about retirement. "Even if you're relatively young, you should consider the impact a divorce today will have on your retirement that's still decades away," says Scott Halliwell, a Certified Financial Planner™ with USAA. Divorce can affect what happens to retirement funds amassed during a marriage, no matter who earned the money. It also can affect military retirement payments, corporate pensions and Social Security retirement benefits.
3. Make a clean credit break. If the divorce decree allows, you should close, split or individually refinance joint accounts, such as mortgages, car loans and credit cards. If you can't refinance separately, sell the asset. You don't want your credit score to suffer if your former spouse fails to make timely payments.
4. Protect child support, alimony and retirement income. If children are involved, the court may award child support or even spousal maintenance. Setting up a life insurance policy can ensure payment of these or other post-divorce financial obligations, if your spouse dies while still obligated to pay. Work with an attorney to structure the policy properly.
5. Update your budget. Before you divorce, outline your post-marriage finances. Expenses often increase when individuals split up combined insurance plans, cellphone plans and other household costs.
6. Dive into the details. Update beneficiary designations in your retirement plan, life insurance policies and annuities. Talk with your lawyer about changes to your will, powers of attorney and other legal documents so they reflect your current wishes. Also tidy up past tax filings, because you may be liable for any tax obligations incurred during the marriage. Ask your attorney or accountant to help you review your new tax situation.