Divorce can be draining, both on your emotions and your finances. But with the help of an experienced divorce attorney and some planning, there are ways to gain control over your divorce while ensuring your bank account doesn’t suffer too much. Here are some financial tips for divorcing couples:
Plan. Set goals for where you want to be after your divorce and then make a plan to meet those goals with some help from your divorce lawyer and a financial planner. These professionals can help you keep focused on the future.
Collect your records. You will need at least five years’ worth of financial records, including tax returns, bank statements, brokerage statements, loan documents, insurance policies, credit card statements, deeds, wills, trusts, and car registrations. If you own separate property, you will need copies of those records as well.
Discover debt. Hidden debt is often discovered during a divorce, and even if the debt is just in one spouse’s name, the other spouse may be held responsible for half the debt. Get a current credit report and scour it for hidden debt. Close joint credit card accounts and open single accounts so your ex’s credit history will not affect your credit score.
Document assets. Take photos of any valuable collection and make copies of purchase records and appraisals.
Monitor legal and financial advisor fees. Keep a firm handle on what you are spending on legal and financial advisor fees and be mindful of how you use your advisors to keep costs down.
Check on Social Security benefits. If you were married 10 years or more, you may get a larger benefit claiming on your ex’s earnings record.
Review estate planning documents. Be sure you change your beneficiaries on retirement accounts and insurance policies and review your will and estate plan for any potential changes you wish to make following your divorce.
Consider tax consequences. There are some decisions made during a divorce that can mean a bigger tax bills. Consult with an accountant or financial advisor on what will work best for your situation.
Take care of health insurance. If your health insurance is carried by your soon-to-be ex’s employer, you will have to find new coverage. You can keep your current insurance under COBRA for up to 18 months, but will be responsible for paying the premiums.
Roll over retirement account split. If you are splitting a 401(k) account or pension under a QDRO (qualified domestic relations order), you have 60 days in which to roll it over into an IRA without penalty. If you want to take some money out for divorce expenses, you can make a one-time withdrawal before you do a rollover without incurring a 10% penalty, even if you are under age 59 1/2, but you will still have to pay income tax on that withdrawal.
It is important that you do not wait too long to retain an attorney when you are facing a family law issue. Delays can cost you valuable legal rights, and you want to make sure that you have the advice and support you need to make the best decisions for you and your family long after the divorce settlement is reached. Contact us today for your free consultation.
