Divorce Information Tips and Strategies to Protect Your Finances

No one goes into their marriage thinking that they are going to have to pull things apart and pick-up the sometimes unfamiliar role of managing their finances. To some, this is what they are used to dealing with and to others, it becomes a very stressful task that is piled onto an already stressful situation.

Listed below are some general divorce information tips that discuss some basic strategies for protecting your finances. This list is not all-inclusive, but provides a good starting point to get you thinking about the financial ramifications related to the divorce.

Planning – One of the most important tasks that you can do in the beginning of your divorce is to sit down with a qualified financial expert and your attorney to put together a plan for what your financial life may look like after the divorce is completed. By doing this in the beginning, your advisors will have an understanding of your current financial situation and what your goals are from a financial perspective. Too often we see individuals in a reactive mode versus a proactive mode. This strategy will not only save you time and money, but it can go a long way in setting the stage for getting what you need from the divorce process.

Bank Accounts – Put together a listing of all open accounts that you hold individually and jointly between you and your spouse. Any accounts that you hold jointly, consider splitting the accounts up. Setup individual accounts in your name and move your direct deposits to this account. Balances that you leave in a joint account have the potential to disappear without your consent.

Investment Accounts – Put together a listing of all accounts that you hold individually and jointly between you and your spouse. For jointly held accounts, if you split the accounts before the divorce is finalized, understand that you may have tax situations that will need to be reviewed. For example, if you have an investment that has increased in value and you sell the investment, you will have to report the capital gain associated with the investment. It may be advised to leave these accounts alone and split them in accordance with the divorce settlement thus transferring assets tax-free.

Property / Titles – Gather up any legal documents that pertain to titles for any property that you own. This listing could include the following: Real Estate (House, Condo, Land), Automobiles, Boats, ATVs, Motor Homes, and Motorcycles. By having this information up front, you protect yourself from having these assets disappear and not becoming part of the divorce settlement process.

Debts / Credit Cards – List all of your debts and credit cards that you currently have. Contact any company that you have a joint debt with your spouse and put a hold on the account. This will stop additional charges from being added to the balance. You are still liable for the balance with your spouse. Make sure you make the payments on any joint accounts and don’t assume that the other spouse will continue to make payments. The credit companies don’t care about your situation and will ruin your credit rating if you miss payments.

Credit Reporting – Contact the credit reporting agencies (Experian, TransUnion, & Equifax) and pull your credit report from each of them. Review all of your open credit accounts and close accounts that are no longer needed. Consider signing up for a credit protection service like LifeLock or Experian’s ProtectMyID to protect your credit from unauthorized use. The small fee you pay for this service is more that worth the time it takes to repair your credit due to your spouse or someone else messing it up.

Taxes – Depending on the timing of your divorce, you may have several tax considerations to review. Who will claim the child dependent exemption? Who will claim the credits? What filing status will you file? (Married Filing Jointly, Married Filing Separate, Head of Household, or Single) How do you split the tax bill / refund? Who will claim the itemized deductions? (Mortgage Interest, Property Taxes, etc.) Taxes are often not thought of until after the fact and can cause an unanticipated financial hardship.

Insurance – Contact your insurance agent(s) and get a copy of all of your insurance policies (Casualty, Liability, Life, and Health related policies). Review your coverages and put a system in place to review that the policies stays in force while your go through the divorce. We have seen situations where policies are not renewed and insurance coverage lapses (intentionally or not) due to nonpayment of the insurance premium when it becomes due.

Beneficiaries – Now is a good time to review the beneficiaries of your various financial accounts and insurance policies. More often than not, you spouse will be the primary beneficiary of your assets and insurance accounts. Depending on your situation, you have many options to consider when determining who the new beneficiaries of your property will be. If you have minor children, you may consider setting up trusts to take care of their well being if something were to happen to you. It is also a good time to review your Will and determine if that needs to be updated as well. Certain states will require that you have spousal consent to change beneficiaries, which can become contentious. We recommend that you discuss these situations with your attorney to determine your best course of action.

Marriage is an emotional life change. Divorce is a financial life change that individuals tend to minimize due to the emotional stresses that often dictate their thinking and rationale.

If you are interested in additional divorce tips and strategies, please download our eBook: The Financial Divorce – Your Guide to Financial Divorce Knowledge.

Save and Share!