Divorcing

Taking inventory of the information listed below can provide useful insight as you navigate the terms of your divorce.

Assets

• Bank accounts
• Investments
• Retirement plans
• Property (the fair market value of your home, vehicle, furniture, household goods, collectibles, electronics, etc.)
• Other assets (airline miles, stock options, etc.)

Liabilities

• Mortgage
• Vehicle loans
• Credit cards
• Other loans/ debts

Insurance

• Life insurance policy information (coverage, type, beneficiaries, owner)
• Property insurance policy information (homeowners, renters, car, etc.)
• Health insurance (TRICARE, dental, other health coverage)

Spending plan

• Income
• Monthly payments (rent, utilities, insurance, loans, child care, etc.)
• Savings

Assets like a house and car hold value, but they aren’t as liquid as money in the bank or investment accounts. They also require cash flow for ongoing payments and repairs. Consider liquidity and cash flow requirements when you evaluate your property and accounts.

Part of either spouse’s retirement account may be awarded to a future ex-spouse. Remember that Roth retirement assets may be more desirable than their traditional counterparts because the taxes have already been paid.

As you plan for your future tax situation remember:

• Child support is not tax-deductible for the payer and is not taxable for the payee.
• Custodial parents can claim a qualifying child as a dependent on their tax return unless an exception has been declared in writing for the non-custodial parent (IRS).
• Certain alimony or separate maintenance payments are deductible by the payer and taxable for the payee.

If you refinance a loan to remove the other party from the debt obligation, it might increase the interest rate of the loan. Your debt-to-income ratio, credit score, and the fair market value of the asset can all affect the terms you’re offered. Identify factors that could make refinancing difficult, like negative equity in a vehicle.

If you have joint debts, take steps to protect your credit. Create an amicable payment solution and stick to it. Check the payments status regularly to make sure your ex is holding up their end of the deal.

Some states may require a person paying spousal or child support obligations to have life insurance. Private life insurance policies have many components, including the owner, insured, payer and beneficiary. The owner of a life insurance policy can make changes to the policy, so it’s often a good idea for the spouse receiving support to maintain ownership of a policy. That way, they can make sure it’s paid on time and that the proper beneficiary is maintained.

Your income and expenses are poised to change, so your spending plan will need to a revision, too.

Per your divorce decree, or as appropriate, you should consider closing joint banking and credit accounts. Establish new ones in YOUR name only.

Think about changing usernames and passwords, and consider setting up automatic payments for your bills. It’s a simple way to protect yourself from the fees and credit score dings associated with late payments.

Experts recommend saving up an emergency fund of at least $1,000 to serve as a financial cushion for life’s many surprising expenses. Learn more about why, how and how much in the Saving for Emergencies Learning Guide.

You should always monitor your credit, and you should especially do so after divorce. You can request a free copy of your credit report from each of the three major credit bureaus at annualcreditreport.com. Check every month or so to make sure there’s no unauthorized activity, like new accounts opened in your name.

The report will show all the current credit in your name, plus your credit history. Read your divorce decree to confirm who is responsible for paying joint loans, and make sure updates accurately reflect the decree and payments are being made on time.

If you and your previous partner own a home together, your divorce decree may convert the ownership from both of you to only one of you.

A quit claim deed can accomplish this. The deed must be filed with the county recorder where the property is located. You might also be required to refinance your mortgage or work out a mortgage assumption.

If you own vehicles, boats, and/or recreational vehicles together, they could require a title change too. The process and requirements will vary by state – your legal counsel can advise.

As you separate your insurance plans, it’s a good time to consider the coverages, premiums, deductibles, and beneficiaries for each of your policies. Your circumstances have likely changed, so your coverages might need to shift too. Your divorce decree may also require certain coverage so be sure to incorporate that into your review.

For health insurance, former military spouse health benefits end on the day of your divorce unless you meet certain criteria within this list. Arrange for a replacement plan as needed to avoid a gap in coverage.

Your circumstances have changed, but the distribution of your wealth and the authority to implement your medical wishes will not change unless you update the documents that make up your estate plan:

• Will
• Power of attorney (POA)
• Medical POA
• Living will or medical directive
• Trust (if applicable)
• Family care plan

Also review and update the beneficiaries on accounts and insurance policies. If you have minor children, make sure they’re provided for in your estate plan. Also name a legal guardian.

Generally, your ex-spouse would be named if they are the parent. If this isn’t the case, or if something should happen your ex-spouse as well, it is important to name a guardian for any minor children. Your divorce decree may provide specific guidance on this, so update your documents accordingly.

If you’ll be changing your name, get several copies of the divorce decree or court change of name document so you can update all the accounts and legal documents that will demand documentation, including your:

• Social Security card – Request a new Social Security card from the Social Security Administration.
• Driver’s license – Update your driver’s license at your state’s Department of Motor Vehicles.
• Passport – Request a name change for your passport through the State Department.

If you’re going to split money in an Individual Retirement Account, Thrift Savings Plan account, or other employer-sponsored retirement plan, be aware that these situations generally require a qualified domestic relations order (QDRO), which should be part of the divorce settlement.

Review your retirement situation. If you regularly contribute to a retirement account that has been partially depleted due to your divorce, you might want to increase the amount of money you set aside so you can replenish what you have lost.

If you’re unable to increase contributions, or contribute at all, you can still plan for how you’ll contribute when your situation improves.