Financial problems are a dimension of divorce that catches many divorcees off guard. Aside from the emotional turmoil and mental and physical exhaustion of the divorce negotiations, you also have to anticipate its financial impact during and after the proceedings.
Many men and women are shocked when they learn that their money problems don’t go away after their ex-spouse signs the final divorce settlement papers. Sure, these documents will state how your assets and liabilities will be divided, but as with many things in life, actual implementation is often another story.
The good news is that most financial problems you’ll face during and after the divorce can be mitigated with some simple measures. If you’re in the process of a divorce or have already signed the papers, be sure to follow these 6 steps to protect your finances.
Take Care of Your Credit
If you still have any joint credit cards with your ex or soon-to-be ex, make sure you cancel these to avoid tying your credit to your ex’s spending habits. If you have yet to build a good credit score under your name, now’s the time to do it.
Plan Your Estate
If you’re still in the middle of the divorce proceedings, it’s a good idea to prepare to disinherit your ex. If the divorce has already happened, talk to an attorney about altering your will and estate planning documents in light of your new status. Should something happen to you, you may not be keen on your ex inheriting your estate.
Update Your Beneficiaries
You should also update all your insurance policies, pensions, annuities, trusts, retirement accounts, and anything else where your ex is listed as a beneficiary.
Divide Your Retirement Plan
Dividing retirement assets can be tricky, requiring the guidance of an attorney who knows how to split retirement plans while protecting you from exorbitant administrative costs and tax consequences. For division of 401(k)s and pension plans (not IRAs), you will need to execute a Qualified Domestic Relations Order (QDRO), which will ensure your plan administrators will pay benefits according to your divorce’s settlement.
Ensure Your Receive Alimony and Child Support
Although your divorce settlement states that your ex must pay child support and alimony, many former spouses do not honor these obligations. What you can do is place measures to ensure you receive maintenance and child support, whether it’s through an annuity purchase, automatic bank transfers, or transfer of specific property to your name.
Sell or Refinance the Family Home
The cleanest way to ‘get rid’ of the marital home is to sell it and split the proceeds equally between the two parties. If either spouse chooses to stay in the home, it’s critical to refinance the mortgage under the name of the person who gets to keep the property. This will ensure that whoever moves out is no longer liable for mortgage payments. Remember, just because your name isn’t in the title, doesn’t mean you’re off the hook as far as the mortgage goes.