One of the hardest things in life is going through a divorce. It is emotionally crushing and financially draining. From a financial perspective, getting back on your own feet can be challenging and overwhelming, particularly for women. In many cases, it can also be a very lonely process as most women going through a divorce feel a tremendous amount of embarrassment around their finances, therefore, aren’t inclined to talk about it. To help ease that pain, here’s a checklist for the things to follow-up on post divorce:
- Home – it may be necessary to refinance the primary house in which one of the spouses will live post divorce. Cooperation from both parties will be mutually beneficial. Be sure to check your credit status during the transaction, and make sure that the title is cleaned up and the liabilities will be properly separated and reflecting on your credit reports.
- Other properties – if there are other properties that need to be divided up, refinancing them may be more difficult. Deed exchanges is a more common practice.
- Checking & Savings accounts – be sure to close all joint accounts and establish new accounts with just your name. Ideally, as soon as the decision is made to end the marriage, you start establishing new and separate account right away.
- Investment accounts (including 529s, options/RSUs) – be sure that you understand how the assets are to be divided, by moving shares or amounts? Note that there may be a delay in obtaining the final judgement, which can create problems due to value fluctuations.
- Retirement accounts – be sure to retain a copy of the QDRO, a document used for dividing qualified retirement accounts and follow up on any payouts or transfer of assets according to the divorce agreement.
- Mortgages/HELOCs – be sure to get your name off any mortgages that you no longer have ownership to, and close the HELOC(s) if they are no longer in use, or as part of the refinance.
- Loans (cars, boats, business, personal, etc) – be sure to follow up on all outstanding debts to remove yourself from those that you are no longer responsible for according to the divorce agreement.
Estate Planning must be updated – trust, will, POA, healthcare directives with new beneficiaries, etc.
Managing the New Life
The first challenge most divorced couple will have to face is “how do we support 2 separate households based on the same amount of income?” It is important and prudent to create a new budget for the new living arrangement. If there is spousal and child support involved, be sure that there is insurance on the payor spouse to protect against accidental death or disability. Ideally, this is discussed and agreed upon during the divorce process, but it is important to follow up on the execution. It is also important for the receiving spouse to be the owner of the policy to prevent any surprise lapse of payments. New health insurance must be established.
Managing the Emotional Effects
Undoubtedly, most divorcing couples will go through cycles of stress –> guilt –> anger –> denial & shame. Paying attention to your mindset is critical in helping yourself get through the process. Ideally, you want to move from a mindset of divorce to a mindset of a new beginning. I realize that on the practical level, it is easier said than done. So, be sure to reach out for support! The checklist provided above highlights the key areas of your financial life to follow up on and pay attention to. There are many more details in each of these areas during execution. So, working with a professional like a Certified Divorce Financial Analyst can help alleviate some of the pressure and overwhelm.
Remember, the key thing to focus on is The New Beginning!