Divorce can strain finances as well as emotions. However, with some preparation and financial planning during the process as well as after the divorce is finalized, you can protect your financial interests and take charge of your future well-being.
Too often, people make the mistake of seeking an attorney to handle their divorce without also seeking financial help. A financial planner can educate you about the basics of money management; explain the concepts of child support, maintenance, and property division; and prepare tactical financial strategies throughout the divorce process.
If you’re already a client of ours, don’t hesitate to reach out to your Senior Wealth Advisor and ask how RFA can be of additional assistance throughout your divorce process. If you’re not yet a client, give us a call and we’ll connect you with someone who can assess your current financial situation and needs moving forward.
Steps to Take During Your Divorce
- Prepare a monthly budget, factoring in one income source, housing expenses, etc.
- Check your credit score.
- Run joint credit reports from all three credit bureaus (Equifax, Experian, and TransUnion).
- Contact credit bureaus if you find an error.
- Identify joint credit cards, then pay them off. The decision to close these is an individual decision and should be decided after speaking with professionals.
- It’s important to have good credit whether buying your spouse out of your current home or buying/renting another home soon after the divorce.
- Contact your attorney to draft and file a qualified domestic relations order (QDRO) if you are entitled to a 401(k) or pension plan from your spouse.
- It’s important to find an attorney who specializes in QDROs.
- The 401(k) plan/pension administrator must approve the QDRO.
- This process often takes at least six to eight weeks, so start early.
Steps to Take After Your Divorce
- Update beneficiary information on your 401(k)s and IRAs.
- Close joint bank accounts.
- Retitle vehicles, the house deed, investment accounts, etc.
- Update your estate planning documents.
- Update your insurance policies (home, auto, health, disability, etc.).
- Alert your tax preparer that you will be filing single, as tax planning may be necessary to avoid surprises.
- Create an emergency fund that ensures the ability to fund three to six months of expenses.
Be sure to contact a financial planning professional to help you with the above if you are uncertain how to proceed.
Financial planning professionals can help with budgeting, investing the funds you received in your divorce settlement, preparing a financial plan for your new future, and tax planning.