When your marriage is ending, you have a lot on your mind including the past and the present. If you plan to make smart money decisions during your divorce, you will need to be focusing on your future as well.
Focusing on your future can really help when you are divorcing. Many couples learn the hard way and don’t examine their financial resources and assets to secure a financial future because they are too emotionally connected to the act of the divorce. Think of your divorce as a business deal and put the emotions aside so you can concentrate on the numbers.
10 Steps for a Money Smart Divorce
Get a Copy of Your Credit Report
The best idea to examine your credit is to get a copy of your credit report before the divorce so that anything in dispute on it can be resolved in advance of the finalization of your divorce. Contact the big three including Experian, TransUnion, and Equifax so you can get a copy of your report from each one.
This is the quickest manner to get all the information you need in one spot about outstanding loan balances, mortgage debt, and credit card debt that you and your spouse will need to divide in the divorce proceedings.
Open Individual Accounts in Your Name
This is another item on your to-do list before your divorce is official. It’s easier to get a credit card and a bank account solely in your name while you are still married because you share joint assets and debt on your credit cards, mortgages, and loans with your spouse.
This is of the utmost importance if you are a woman and have never established credit before. As people age and they don’t have credit, then it is almost impossible to get credit because they are seen as having no background with credit to be considered for a credit card and thus will be denied just because of no credit background.
Close all Your Joint Accounts
Divorces can be a long-drawn-out process that can take a lot of time. You want to close out all your joint accounts with your spouse to avoid acquiring more joint debt or losing shared bank assets during the process.
Cancel the accounts in writing and make certain to request that each creditor report the account as “closed by customer” to the credit bureaus so it does not reflect badly on your individual credit reports. Even though you close out all of the accounts, you will still be jointly responsible with your spouse to pay off the balance on each closed account.
Keep Property Separated
The assets that you acquired before the marriage and brought into the marriage, such as vehicles, real estate, an inheritance, gifts of any kind and money you had before the marriage are your separate property and they are yours after the divorce. You need to make sure and keep these separated in order to be awarded them.
For example, if you had a monetary inheritance and the money went into a joint bank account after you got married, then the court will consider this joint property and they can divide it according to the property laws of the state in which you reside. Keep in mind that your separate debt also travels with you. If you had a student loan and your spouse was jointly helping to pay the payments on it, you carry the balance out of the marriage with you.
Consider Selling the House
Women divorcees often want to keep the marital home at any cost because of emotional ties to it and the family. You should look at this issue and set aside your emotions. If you may not be able to afford the payments, then you can lose the home in the future.
You might consider selling the marital home and using the money to purchase a smaller home that you can easily afford with money left over as a financial cushion in the case that you would need it. This is especially important in an economy where we have no clue what the future will hold.
Change Your Beneficiaries
Most married couples name their spouse as their beneficiary on wills, trusts, IRAs, life insurance, and pension plans so that if one dies, the other will have the money to take care of the children. You really don’t want your ex to have a windfall of money in the case that you have an untimely demise. You can also examine each of these documents when you make changes to them and change your marital status on them at the same time.
Reclaim Your Maiden Name
Many women want to reclaim their maiden name to sever the ties of the relationship after a divorce. You will be required to have proof of the divorce decree in order to do this. You have a long list of to do’s here. You need to get a new driver’s license and report your name change to your employer, doctors, human resources department, your children’s teachers and schools, your landlord, mail person, health insurer and your pharmacist.
You will need to redo your W-4, other tax forms and report the name change to the Social Security Administration. You could lose valuable credits on your social security if there is a mix up with the names.
Check into Your Retirement
If you are pretty close to retirement age, you should check into your Social Security benefits. If you are 62 or older, were married for 10 years or more and have been divorced more than two years, without remarrying and you don’t qualify for an equal or higher Social Security benefits on your own, you can receive benefits that are based on your ex-spouse’s Social Security record even if your ex has not applied for benefits that they are eligible to receive. If you remarry, those benefits will end.
If you are raising a child that is under the age of 16 from the marriage you may be able to receive benefits on your ex-spouse’s record even if your marriage didn’t last 10 years. Usually, you can expect the same amount you would have gotten if you had remained married and sometimes all of it if your ex-spouse dies. The benefits you draw on your ex-spouse’s account do not affect amounts that are due to your ex-spouse’s current spouse.
Keep Your Health Coverage If at all Possible
If you are divorcing, try to keep health coverage if at all possible. One uncovered medical emergency can cripple you financially for the rest of your life. The COBRA program ensures that you are guaranteed 18 months of health coverage. It’s best to pay the much higher fees but remains with health coverage until you can find a lesser expensive alternative.
Get Up and Get Going
It’s recommended to get your credit report again about three months after your divorce is finalized. This will enable you to clean up any loose ends and to see all of your debts and assets in one area. If you received a lump sum payout in the divorce, you may want to consult a financial planner to ensure that it is well taken care of and don’t buy that fancy new sports car that you’ve always wanted.
Remember that you can live well no matter what your net worth is or what your marital status is.
These items on your to-do list will help you to remain financially sound after a divorce when you will need to handle all of your own finances. It’s a hard task, but the more you can put aside emotions, the better off you will be on your own.