The Divorce is Final and Now You Are Done? Not So Fast…

April/May 2014 Issue of Rhode Island Women’s Journal
The Divorce is Final and Now You Are Done? Not So Fast…

For most women, divorce can be a long weary process.  After the final court date, there may be a sense of relief when the final Property Settlement Agreement has been signed.  Depending upon the circumstances, you may feel that all stress is finally behind you concerning this unpleasant event.

Well, not so fast.  Unfortunately, there may still be work to be done, especially with your financial life.  As we often tell clients, marriage is an economic partnership.  Dissolving that partnership may require unwinding the financial arrangements of the past.  In addition, the division of assets that has been agreed upon in the Property Settlement Agreement needs to be addressed soon.  Often this requires paperwork; a lot of it.  Unfortunately, we often see new clients who have been divorced for years, yet some of this work hasn’t been done.

One of the first tasks is obtaining a copy of your final divorce decree.  You may need this as proof of your right to marital assets, such as IRA accounts, investment or bank accounts, and perhaps other physical property.  Next, if not done already, you absolutely need to close any joint bank accounts (checking, saving and bank CD’s) as well as any joint credit cards that still have your ex-husband’s name.  Open up new accounts under your sole name and be sure to designate a beneficiary under the “Transfer on Death” law.  (This law allows for a beneficiary for a taxable account).

A Qualified Domestic Relations Order (or QDRO) may need to be drafted to access your portion of employer-sponsored retirement accounts or benefits, such as 401(k) accounts and pensions.  Ideally, the QDRO should be drafted prior to the divorce being final, but often this occurs after the divorce is finished.   Monitor the progress on getting this document drafted and approved so you can submit it to the appropriate administrators.  An IRA division does not require a QDRO, though other forms and signatures may be required.  Also remember that you ideally want the money to transfer to a tax-deferred retirement account – taking the money directly could trigger unnecessary penalties and taxes.

With retirement accounts, other investment accounts and life insurance/annuity policies, an often-overlooked task is changing beneficiary designations to someone other than your ex-spouse.  This is one issue we see too often in post-divorce finances.  In one situation, a post-divorce client failed to change the beneficiary of her IRA and a medical-insurance annuity from her ex-husband to other intended family members after her divorce.  When she died unexpectedly, the proceeds from those financial assets went to her ex-husband, not her family members, and there was nothing they could do about the consequence.  So be sure to change all your beneficiaries after your divorce.  If there are investment accounts for your children controlled by your ex-spouse, make sure you request receiving regular “third-party statements”, so you can monitor the distribution of those accounts for your children.

Estate-planning in general is another overlooked area.  Ideally, married spouses are the executors of each others Last Will and also are named representatives in Financial and Health Powers of Attorney.  After divorce though, you may wish to name someone else for these important duties, as well as changing how your estate will be disposed.  In addition, if you have children, you may have specific wishes for them if you die prematurely.  All of this suggests consulting with an attorney practicing estate law to review your will and other documents.

Healthcare is also an important area.   If the divorce has changed your access to health care and insurance, you need to research possible plans (through the government or otherwise) and take care of this area of personal finance right away.

Establish a system to keep track of spousal and child support payments.  You might want to establish on-line banking and request electronic payments of these income items from your ex.  This way, you can monitor deposits and the excuse of slow postal mail or a check lost in the mail is no longer valid.

Finally, now that you are entering a new phase of life, a financial plan is critical.  Setting new goals and having a plan can go a long way in building your confidence and your ability to secure a sound financial footing for your future.  Don’t procrastinate as so many others do.  If you are unsure of where to begin or how to proceed, financial planners who are familiar with divorce and finance may be a great help.

Read other articles we have published in the Rhode Island Women’s Journal, or contact us via our Contact Us page to receive other free articles and information about divorce finance and planning.