Going through a divorce can be an overwhelming process. No one can really disagree about the fact that divorce is usually one of the major life events that can bring prompt changes in your life. These changes are just not limited to change in marital status. During the event of divorce, your change in circumstances will make you also experience changes in your financial status, which means you will be required to make changes to your financial budgets. The article below is written for educational purposes only and will list out the basics of financial planning post divorce.
By taking the time to review suggestions given below and making necessary changes, you can start your life on good note and avoid problems down the road that you are likely to encounter post-divorce. As always, it is generally advised to consult your local family law attorney who can assist you with financial planning after divorce.
1. Cancel and/or suspend joint accounts. After divorce is granted, it is advised to cancel and close all the joint bank accounts that you shared with your former spouse immediately. If any joint accounts get left out after divorce, then it can come back and haunt you, as it can be considered as a liability. This is something you don’t want to happen and it’s the last thing you would want to be on hook for after your former spouse runs up charges on the credit cards or overdrafts bank accounts. If for any reason there is account balance that cannot be paid off immediately, then you are required to instruct the bank or the credit- card company that you would like to suspend the account and not allow the bank to hold you liable for the future charges. You should also confirm that the account cannot be re-opened or un-suspended.
2. Open new accounts. On the basis of your situation, it may make sense to apply for new credit card accounts before canceling your joint accounts. If you have marginal credit and do not have an emergency reserve of cash, getting access to a credit card should be a priority. Using credit cards might be a good idea, because it is possible that a lot can happen in a short amount of time if someone does not have sufficient assets to cover the rent, buying food, or paying for healthcare. Sometimes you may be required to get a small loan until you get back on your feet, a credit card can come handy during this time. Additionally, it is advised to open bank accounts, investment accounts etc. Lastly, it is recommended to make a list of all the accounts you have had while you were married, and plan to replace those accounts as soon as possible.
3. Change beneficiaries. It is recommended to change your beneficiaries on the accounts after divorce. Failure to do this can possibly result in your ex-spouse ending up with your retirement and other assets when you are no longer. In order to change your beneficiaries, not much is required. It is a simple process which requires you to fill out a simple form which lists out the primary beneficiary and contingent beneficiary. If you do have a new living trust, you should consult your estate lawyer who should be listed as primary and contingent beneficiaries on your accounts.
4. Review, and if needed updated personal insurance coverage. You are advised to consult your insurance broker and update automobile, homeowner’s and liability coverage. It is advised that you do pay particular attention to the assets scheduled on your homeowner’s policy including, but not limited: jewelry, collectibles, and other valuables your spouse may have received in divorce settlement. There is no sense in paying insurance premiums for assets you do not own.
5. Have an emergency reserve ready. After divorce is granted, it is important to have cash safety net. You can set aside six months of living expenses in cash in a bank account- or, because interest rates are so low, consider putting the money in an ultra-short-term bond fund to get a 2% to 3% yield on your money.
6. Create an income safety net. One of the most common fears I hear from both men and women after a divorce is that they feel financially vulnerable – that they don’t have anyone to turn to if they get laid off or suffer a financial setback. One solution is to consider getting a disability and/or critical-illness insurance policy on yourself. These policies provide you with a monthly “paycheck” if you become injured or ill and cannot work, providing peace of mind that your financial life will not be ruined if you suffer from a long-term disability or illness.
7. Keep an eye on your credit score. During and post divorce, you should monitor your credit score. Free credit reports are available on: www.usa.gov/topics/money/credit/credit-reports/bureaus-scoring.shtml (USA). If you notice any errors on your credit report, contact the credit bureau to get the discrepancies resolved; as the errors can have a huge impact on your credit and can cause you to pay more for loans and insurance while making it difficult for you to get a new job or rent a new home.
8. Create a new estate plan. Now is the time to think about creating an estate plan, after the divorce is finalized. If you do have children, you may be required to update your will, but regardless there are estate-planning issues that should be considered. Update or create a power of attorney for healthcare and finances, a living will, and other documents. If you had a living trust, consult your estate lawyer to create a new trust.
9. Re-title assets in your name. Post-divorce, you may have many assets that likely need to be retitled. If for instance you owned your house in a trust with your spouse, you should retitle the house in your name only or in the name of a new living trust you create.
Financial planning post-divorce can prove to be very beneficial if done right. The article is written to provide you with a basic framework of what should be considered during your planning. As always, it is recommended to contact your local family law attorney who can guide you depending on your situation. Our attorneys at Coleman Legal Group, LLC have helped many like you plan their financial future post-divorce. We are here to help you during this difficult time. Call us today at 770-609-1247 to meet with our experienced divorce and family law attorneys today.