Common Financial Issues When Facing a Divorce

Divorce is a difficult time for both spouses, and it can be even harder when there is disagreement or confusion regarding financial issues. Most experts agree that planning and understanding your financial situation can help with the process. Here is a checklist to use when making decisions about separating your finances:

• Gather copies of tax returns, financial records; request credit reports. Separating all of your assets is a monumental task but one you should do promptly to prevent unexpected credit card charges and bank withdrawals. Gather all financial and property records. Obtain records of all bank, and brokerage accounts, insurance policies, retirement plans, tax returns, and other financial data. Start by ordering your free credit reports.
• Consider selling the house to get it out of both of your names or refinance it to put it under one person's name. Many divorcing couples want to keep the house, rather than sell it. Mortgage payments, upkeep, and property taxes are usually an after-thought.
• Close joint credit card accounts and other lines of credit. Pay off household expenses from joint bank accounts; and transfer funds to individual accounts. Discuss all the credit accounts held jointly, such as mortgage, home equity loans and credit cards. You should notify your creditors of your decision to divorce and reopen the accounts in only one spouse's name. This will also help each spouse establish individual credit records. A creditor can close the account at the request of either spouse. The creditor may require each spouse to reapply for credit on an individual basis.
• Check overlooked assets: frequent flier miles, club memberships, vacation pay, joint tax refunds, stock options, prepaid insurance, timeshares, magazine subscriptions and professional dues. When a couple is separating, it is very easy to overlook smaller assets because you are thinking about your children, the house, bank accounts, etc. Refer to your asset list and make sure these items are included.
• Update your will and the beneficiary forms on your life insurance and retirement accounts. Wills and trusts can also be seriously impacted by divorce proceedings. If divorced spouses wait unnecessarily long to change a beneficiary on a will, for example, the money may go to the wrong person — your new spouse may get nothing, while your ex spouse inherits the amount provided for in your will.
• Revise your budget. Think about long term planning. Set a realistic budget that takes into account your mortgage, property taxes, and maintenance. Expenses such as life insurance, health insurance and cost of living increases must also be taken into consideration when agreeing on a final financial settlement. Consider contacting a Certified Financial Counselor to help review your credit reports and revise your budget.