Getting Divorced? A Checklist for a Financially Sound Separation
Managing the financial aspects of a divorce may be just as important as coping with the emotions. This checklist can help you transition from "ours" to "mine" and "yours."
Day-to-day transactions and financial accounts
- Divide all bank account balances as called for in the divorce agreement
- Cancel joint checking, savings and revolving credit accounts, such as credit cards
- Establish individual accounts in your name for ATMs, checking, savings and credit cards
- Let your utility companies know if you're assuming responsibility for the bills or if your name should be removed from the accounts. Make sure to update the accounts for gas, electric, heating oil, water, sewer, cable/satellite television, telephone and broadband Internet. Clarify responsibilities for any condo or co-op fees.
- Convert family mobile plans to individual contracts, if applicable
- Notify all of your creditors of your changed circumstances and responsibilities, including change of address if applicable. Make sure you notify organizations with whom you may have automatic payment arrangements such as private schools, religious congregations and associations.
[Note: The divorce agreement negotiated during your proceedings should spell out who owes what to whom and who is assuming which obligations. You should make suitable arrangements for your responsibilities and remove yourself from things you are no longer responsible for. Community property states may have unique rules governing the division of assets and liabilities, but similar post-separation principles would apply.]
Other financial assets
- Revoke any joint authorizations or powers of attorney you gave to your ex-spouse over investment accounts and assets
- Remove yourself from any joint accounts your spouse intends to maintain independently. (You may have to explicitly notify the institution that you will claim no future interest in the account.)
- Remove your ex-spouse from any accounts you intend to maintain individually
- Make suitable arrangements (opening new brokerage or trust accounts if necessary) for any securities due to you from the divorce settlement
- Open new trust accounts for any assets you expect to receive on behalf of dependents
Retirement plan issues
- Update the beneficiary designations of your existing retirement accounts and insurance policies
- Seek a qualified domestic relations order (QDRO) for any retirement assets you are entitled to in your spouse's employer-sponsored plans. (The QDRO is a tax-efficient way to preserve and enforce your financial interests in your ex-spouse's pensions and defined contribution plan assets.)
- Create rollover IRAs in your name to receive any assets you might be due immediately from your ex-spouse's IRAs under the terms of your divorce settlement. (Taking those transfers as cash distributions could trigger immediate and costly tax consequences.)
Property and other resources
- Update the deeds and title papers to reflect any changes in property ownership conditions specified in your divorce agreement. Notify any mortgage holders and lienholders of the changes.
- Notify all taxing authorities (city, country, school district, etc.) of any changes in responsibility for real estate tax payments
- Update motor vehicle title, tax, insurance and lease arrangements
Moving forward on your own
- Take a fresh look at your plans for the future to determine whether your divorce will affect your financial needs, risk tolerance and time frames. Among the things to reevaluate are:
- Life insurance and disability insurance needs
- Investment allocations
- Retirement savings rates
- Review your will to be sure that its provisions reflect your new circumstances (if you have no will for yourself, create one)
- Evaluate your Social Security status. (A divorced person may be eligible for Social Security benefits based on his or her ex-spouse's earnings record if he or she is at least 62 years old, was married for at least 10 years, and does not remarry before age 60.)
Plan for your financial future
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The material was authored by a third party, DST Retirement Solutions, LLC, an SS&C company ("SS&C"), not affiliated with Merrill or any of its affiliates and is for information and educational purposes only. The opinions and views expressed do not necessarily reflect the opinions and views of Merrill or any of its affiliates. Any assumptions, opinions and estimates are as of the date of this material and are subject to change without notice. Past performance does not guarantee future results. The information contained in this material does not constitute advice on the tax consequences of making any particular investment decision. This material does not take into account your particular investment objectives, financial situations or needs and is not intended as a recommendation, offer or solicitation for the purchase or sale of any security, financial instrument, or strategy. Before acting on any recommendation in this material, you should consider whether it is in your best interest based on your particular circumstances and, if necessary, seek professional advice.
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