Divorce Checklist

divorce-checklist

Divorce Checklist

There are no two ways about it. Divorce is messy. Which is why being organized is critical. If you are still contemplating a divorce, or have made the decision but don’t know where to begin, check out our pre-divorce checklist. Once things are in motion, this divorce checklist will help you avoid critical mistakes that could negatively impact your financial  future.

Make a Plan for the Children

If you and your spouse have children, you need to get on the same page for your children’s sake.

Legal Custody

The first step is figuring out who has legal custody or if custody is shared. Legal custody impacts who makes major decisions about the children regarding education, religion, and major healthcare issues.

Physical Custody

The next step is to figure out when the children will be with each parent. In addition to determining regular schedules, you need to account for birthdays, holidays, vacations and other exceptions to the rules. Depending on where you both plan to live, this could also impact where the children go to school.

Child Support and Expenses

There are lots of things to take into account when it comes to the finances around your kids, but here are some of the major items to consider.

  • Child support: amount, method, and timing

  • Health insurance, as well as medical expenses not covered by insurance

  • Childcare expenses

  • Tax deductions

  • School/college expenses

  • Expenses for extras: activities, birthday parties, non-essential items

Communication

Last, but certainly not least, is communication.  How will you break the news to your kids and how will you help them cope? Moving forward, how will you and your ex-spouse communicate with each other about the children? How will the parent without physical custody communicate with the kids?

Settle the Financial Aspects of the Divorce

Asset Distribution

As we outlined in our pre-divorce checklist, the first step is to catalogue and agree on the value of the marital assets. Once you come to a common understanding here, you can begin to decide who gets what in an equitable fashion. Do remember to take liquidity into account as we discussed in “Divorce and Finances – 6 Mistakes to Avoid“. Illiquid assets are generally not as valuable as liquid ones. Also, if you end up with some of your spouse’s retirement account, make sure you get a Qualified Domestic Relations Order (QDRO) to give to the plan adminstrator and don’t forget to actually have the assets transferred.

Child Support

If you have children from your marriage, you or your spouse may be required to pay child support.  While the judge has some latitude, states have default formulas to calculate any required child support. To get a rough expectation of what you will pay or receive, use one of the many online child support calculators.

Spousal Support

Unlike child support, there is more discretion in how spousal support is determined.  The key issues to resolve are

  • Is either party entitled to spousal support?

  • If so, how much and for how long?

  • Will health care coverage be available under COBRA?  As a side-note, if you have good insurance now, take advantage of it to get any outstanding medical issues resolved.

The factors and rules the judge uses as a basis to determine spousal support vary by state, but the general principle is to take into account the earning potential of each party and come up with a solution that either allows both parties to maintain their pre-marital standard of living or more likely that they share the decreased standard of living equally.

Create a New Financial Plan

Divorce has serious financial and retirement security implications, particularly for women. A financial advisor can help you identify your options and priorities. He or she can also help you understand the long term financial implications of your divorce settlement. Use our proposal request tool to find and connect with financial advisors that can help you.

Your finances will look quite different once you are divorced, but it’s critical you don’t ignore them, especially if you were the spouse that didn’t handle the finances during your marriage. You should:

  • Articulate your goals and create a financial plan to achieve them

  • Create a new budget

  • Establish an emergency reserve of 3-6 months of expenses

  • Ensure you have adequate disability coverage to create an income safety net

  • Project and understand your new tax obligations

  • Analyze your investments and ensure they align with your plan and your willingness to take risks

Separate Debt

The goal is straight-forward.  You don’t want to be legally obligated to any creditor with your ex-spouse. Unfortunately, this isn’t always so simple in practice. For bigger loans like your mortgage, you most likely took out the loan jointly and many lenders aren’t willing to remove a party from their obligations. If you look to refinance instead, there will a) be a cost to this and b) you might not qualify using your post-divorce finances.

For credit cards, you can certainly close them and open new accounts, but this will have a negative impact on your credit score. If your card issuer will allow it, you should try to keep the cards open and remove your former spouse as an authorized user.

Update Accounts, Beneficiaries and Other Legal Documents

Don’t forget to update the beneficiaries on your retirement accounts, pensions and insurance documents. You should also close or retitle properly any bank and investment accounts. Finally, you should updates your will and any other estate planning documents to reflect your post divorce wishes. For women, if you plan to revert to your maiden name, it’s a good idea to handle all of these things together.

In addition, you should pull your credit report at the beginning of your divorce and again once the divorce is finalized.  This is a good way to ensure you don’t overlook joint accounts or obligations.

Agree on Communication and Dispute Resolution Post Divorce

While you may wish to never interact with your spouse again after the divorce, there’s a good chance something will come up, and it’s better to discuss a framework for communication and dispute resolution as part of the divorce process rather than trying to figure it all out later.

Complete Your Divorce Checklist

A divorce checklist is only effective if you use it.  There is a lot to do, and a single article cannot hope to contain everything you need. However, by focusing on the big picture, implementing this divorce checklist can provide a framework for avoiding some of the biggest mistakes people often make.