If you are approaching divorce, you know that you are on the cusp of confronting significant change in many aspects of your life. This is true whether you have been blindsided by your spouse or whether you’ve initiated the proceedings yourself. Either way – and any way in between – you’ll have to navigate a process that involves a tremendous amount of disruption and upheaval in your life. And while it may be the emotional toll that you begin to experience first, divorce has many financial consequences that will require your immediate attention.
If you’re feeling overwhelmed about divorce and finances, start with the six steps below to get your money matters in order as you prepare for divorce.
Step 1: Gather Your Account Information
As soon as you know divorce is on the horizon, take action to gather all your financial records. It will be critical to have financial documents on file for your bank accounts, mortgage statements, credit card bills, wills, trusts, and anything else your name appears on. Don’t rely on online account information – try to print out what you need and make hard copies to keep in a secure file. Rather than keeping this file in your home, you may want to leave it in the care of a trusted friend or family member, or keep it in a safe deposit box that only you can access.
Step 2: Be Proactive About the Funds You Need
Divorce comes in many flavors, and it’s certainly possible that you and your spouse are amicable and not planning anything underhanded during the divorce proceedings. Unfortunately, many women find their spouses using financial tactics, so you’ll want to be sure to secure the funds you need for legal representation and other professional fees. You never want to be in a position to sign a divorce agreement that isn’t in your favor simply because you’re feeling a financial squeeze. So, be proactive about securing the money you need and then keep it somewhere where it is only available to you.
Step 3: Open New Accounts
As you prepare for divorce, you should open new checking and savings accounts in your own name if you only have joint accounts with your spouse. If you need new accounts, try to use a different bank than the one where your joint accounts exist. State laws differ, but many divorce attorneys will ask you to withdraw half of your joint funds, and you’ll need somewhere to deposit those funds.
You should also open a new credit card in your own name if you only have joint accounts at the moment. As you move forward past divorce, it will be important to maintain your own good credit standing and solid financial footing.
Note: If you already have separate financial accounts but your spouse knows your commonly used passwords or other account information, consider whether you’ll need to change your account access moving forward.
Step 4: Look Up Your Credit Report
Accessing your credit report will let you know if your name is on any accounts that you weren’t aware of and remind you of those that may have slipped your mind when you were gathering your records in step one above. It’s also a good way to monitor any big financial moves your spouse may be making without your knowledge, especially those that may be depleting marital assets. You can access your credit report for free here, and many credit card companies also offer credit score and report access, as well as credit monitoring services that you may find useful.
Step 5: Open a Post Office Box
Since you’re doing things like hiring an attorney and opening new bank and credit card accounts, you’ll likely begin receiving mail that you may want to keep confidential. Using a post office box can give you the peace of mind that any sensitive mail will be secure and only accessible to you.
Step 6: Update Your Estate Planning Documents
Once divorce proceedings have been initiated, you’ll want to take steps to change your will, update medical directives, and change account beneficiaries. This process can feel overwhelming but take it one step at a time. If you want to be sure your spouse would not inherit all of your assets if you happened to die before the divorce is final, begin there. If you’re more concerned about changing your living will so that your spouse would no longer make medical decisions on your behalf, tackle that step first. In the end, you’ll need to do both of those things anyway, in addition to removing your spouse as a beneficiary on life insurance policies and retirement accounts.
Divorce can feel overwhelming even without the financial aspects involved, and it’s normal to face some anxiety or trepidation about getting all the money details in order. Establish a goal to make thoughtful, reasoned decisions throughout the process, rather than being led by your emotions. If you begin with the six steps above, you’ll begin to feel more in control and better equipped to move forward with clarity.
No one plans to get divorced, yet it is a life transition that nearly half of married American couples will face. What’s more, it can be particularly damaging to women, especially from a financial standpoint. Financial advisors commonly assist people during this complex life transition, and this is an area of interest for me at my company, Flourish Wealth Management. If it’s important to you to emerge from this challenging time with solid financial footing, your assets protected, and a long-term financial plan in place, please contact me today.
For more on this topic, listen to Episode 20 of my Flourish Financially Challenge Podcast: Divorce and Your Finances.