You’ve signed the papers and the divorce is now final. Whether you feel like taking a victory lap, recovering in bed, or taking the time you may not have previously allowed yourself to grieve, there are some things you should consider immediately – while others can wait – in order to make the most of your divorce for today, tomorrow, and your new future.
1. File your Qualified Domestic Relations Order
If part of your settlement includes Qualified Retirement assets you want to work with your attorney to file the Qualified Domestic Relations Order (QDRO) as soon as possible. It can take months for assets to be moved from a 401(k) or other qualified plan, so the sooner you file these papers, the sooner you can gain control over the management of the assets you are entitled to.
It’s worth noting that IRA assets do not require a specific order. You will simply need to sign some paperwork and submit a copy of your court approved divorce decree to transfer IRA assets.
2. Separate your assets
Close any remaining joint bank or credit card accounts and open new ones in your name. This is critical to your financial health as you want to ensure that your ex-spouse cannot access your assets or accrue debt in your name. Update deeds to your real estate and automobiles.
3. Take control of your money
There are several factors to consider when managing your assets post-divorce.
a. First things first—cash is king
Start with your cash flow. Your accountant and a good financial advisor should be able to help you determine what your new monthly cash flow will look like. Living within this new cash flow and allowing your investments to grow, if possible, will provide the best opportunity to maximize your settlement for your future needs. A qualified Certified Divorce Financial Analyst (CDFA®) can help streamline payments for the payor or ensure the recepient gets what they are entitled to. This is particularly important when there are complex compensation plans with year end cash or stock payments and “true-ups” are required.
b. Understand your tax situation
Make sure to review your current tax situation with your accountant and financial advisor. Set aside any payments you may need to make now and create a plan for paying taxes going forward. While spousal support payments for divorces finalized in 2019 and after are not deductible by the payor nor taxable by the recipient, some states have different laws so it’s important to consult with your tax advisor.
c. Define your values
It is wise to review not only your financial priorities, but also your values. Reflect on what you learned about money growing up as well as during your marriage. What matters to you today may be very different than what mattered to you a year ago. Your career goals may have changed. Your retirement dreams may have evolved. You may have new priorities for how you spend your free time. You no longer need to align your financial values with your ex-spouse’s – enjoy exploring what matters to YOU!
d. Redeploy your assets
Once you have clarity on your values and priorities, revisit your investment strategy. You and your financial advisor now have the freedom to manage your investments in alignment with your values and goals. Don’t be surprised if your asset allocation has changed as your risk tolerance and return needs may be quite different than they were as a couple. Discuss with your financial advisor if you’d like to skew your portfolio towards companies whose mission and business practices are aligned with your values. Common areas investors consider are climate change, clean water, racial justice, education, human rights, corporate diversity and inclusion.
4. Retitle your accounts and beneficiaries before changing your name – update your estate planning documents
If changing your name is something you are planning to do, consider waiting until after you have received all the assets you are entitled to. Keeping your name as is will make this process far simpler at first. Down the road, you can retitle your accounts to a new name if desired. It’s also critical to update the beneficiaries of your retirement accounts and life insurance policies as well as update your will, trust, and powers of attorney for health care and property.
5. Think about waiting to purchase a new home
After going through a divorce, it’s quite natural that you may want to get a new space that is truly yours. But this is one decision that may be worth waiting to make. Owning any real estate typically requires a significant amount of a divorce settlement and is a long-term commitment, so taking the time to get it right can make a meaningful impact on your financial choices in other areas. Understand that many individuals end up moving a few times after a divorce. Some choose a recovery home before putting down new roots. Others may stay in the marital home for the short term or for the long term. And still others may live with family or friends for a while. If you want or need to move for any reason, renting may be a good first step. This can help you test out different areas and different types of properties while you adjust to life on your own before making an expensive complicated commitment.
The future is now yours to define. How will you take control of your life—and your finances—to make your next chapter everything you want it to be?
CONTENT DISCLOSURE
This information is for educational purposes and is not intended to provide, and should not be relied upon for, accounting, legal, tax, insurance, or investment advice. This does not constitute an offer to provide any services, nor a solicitation to purchase securities. The contents are not intended to be advice tailored to any particular person or situation. We believe the information provided is accurate and reliable, but do not warrant it as to completeness or accuracy. This information may include opinions or forecasts, including investment strategies and economic and market conditions; however, there is no guarantee that such opinions or forecasts will prove to be correct, and they also may change without notice. We encourage you to speak with a qualified professional regarding your scenario and the then-current applicable laws and rules.
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