Ending a marriage doesn’t just take an emotional toll; it takes a financial toll as well. So no matter what state you find yourself in, it’s important to take some sensible financial steps to ensure you are protected during and after the divorce. What are the most important financial steps? There are several, and the most important financial steps are discussed below.
Take the right financial steps
1. Get professional help
Although you might want to solve all your problems on your own, in most cases, it makes sense to hire a divorce lawyer, financial planner and/or a tax accountant to review your financial position. This is especially true if you have assets to divide, support payments to negotiate or a business which you run with your spouse.
2. Gather and deal with documentation
If you’re like many spouses you may have let your partner deal with most financial matters. Not anymore. If you are getting divorced it’s time to gather all your financial data and make sure you make all the necessary updates. This can include updating the Qualified Domestic Relations Order (QDRO) (which is used to divide pension and employer retirement funds), the retirement assets (which are not included in an employer plan), Social Security information, medical power of attorney forms, wills, and title forms.
Keep in mind, failing to update your finances can have real consequences for you in the future. In fact, one friend I know still owned the mortgage to their home jointly with her ex-spouse and eventually her credit was negatively impacted by husband’s irresponsibility. Experts note that selling the home may be difficult, but it can, in the end, allow you to have a clean break from your spouse.
3. Don’t be afraid to fight for what you need
Don’t wait until after the spousal support is negotiated to determine whether you have sufficient resources to meet your financial needs. One of the most important financial steps during your divorce is to take an inventory of your expenses, income and assets. The information can be used to support any financial requests you make in the divorce process. Consider also the liquidity and the tax implications of the assets you agree to receive.
4. Start saving for your future now
Living alone can be very expensive, and you may struggle financially, especially until you get back on your feet. This can be especially true for women who left the workforce to care for their family and now suddenly find themselves back on the job market. If this is your story, it is time to talk to someone about your financial goals and how your assets should be allocated. Allocation can vary based on your investment goals, your necessary asset allocation, and how liquid your assets need to be to meet your daily expenses.
One of the final financial steps for divorce is to make sure you are protected against the unexpected. This is especially critical if you have children who depend on you for support. If you have lost your health insurance or you have not purchased life insurance, it’s time to talk to an expert to evaluate your choices.
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