Rebuilding after a divorce can be a long and confusing process. You’ve just been through a deeply traumatic experience. Now trying to figure out what life looks like for you as a newly single person can be pretty stressful. With all of that on your plate, figuring out your finances might feel like the last thing in the world worth tackling.
Due to the complexities in the division of marital assets, oftentimes certain important factors can be overlooked. As such, it’s important to educate and empower yourself as much as you can, especially for women. Do your research or seek out a financial professional who can help guide you through this new phase in your life, and advocate for your best interests.
Steps for Rebuilding After a Divorce
1. Revise Your Will
Relationships and responsibilities have changed. Your will usually determines how your estate is to be distributed at your death. Review it immediately to make sure it reflects your new situation and objectives so that, in the event of your death, your assets can go to the people you designate. Talk to your attorney about your options.
2. Sever All Unnecessary Financial Ties with Your Ex-Spouse
Your divorce decree may mandate child support, alimony, or life insurance on one of your lives for the benefit of the other or for your children. Other than these requirements, it is generally a good idea to disentangle yourself financially to reduce your liability.
Start by contacting lenders and make sure all joint credit cards have been canceled and new ones have been issued in your name only. Otherwise, in many states, your liability for your ex-spouse’s bills will continue.
3. Update Your Retirement Plan Beneficiary Designations
As with life insurance, survivor benefits will be paid to the person you named in your qualified and non-qualified plans. Even if you obtain title to the funds as part of the divorce, this does not automatically change the beneficiary.
Since the beneficiary is almost always a spouse, review your named plan beneficiary to make sure it reflects the changes in your life. Talk to your investment professional for help or contact retirement plan administrators directly.
4. Review Your Overall Retirement Situation
Divorce can scramble your retirement nest egg, separating you from assets that may have taken years to accumulate. You may want to start “power saving,” or accelerating the amount of income you put aside, if you hope to retire on schedule.
If you are not already doing so, this may also be a good time to start making maximum contributions to your employer-sponsored 401(k) plan and your own IRA.
5. Review Your Life Insurance
This especially pertains to ownership and beneficiary designations on your existing coverage. Beneficiaries cannot be changed by your will, so you should complete a change-of-beneficiary form with the insurance company.
It is common for people to neglect this task; then, decades later, the “wrong” spouse receives life insurance proceeds at the insured’s death. That’s why it’s better to address the issue now.
We Can Help you Find Your Feet Again
Rebuilding after a divorce is no easy feat. That said, if and when the time is right for you, we’ll be standing by to help you figure out the money part of the equation.
If you would like to discuss this, or any other topic affecting your financial life, then please don’t hesitate to get in touch.
Laryssa Freeman, CFP® is a member of the Fee-Only Network. She offers two options for new clients depending upon their needs:
1) Project-Based Financial Planning Service on a flat fee basis. The implementation of the plan is done by the client. The scope of work for the Project-Based Financial Planning Service may include the following topics based on the client’s needs: Retirement Planning, Estate Planning, Development of Financial Goals, Investment Analysis, Risk Management, College Planning and Tax Planning Strategies.
2) Comprehensive Financial Planning which includes all of the services above plus investment management and financial plan implementation by Meritage Wealth Management.