Seven Steps to Divorce Your Finances from Your Ex

Don't forget to tie up financial matters after you divorce. Our checklist will help.
Don't forget to tie up financial matters after you divorce. Our checklist will help.

Don’t forget to tie up financial matters after you divorce. Our checklist will help.

by Ginita Wall, Certified Public Accountant (CPA), Certified Divorce Financial Analyst (CDFA), Certified Financial Planner (CFP®)

Even in the best of circumstances, a divorce is a long, arduous, and emotional task. As soon as you finalize the divorce, you might just want to curl up in bed for a few weeks and watch every single thing on Netflix. Not so fast! Now that you and your ex have uncoupled your married lives, it’s time to uncouple your financial ones at well. As you begin to walk your own path, you must ensure that you are now solely in control of your finances, including your bills, insurance policies, and estate planning documents. Pause that Netflix show, you have some financial divorcing to do!

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Ginita Wall

  1. Separate Your Bank Accounts and Open Your Own

If you and your spouse held joint bank accounts, it is time to close those suckers out and open your own accounts. This will allow you to control your own money and will help you both avoid inequities in spending within the shared account.

  1. Re-Route Direct Deposits and Direct Bill Pay

Now that you have your very own checking and/or savings accounts (I recommend both), you need to make sure that your automated deposits and bill pay go to the right place. You are going to be mighty unhappy if your next paycheck tries to go into the joint account you just closed, and your electric company won’t appreciate trying to pull your monthly payment from a non-existent account. Make a list of all the automatic payments that go into and out of your joint accounts and then make sure to re-route the ones you are responsible for.

  1. Deactivate Joint Credit Cards

It might be tempting to put some last-minute charges on a shared credit card, but it is best to resist. Instead, open new credit cards in your own name first and then work with your spouse to close down all your shared cards. You two will need to work together if your shared cards have a balance. Most credit card companies allow you to transfer part or all of a card’s balance to a new account, and many actually offer special promotions with low or zero introductory interest rates on transferred balances. As with your online accounts, make sure you re-route any automatic payments from your old credit cards to your new ones.

  1. Remove Your Ex from Your Insurance Policies

Unless your divorce agreement provides otherwise, it’s time to boot your ex off of your health insurance policy, car insurance policy, and renter’s insurance. Make sure to let him or her know what you are doing so he isn’t surprised to learn he doesn’t have insurance after a car accident. If you are on your ex-spouse’s insurance policies, don’t bet on him paying your premiums unless that was part of your settlement. Time to start shopping for your own insurance policies. (Learn about how to Maintain Your Health Insurance After Divorce).

  1. Make Sure Your Ex Isn’t Your Beneficiary

During the good days of your marriage, you probably made your ex-spouse the beneficiary of your life insurance policy, your retirement accounts, the trust that holds your inheritance, and perhaps your entire personal estate. Unless you two somehow managed to stay best friends, chances are you don’t want him to benefit financially from your demise. Schedule some time in the near future to remove him as your beneficiary from these documents. (Learn more about Estate Planning for Women).

  1. Remove Your Ex From the Title of Your Assets

Is your spouse listed on your car title or the deed to your house or other property? If you received these items as part of the divorce settlement, you’ll want to make sure that yours is the only name on those important documents. Transfer your vehicle title to your name and record an Interspousal Transfer Deed to remove your spouse from the house deed once all other ownership arrangements have been made (for example, you’ve paid him to buy him out his share of the home).

  1. Create a New Will

One of the most important things you need to do now is make sure that your financial legacy goes to the right people in your life. If your ex-spouse is the prime beneficiary of your will or is listed as your agent in your durable power of attorney, you’ll likely want to update both of these documents. This might mean giving your estate planning attorney a call or filling out new online templates.

Yes, tying up all of these loose ends is a lot of work, but it is also worth the hassle. Financially divorcing your spouse after your official divorce will put you on more solid financial ground and give you a clear path ahead as you begin to rebuild.

Ten Must-Dos After Your Divorce

What are the first steps to take if you're thinking about divorce? Get answers at our free workshop December 3. RSVP 858-472-2022 San Diego

Divorce must-do list by Nancy Stassinopoulos, Certified Family Law Specialist
Nancy Stassinopoulos, APC

Many couples think their case is over on the date they sign their Marital Settlement San Diego divorce attorney Nancy StassinopoulosAgreement. This is a momentous occasion, especially in a collaborative case where the entire team usually meets in a conference room to review and sign the final documents. Emotions can run high, ranging from tears to smiles of happiness that a divorce has been concluded with dignity and respect.

But wait, before you break out the champagne to celebrate with your friends, there’s more to be done. Here are ten important reminders:

  • Finish your QDROs. If your Marital Settlement Agreement provides for retirement accounts and pension plans to be divided by a Qualified Domestic Relations Order, you should start working with the QDRO attorney or QDRO preparation service recommended by your collaborative attorney. In fact, most collaborative attorneys recommend that the couple start the QDRO drafting process before the Marital Settlement Agreement is signed, so that the QDROs can be signed and submitted to the court with the Judgment. Then, you need to make sure that the QDRO is served on the Plan.
  • Divide Your IRAs. The division of Individual Retirement Accounts is usually spelled out in the Marital Settlement Agreement, either as a formula (one-half to each spouse) or a dollar amount to one spouse. The division of IRAs does not require a QDRO. However, you need to contact the custodian of the IRA to request forms for the transfer of the funds, which can be rolled over into the transferee’s IRA without tax consequences. Your Collaborative Attorney or Financial Specialist will assist you if you need help.
  • Change your estate plan. You should make an appointment with an estate planning attorney. If you and your spouse had an estate plan, such as a family trust or wills, be aware that the divorce will automatically revoke any wills or trusts that were in existence on the date of the divorce. Thus, you will need to make a new estate plan. If you fail to do so, and then pass away, the laws of the State of California will decide how to distribute your assets. Also, probate fees for those who die “intestate” (without a will) are costly.   You can leave more money to your heirs with a good estate plan.
  • Check your life insurance. You should review and change the beneficiaries on your life insurance policies, to conform to the Marital Settlement Agreement. Remember, life insurance is not controlled by a will or trust. All beneficiary changes must be made in writing.
  • Change retirement plan beneficiaries. You will need to change the beneficiaries on your Individual Retirement Accounts, 401(k) Plans, and pension plans, to conform to the Marital Settlement Agreement. If these accounts will be divided between you and your spouse, you will need to get that done before you can change the beneficiaries. All beneficiary changes must be made in writing, usually on a form provided by the company.
  • Change your powers of attorney. During marriage, you might have given your spouse a financial power of attorney, or a power of attorney for health care. Be sure to revoke those documents and create new ones. Your estate planning attorney can assist you.
  • Close all joint credit card accounts. Remember, on a true joint credit account, both you and your spouse remain liable for any future charges, even after your divorce is final. If you are not sure whether an account is a true joint account, as opposed to one on which your spouse is an authorized user, call the card issuer and ask.
  • Close all joint bank and financial accounts. Most banks and financial institutions will require both account holders to authorize the account closure.
  • Copy your family photos and videos. Usually the Marital Settlement Agreement will provide that family photos and videos will be copied, with the expense to be shared. Be sure to make these arrangements as soon as possible.
  • Change the passwords on all accounts. If your spouse had access to your online financial or credit card accounts, you will have to change your passwords. Remember, your ex-spouse may be able to answer security questions such as your mother’s maiden name, and obtain access to your accounts after the divorce.

This list may seem overwhelming. It is a lot of work to address these important details. But think about how much work you have already done, to get to this point in the divorce process. Don’t let it all unravel because an important detail was not addressed.

Here’s a tip: Start with the tasks you can accomplish quickly. Tackle the tasks one at a time, check them off as you complete them, and move on to the next one. You will have all this work done in no time. Then you’ll be able to relax, knowing that your future, and your family’s future, will be secure.