At its heart, divorce is fairly simple. One spouse has to tell a judge that he or she wants out of his or her marriage. Then, the judge needs to make sure that the couple’s property is equitably divided and their children are taken care of. Once those issues are settled and any required waiting period is up, the judge will order the marriage to be terminated and the now-single former spouses can each go their separate way.
Mistakes made during this process can be financially devastating, though. To avoid some of these mistakes, here is a handy divorce financial checklist.
1. Collect important information while it is easy
Once you have filed for divorce, you and your spouse may be fighting like cats and dogs. Your spouse may not be helpful if you need to obtain information. For example, in many couples, one spouse handles the taxes and the other spouse does not really understand what is in them. In a divorce proceeding, both spouses have the right to see those taxes but one spouse may not be cooperative. You should make sure you have documentation of any:
- Income tax returns;
- Real estate and mortgages;
- Pay stubs for your jobs;
- Business records;
- Bank account information;
- Any recent loan applications (these often provide a good snapshot of your finances);
- Retirement savings or pension plans;
- Employment contracts;
- Wills or trusts;
- Insurance, especially life insurance; and
- Anything else of significant value.
2. Make sure bills are getting paid
Your bill collectors will generally not care that you are getting divorced. If you have a joint mortgage, for example, you could be in a situation where both spouses think the other is supposed to be paying. You do not want to default on debt while your divorce sorts itself out.
3. Change your beneficiaries
After a divorce is complete, you will want to make sure you have changed your beneficiaries on any accounts or insurance policies that you have. You may have made your wife a beneficiary to your life insurance policy, for example, and if you die you probably do not want all that insurance going to your ex-wife. You should be very careful not to do this too soon, though. In many situations, you are not allowed to change beneficiaries (or make other major changes to your assets) while the divorce is ongoing.
4. Change your passwords and mailing address
You do not want your estranged spouse logging into your accounts or reading your mail without your permission.
5. Check your credit
Many people that have no problem with credit in a dual-income household can find themselves suddenly struggling to get a credit card or mortgage once they are down to their own income and credit history. You should check for any problems and work to build your own credit if necessary.
6. Hang on to important personal items
Expensive but small items like jewelry, electronic equipment, and art have a tendency to disappear during a divorce and it can be hard to account for all these personal items. Plus, couples wind up fighting over many personal items with no monetary value, like personal photographs. Be sure to keep important items like this in your possession where possible.