You have just signed your final divorce agreement, memorializing an end to what was likely a long and emotionally draining process. However, the work is not yet complete. There are crucial practical matters to address immediately. Here are 17 essential steps to take after your divorce is finalized, ensuring a smooth transition to your financial and personal independence.
1. Close all joint cards, bank accounts, and financial accounts.
This is a critical first step. Joint accounts create potential for financial entanglement and should be closed as soon as possible.
2. Remove your former spouse’s access to all existing individually owned accounts.
Revoke your ex-spouse's access to prevent unauthorized transactions.
3. Consider data security. Change passwords and logins for existing financial accounts.
Take this opportunity to strengthen your online security. Change passwords and security questions for all financial accounts, email, and other sensitive online platforms. It is likely that your ex-spouse has had access to this login information during your marriage.
4. Review property and casualty policies such as homeowners and automotive policies.
Update your insurance policies to reflect your new marital status and living situation. Remove your ex-spouse as a named insured where appropriate.
5. Review automatic payments for bills that occur each month from bank accounts and on credit cards.
Identify and remove any automatic payments that are no longer relevant or that your ex-spouse should be responsible for.
6. Update bills such as utilities and cell phones to remove ex-spouse.
Contact utility companies, cell phone providers, and other service providers to remove your ex-spouse from the accounts or establish new accounts in your name.
7. Update mailing address with all financial account providers and creditors, if applicable.
Ensure all correspondence is sent to your current address to avoid missed bills or important notices.
8. Update titles on real estate, automobiles, etc.
Transfer ownership of physical assets according to your divorce decree. This may involve updating titles and registrations.
9. Take action to separate other accounts you are entitled to and open any necessary new accounts in your name.
This step is crucial for dividing retirement accounts and other assets. A Qualified Domestic Relations Order (QDRO) is often necessary for retirement plan distributions from workplace plans such as 401(k)s or pensions. The drafting of the QDRO is likely completed by one of the attorneys that helped facilitate the divorce. You, or a financial professional you have engaged to work with, will likely take a lead role in contacting each provider and facilitating the split of accounts you are entitled to and completing paperwork to open new accounts in your name alone.
10. As needed, refinance debts you remain responsible for and/or remove spouse from open credit lines.
If you're assuming responsibility for certain debts, confirm with the creditor who is named as responsible for the debts. If required under your divorce agreement, remove your ex-spouse from joint credit lines. Determine if it is necessary to refinance certain debts.
11. If applicable, change your name.
Starting with Social Security, apply for a new Social Security Card with your name change. Once complete, update your driver’s license and passport.
12. Update name on all existing financial accounts and with creditors.
Once your name change is official, update your name on all financial accounts and with creditors. This is likely to require legal proof of your name change as well as a final copy of your divorce decree.
13. Update beneficiaries and estate plan.
Review and update beneficiary designations on life insurance policies, retirement accounts, and other assets. Update your will or create a new estate plan.
14. Review your current tax structure with your tax advisor or financial professional.
Your divorce will impact your tax filing status and individual tax responsibility. Consult with a tax professional to understand the implications and adjust your withholdings or estimated tax payments accordingly.
15. Review credit report 30-60 days after closing credit lines to ensure properly recorded and reflected with reporting bureaus.
Monitor your credit report to ensure that joint accounts are closed and that your credit history is accurate.
16. Complete or update your individual financial plan.
Celebrate your new beginning. Now is the perfect time to dream big, face your fears, or maybe a little of both. With thoughtful planning and professional advice, you can get answers to burning questions such as:
- • Can I afford to keep the house?
- • How much insurance do I need?
- • How much will I owe in taxes?
- • Do I have enough income and assets to live comfortably for the rest of my life? If not, what adjustments do I need to make?
- • What happens when alimony and child support payments end? Will I need to make major lifestyle changes?
You have now reached the final step of implementing your new plan. This may include:
- • Setting up a cash flow system to make it easy to stick to your budget.
- • Re-building emergency funds
- • Fine-tuning your investment strategy
- • Plugging insurance gaps
- • Implementing tax-saving strategies
Taking these steps promptly will help you establish a solid foundation for your post-divorce life. Remember to consult with financial and legal professionals as needed to ensure you're taking the right steps for your specific situation.
Investment advice, financial planning, and retirement plan services are provided by Prosperity Planning, Inc., an SEC registered investment advisor. The information contained herein, including but not limited to research, market valuations, calculations, estimates and other material obtained from these sources are believed to be reliable. However, Prosperity Planning, Inc. does not warrant its accuracy or completeness. The information contained herein has been prepared solely for informational purposes and is not an offer to buy or sell or a solicitation of an offer to buy or sell any security or to participate in any trading strategy. If an offer of securities is made, it will be under a definitive investment management agreement prepared on behalf of Prosperity which contains material information not contained herein and which supersedes this information in its entirety. Any investment involves significant risk, including a complete loss of capital and conflicts of interest. The applicable definitive investment management agreement and Form ADV Part 2A will contain a more thorough discussion of risk and conflict, which should be carefully reviewed before making any investment decision.
