Getting a divorce is bad enough emotionally without having to suffer unnecessarily when it comes to your finances. Here are some tips for making smart divorce financial decisions:
Count all your assets. In preparation for a divorce, you both will need to make an itemized list of all your assets. These should include both individual and joint assets, and cover what you have now as well as what you may expect in the future from inheritances, gifts, insurance policies, etc. Working with a financial professional like a certified divorce financial analyst can help you not only uncover all your assets but also project what you will likely need to live on in the future so you can negotiate for it in your divorce settlement.
Close joint accounts. First, be sure to check with your divorce attorney on when to close accounts so it doesn’t have an adverse impact on your case. If possible, divide the joint accounts equitably and open individual accounts.
Consider tax consequences. Consult with your CPA as soon as a divorce is imminent so you understand all the potential tax consequences to dividing IRAs, 401(k)s and other assets. Make sure you know what your tax liabilities are not only for now but for the future as well.
Protect future support payments. If you are awarded alimony and child support and your ex dies, those payments will stop. It is a common practice to negotiate for a life insurance policy on your ex as part of your divorce settlement, to ensure you will continue to get paid even if your ex is no longer around to make those payments.
Review beneficiary designations. Be sure that your ex is no longer listed as the primary beneficiary on any of your insurance, investment or retirement accounts. If your ex is a beneficiary of your parents’ will or trust, be sure they make those changes as well.