Most people don’t realize there is anything left to do after the divorce agreement is finalized. Once they’ve hammered out the details of the divorce settlement, signed on the dotted line, and accepted their fate, many clients assume that their attorney is going to take care of all the transitional issues for every item. However, this is often not the case.
While you’re in negotiations, there are details which need to be researched and set in place. Don’t put off until after divorce what you should be doing right now. Post-divorce actions are just administrative follow-throughs to make sure everything that was promised in the divorce is actually done. Your post-divorce checklist is what you will do as soon as the judge’s signature is on the marital settlement agreement. Click here for a printable Post-Divorce Checklist.
But who’s doing that? Are you sure it’s being done? Many of these items are not done automatically or even correctly. You need to engage a professional to see to these details. That’s what one of the things a CDFA can do.
Engaging a professional prior to finalization will allow someone to get to know you, learn your attitudes toward money, and prepare a plan based on your unique money style to help ensure a secure your financial future. Here are 3 such details:
1) Before it’s all final, create a post-divorce budget. As you start to have an idea of what your final settlement is going to be, your budget is the linchpin of everything going forward. Create a realistic budget first based on what you now have to work with. You may not get unlimited resources; you’re going to have to work within a budget. A skilled financial planner can take the terror out of working with less and create workable solutions to live within your means and plan for the future.
2) You can also create a new will and trust during the divorce: See my October blog article called The Importance of Estate Planning During Divorce. While you can not change the terms of your existing estate plan, your new plan should be in place. If you die during your divorce, where are your assets going to go? If you are incapacitated, who will hold your durable power of attorney and act on your behalf? Don’t wait until the divorce is over to create that new will or trust. This should be done as early as possible.
Change your durable healthcare power of attorney immediately. If you don’t want your soon-to-be ex-spouse making critical health care decisions for you if you are unable, just do it.
3) Before your divorce is finalized, you can take control of your life by taking control of your financial future. Start by visiting a certified financial planner who can create a plan based on your individual risk tolerance, time horizon, and financial goals. What do you want your life to look like post-divorce? Think big picture. Most importantly, because of your divorce and changed circumstances, revisit your retirement plan.
You can set up new retirement or investment accounts during the divorce process: Your planner can open unfunded, aka “shell,” accounts to accept a 401(k) transfers, IRAs, and portions of joint investments that will be divided and distributed when the divorce is finalized. This is one of the rare times you can take a cash distribution from a 401(k) without a 10 percent penalty under age 59 ½ if it’s planned correctly.
Doesn’t it make sense to figure out as much as possible before the papers are signed, sealed, and delivered? I’d want to try to establish relationships with people that are going to help me. With the help of a divorce planner, look at—and cross-off—each item on your post-divorce check list. Together you can optimize your chances for a secure financial future.