Your marriage is over—or at least it’s headed in that direction. This is one of the most stressful and uncertain periods of your life. Unfortunately, you’ll need to make a large number of decisions during this time to protect yourself, your family, and your future. With so much to do, it’s all too easy to miss something important. Consider this your financial checklist.
Talk to Your Spouse
It could be that the last person you want to talk to right now is your future ex. However, it could make the entire process a lot easier if the two of you can come to an agreement about how assets should be divided. In addition, you need to go over all of the household bills.
Often, expenses are handled by just one spouse. Other times, spouses will divvy up household bills for each of them to pay. If you’ve lost track of who pays what (and when), then you’ll need to come up with a clear picture of your shared expenses before you can split them up. Don’t forget about minor bills, such as your Netflix subscription, or bills that are charged quarterly or yearly instead of monthly.
If you are on good enough terms with your spouse, do this step together. Otherwise, a professional and impartial mediator could be helpful. In an acrimonious divorce, both of your lawyers might need to be present to ensure that this process goes smoothly.
Pull Your Credit Report
One of the first things you should do after deciding to divorce is to get a copy of your credit report. Go to annualcreditreport.com, the official site authorized by the US government, and request a copy from at least one of the three main bureaus. Review every item and make sure you understand the full scope of any debt that’s in your name.
Generally, if your spouse ran up consumer debt while you were married on a joint credit card, you are equally liable for the amount. However, in community property states, you could be responsible for debts incurred during your marriage even if your name isn’t on the account.
After you’ve pulled the report, it’s not a bad idea to sign up for a credit monitoring service. You should be alerted if your soon-to-be-ex attempts to apply for new cards or stops making payments on a shared account.
Inventory Your Assets
Sit down and make a list of all your marital assets. The biggest item on the list will be a home, if you own one. Any vehicles, fine jewelry, and other illiquid assets should be tallied up. The cash in your shared bank accounts should be on that list, too. The money in your retirement and investment accounts may also be subject to an even split—whether that includes the entire amount or only the assets accrued during your marriage is dependent on the state where you live.
Community property states and common law states handle things differently, so educate yourself on how your state operates. Community property states consider any assets acquired during the marriage to be shared regardless of whose name is on the paperwork.
Close Joint Accounts
As your marriage comes to a close, it’s time to close any joint accounts. Before you start moving money around, it’s not a bad idea to freeze the account. This ensures that neither of you can withdraw the balance. You can call your bank and explain that you are getting a divorce; most financial institutions will be able to help you without too much hassle.
You and your spouse will need to decide on a fair way to split the money in your joint checking and savings accounts. In a perfect world, you could divide the number by two and walk away happy. However, the reality is that you may need to negotiate and advocate for yourself.
Of course, as you’re closing joint accounts, you’ll also need to have a place to put your money. If you don’t already have a separate bank account, go out and open one right now. Most financial experts advise against keeping the old account open even if your spouse’s name is removed from it.
One commonly overlooked step in separating finances is updating your direct deposit information. If any part of your paycheck was previously deposited into a joint account, contact your HR representative as soon as possible to update your bank account and routing numbers. Get it in writing just in case the check is accidentally sent to the wrong account on your next payday.
Finally, don’t forget to update any automatic bill payments!
File a New Will
Filing for divorce is hard enough; why make things more unpleasant by filing a new will at the same time? Unfortunately, divorce is one of those big changes that sends ripples through every other aspect of your life. That includes estate planning. For one thing, your assets will likely be changing as you decide how to split them during the divorce. For another, you probably don’t want to leave any part of your estate to your ex.
In addition, if you have any kind of power of attorney, including medical POA, update it as soon as possible. Your spouse no longer gets to make any decisions about your life, nor can they benefit from you in any way. This might be a surprisingly tough change to process, so it’s helpful to hire a lawyer to help you through the process of updating your will.
Update Insurance Policies and Beneficiary Information
If your future ex is listed as your beneficiary on life insurance policies, retirement accounts, or literally anything else, change those documents as soon as possible. While the chances of anything happening to you before the divorce is finalized are slim, there’s still a non-zero chance. What’s more likely is that you’ll simply forget to update your beneficiary information.
Insurance can be very tricky to navigate during a divorce, and you might want to enlist the help of a professional. If you’re currently on your spouse’s health insurance plan, you can shop for a new one at healthcare.gov even outside of the standard open enrollment period. Your homeowners or renters insurance policy also needs to be updated, as well as your car insurance. If you share a car insurance policy on a vehicle that is registered jointly, you’ll need to take the extra step of applying for a new title first.
One interesting wrinkle in US law is that if a couple is married for at least 10 years, the spouse who earned less during the marriage can be entitled to a share of the higher-earning ex’s Social Security benefits after retirement. If you were the primary breadwinner in the marriage, there’s not anything you can do to change this rule. However, you cannot claim a portion of those benefits if you have remarried. The AARP provides a helpful rundown of all the hoops you’ll need to jump through if you want to pursue this avenue.
Be Prepared for a Tax Bill
If you receive marital assets during the divorce, you can and will be taxed on them. As you’re determining how to divide your property, make sure that you are considering the after-tax value. In addition, you may be accidentally setting yourself up for a nasty surprise come April 15 if you don’t realize how your new filing status, assets, and income will change your tax preparation.
This is absolutely an aspect of divorce that requires a professional to guide you. A good divorce lawyer should be able to recommend an accountant who can help you navigate your taxes.
Keep All Your Receipts
Even in the least contentious divorce possible, you should still be diligent about protecting yourself. A good way to do that is to keep all of your receipts and write down all of your purchases. Having records can cover you in the event that you need to provide records. It’s also very helpful as you reconsider your budget. Speaking of which, you’ll also need to redo your budget. Let’s dig into that next.
Adjust Your Budget
If you’ve been married for a while, you might have forgotten how much it costs to live alone. Unless you plan to find a roommate or move in with family, you’ll have to start shouldering all of the household expenses.
One of the biggest financial mistakes people make during a divorce is deciding to remain in a home that they can no longer afford as a newly single person. Choosing to move out can be an emotionally fraught decision, but it might be better in the long run. Living within your means is even more important as a recently divorced person, as you’ll have to essentially relearn how to budget.
Be realistic about how much you can afford for housing costs, utilities, transportation, groceries, and other necessities. You may not be able to maintain your old standard of living, so adjust your expectations and reset your budget.