Protecting Your Interests During Divorce

Morningstar, Inc.2


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Dealing with divorce is no picnic. If you've ever been through it, you know the kind of havoc it can wreak not only on your life goals, but also on your financial goals. With such wide-ranging effects, it’s important to educate yourself on the many issues your divorce is likely to throw at you.

Follow this checklist to begin organizing and mobilizing yourself. Then consider seeking additional counsel from a specialist in this field.

Prepare a list of your assets and liabilities. Some of you may have assets that were yours prior to your marriage. As for the marital assets, those will probably be divided. Here's a checklist of 11 things you can do to help the process go smoothly and quickly--and to make sure you get a fair shake from the settlement.


1. Splitting the shared property.


Give some thought to how to split the marital assets. Two of the biggest assets for many couples are the house and the retirement accounts.

If one spouse wants to keep the house, you'll need to come up with a plan to compensate the other. Sometimes that is done at the time of the divorce and sometimes it is done once the children (if there are any) leave the house.

A pension plan or other type of retirement plan can be split among two spouses by a Qualified Domestic Relations Order agreement (a court order delivered to the administrator of the retirement plan). There are typically no tax drawbacks to simply splitting the retirement accounts between spouses.


2. Planning your new financial future.


Sit down with your credit-card statements and your check register to figure out where and how you've been spending. This may be an eye-opening experience. Many people don't track their spending and are shocked to see it all added up. Both spouses will need to think about how expenses will change after a divorce. If children are involved, you'll need to agree who will pay their expenses. If one spouse will be buying a new home, be sure to investigate the associated costs of that home, including insurance, property taxes, association fees, and maintenance.


3. Knowing tax issues relating to alimony and child support.


Talk to an accountant about how alimony and child support would affect your tax return. Alimony is generally deductible for the person paying it and taxable for the person receiving it. This might be a surprise, but you can also structure alimony so that it is tax-exempt for the person receiving it and nondeductible for the person paying it. Child support is not deductible by the person paying it or reportable as income for the person receiving it. For more on tax issues related to divorce, see IRS Publication 504.


4. Holding the ex-spouse accountable.


If you've had your estate documents prepared in the past, you'll most likely need to revise them. You'll need to think about who you would want as guardian for your minor children, executor of your estate, trustee of your trust, agent for your powers of attorney. You may also want to include a provision that says your ex-spouse must hold life insurance in an amount equal to his or her obligations for a certain amount of time. This can be especially important if part of your divorce settlement is an asset to be sold in the future. You wouldn't want to stand in line with other general creditors if your ex-spouse dies and there’s not enough money to pay all the obligations. You may also want to address how a mortgage held in both names would be paid off if one spouse dies.


5. Arranging for custody.


Issues about custody of the children can be very emotional for everyone involved. You'll need to come to an agreement about who sees the children at what times and for how long. You may want to get a mediator involved to help work out these arrangements. You can find a mediator by contacting your county's family or domestic-relations court, or by calling the Academy of Family Mediators at 781-674-2663.


6. Planning for your children's education.


You'll want to discuss how funding your children's college education will be handled. Your divorce decree can specify how much each spouse is expected to contribute.


7. Securing health-care coverage.


Review and revise company benefit packages. If you have a job that offers benefits, you may need to make some changes. It probably covered the whole family in the past. An ex-spouse can go on COBRA for a period of up to three years after a divorce. (Divorced spouses may call 866-444-3272 if they have questions about COBRA continuation coverage or their rights under ERISA.


8. Changing your beneficiary designations.


Review beneficiary designations on IRAs, company retirement plans, life insurance and any other contractual asset. If your spouse has been the beneficiary in the past, you'll need to rethink to whom you want these benefits to go in the event of your death.


9. Knowing your social security options.


If you were married for 10 years or longer, you will be entitled to the greater of your own Social Security benefits or one half your ex-spouse’s benefits when you reach retirement age. Even if your ex-spouse remarries, you can still collect on his or her record. But if you remarry, you are entitled to the greater of your own benefit or one half of your current spouse’s benefit.


10. Searching for effective legal representation.


Find an attorney to represent you in court. Finding the right attorney is crucial. Many spouses can go through most of the steps above with a minimum amount of disagreement. You don't necessarily want that to change when your attorney enters the discussion. You can contact the American Academy of Matrimonial Lawyers at 312-263-6477 and the American Bar Association at 312-988-5000.


11. Finding a specialist to aid with your new finances.


If you haven't had experience handling money, you may want to hire a financial planner or money manager. A comprehensive financial planner can help you on a whole host of issues including college funding, investing your own money, preparing for retirement, planning your estate needs, reviewing insurance, tax issues, etc. A money manager will focus more on investing your assets. You can find people who do both. For referrals to planners, go to or


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