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The Essential Things You must Review and Do After Your Divorce

The Essential Things You must Review and Do After Your Divorce:

I would like to address this article to those people who have completed their divorce negotiations and now need to organize and tie up the “loose ends”. There are certain things that must be done in order to protect your assets, credit rating, and also shield yourself and loved ones from any future legal entanglements resulting from the divorce. All those matters are solely your responsibility. As you go through this posting, make a list of things that need to be done.

Review Your Estate Planning Documents:

Take a look at your will, your Power of Attorney, and your Medical Directive or Living Will. These documents will have to be changed. People whom you named as guardians of your children or executors of your estate may no longer be suitable or may be unwilling to serve in these capacities now that your relationships have changed. Assets that you had included in your will may no longer be in your possession. If you had a Power of Attorney or Medical Directive, you probably no longer want your former spouse to make financial or medical decisions for you. If you don’t have a will, now is a good time to make one. A will saves your family substantial expense, time, and heartache in the event of your demise. Trusts also need to be reviewed. Consult your estate planning professional and/or your attorney to ensure that all of the above mentioned documents are in order.

Credit Cards and Loan Accounts:

Make a list of all your accounts and loans. Ensure that you are the only one who is authorized to use the account. Make sure that all the joint credit accounts are closed and open your new individual accounts. No matter what your divorce judgment or agreement says about whom is responsible, a creditor is not bound by the court’s decision or by your written agreement. Even if you trust your former spouse to be creditworthy and responsible, circumstances (such as disability, death or bankruptcy) may prevent her/him from making payments on an account. Unless you have removed each other from liability in the eyes of the creditors, your credit remains at risk.

Check Your Health Insurance Coverage:

If you have your own coverage and your spouse was on your plan, be sure to notify the plan of the status change. If your former spouse is obtaining coverage through your employer with COBRA options, it is your former spouse who should arrange for the coverage. It is a good idea to explore health care coverage options prior to the divorce and to make arrangements for appropriate coverage starting immediately after the divorce so there is no lapse in coverage. In addition to your own coverage, make sure the children’s coverage isn’t jeopardized by changes in the adults’ coverage or plans. If you are covering the children, be sure you are being billed for “Parent and Child” coverage rather than the “Family” coverage rate, which is higher.

The Marital Home:

If you are receiving the marital home as part of your settlement, you need to have your attorney prepare a proper deed. Please discuss with your attorney which type of a Deed applies to your case. You might also need to refinance your property to ensure that your ex-spouse’s name is removed from all the mortgage documents. Change the homeowner’s insurance so that insurance claims won’t be paid to both you and your former spouse.

If you are planning to continue to jointly own the marital home while children are growing up, ensure that the details on when and how the house is sold are spelled out in your agreement (when and how to sell the house, how to split the proceeds, who will be paying the capital gain tax, etc.).

Motor Vehicles:

Check the status of all family vehicles. Check the loan status as well as the title. Follow through promptly on the title transfers. Be sure you coordinate your motor vehicle insurance with the title transfers. If you are no longer residing in a home with licensed teenagers, tell your agent and take advantage of the reduced cost of insurance.

Life Insurance Beneficiary Designations:

You must make certain that all the provisions regarding your respective life insurance policies that are spelled out in your agreement are strictly adhered to.  For all your insurance policies – provided to you by your employers as a benefit as well as those purchased privately – check your beneficiary designations. Make the appropriate changes. Some people list their sisters/brothers, etc. as the beneficiaries, assuming that they will use the death benefit payments for their children exclusively. However, even though your relatives maybe completely trustworthy, they may find themselves in a position of not being able to use these funds as you intended. This is due to the fact that the insurance proceeds will be paid to them as individuals and therefore, will immediately become subject to the claims of their creditors and potentially their spouses. It is better to set up a trust and make your relatives/or former spouses as trustees for your children. Consult your attorney for that. If you are to be the beneficiary of life insurance, make sure your former spouse has complied with the requirements.  Contact the insurance company to verify that the insurance requirements are being fulfilled.

Retirement Assets and Beneficiary Designations:

You must check whom you have names as beneficiary of your retirement assets. Check all your retirement assets. That includes every benefit you have at work as well as retirement plans from prior employment including self-employment. You may also have Individual Retirement Accounts (IRA). It is important that you have the appropriate beneficiaries named on all of your accounts. Another divorce aspect of retirement benefits is their division according to the equitable distribution plan. This is an area in which you must consult your attorney. A Qualified Domestic Relations Order (QDRO) is required to divide retirement plans subject to ERISA (the employee retirement income security act of 1974). Most non-government pensions are subject to ERISA. Other plans use other types of orders. Some plans will not honor any orders, in which case the non-employee spouse must depend on the employee spouse to share the assets when they are eventually received. You need to know what will be contained in the order and how you will be affected. Some employers don’t provide a QDRO package, in which case you should carefully review the order provided by your attorney.

Bank Account and Investments:

Another group of assets needing attention is investments and bank accounts. Most of these assets will have a beneficiary to whom the asset will go at your death. Check each asset carefully and make new beneficiary designations as needed. Another consideration regarding these assets is the tax consequences of equitable distribution of those. Discuss all these accounts with your tax accountant to avoid any surprises.

I sincerely hope that you found this posting useful. Divorce is a very difficult process and will affect you finically, psychologically, emotionally and socially. But it can also be a time for self-empowerment and positive change. Finalizing the business of your divorce is essential to making a smooth transition to the next phase of your life.

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