Few of us get married thinking it will end in divorce. In fact, most of us expect to remain married for life. Unfortunately, though, there are times when it doesn’t work out and divorce becomes the most viable option.
The emotional aspects of divorce are well-known, and there are a number of relationship issues that need to be worked through, especially if children are involved. What isn’t planned for, in many cases, is the financial toll a legal separation can take.
When you’re going through a divorce, there are a few things that seem self-evident. You know you might have to divide your assets and debt, and you should look into getting rid of your joint accounts. You may even have thought about the cost related to hiring lawyers to help represent you.
However, there are some other financial issues you could be forgetting about. It seems unfair to need to think of these money issues when your life is already turned upside down, but they are important issues to consider.
Here are seven financial issues that you might be neglecting as you go through the divorce process.
1. There Could Be a Bunch of Up-Front Costs
When you factor in lawyers, tax advisors, and time off work, the cost of divorce can run way higher than what you originally thought.
Most divorces cost at least $20,000,, and can become more expensive the more assets you own or children that are involved.
You may initially think that forcing a divorce through the court is the way to go, but you can save money by considering mediation. Mediation can reduce the cost by quite a bit, and it can also mean less acrimony.
2. Remember to Change Your Beneficiary Information
While you are changing your bank accounts and (hopefully) making sure your ex is no longer an authorized user on your credit card account, you may have forgotten some of the realities related to life insurance and retirement accounts.
The beneficiary information you have listed is what is honored if you pass away — not what you have in your will. Beneficiary information doesn’t take into account your marital status.
As a result, if you don’t want your ex getting the life insurance payout on your policy, or if you don’t want him or her accessing your retirement account if you pass away, then you need to fill out the necessary paperwork to make sure that information has been updated with your preferred beneficiary.
3. Separate Digital Assets
You’ve probably divided up the assets you have in “real” life, but have you divided up your digital assets? Chances are you share an iTunes account or an Amazon account or other accounts.
My ex and I had several accounts related to the household. From Netflix to PlayStation Network, we had shared accounts connected to credit cards and a PayPal account. As a result, we had to figure out who gets to keep each account and change the payment information associated with each account, as appropriate.
You don’t want to find out later that your credit card is still being charged for a TV subscription you don’t even watch. And, of course, the person who doesn’t keep the account has to open his or her own separate account.
4. Have a Plan for Health Insurance
Health insurance is something that I didn’t think about until it was almost too late. My husband’s job means that my son and I are still covered — at least until the divorce goes through. Then my ex-husband can change his plan so that we aren’t included.
This means I’ll have to get new health insurance coverage before that happens. However, things get a little more interesting when you have children. My son could stay on my husband’s health plan if we wanted to arrange things in that way. We are choosing to do something else, due to our living arrangements, but it’s a possibility to consider if you are going through a divorce.
Another consideration is whether or not your needs will change in terms of coverage and deductibles. I’ll probably stick with a high-deductible plan so I can continue using my Health Savings Account (HSA). My husband, however, prefers a different approach now that he doesn’t have my income and HSA to use for higher out-of-pocket expenses.
5. Find Out What You Need Now
Don’t forget any detail that could help you survive financially. There are cases when the divorce will devastate your savings and future financial goals, and you’ll have to rebuild.
However, you can protect yourself to some degree by prioritizing. If you’re concerned about making ends meet during and after the divorce, that should inform your negotiation strategy.
Focus on more liquid assets, like stocks and bonds, rather than trying to access retirement accounts. You can build your own retirement moving forward, and wrangling over access to long-term assets can reduce your ability to manage it right now.
6. Get to Know the Tax Situation
You should be aware that what you’ve done in the past with your joint tax return, and how that will affect you moving forward. Realize that you both can’t claim the same dependents, and you’ll have to figure out how that will work.
You should also realize that tax benefits accrued during the marriage are considered negotiable in the divorce settlement.
And although you may be in the process of a divorce right now, in the eyes of the IRS you are still married until the paperwork is final. So you may have to file jointly one last time until everything is finalized.
7. Make a Plan for the Debt
Joint debt is shared debt, which means you are both responsible for it. It doesn’t matter what settlement you and your ex come up with. If a debt isn’t paid and both of your names are on it, then both of you will suffer the consequences.
In order to negate some of the risks, have your name removed from accounts that are your ex’s responsibility, or insist that your ex refinance the debt in his or her name only. In some cases it’s impossible, so you’ll just have to stay on top of the debt payments.
No matter your situation, make it a point to consider the financial implications. Talk with a financial professional who can guide you through this tough time. This is someone separate from your divorce attorney, as they will be looking at helping you with other emotional and practical things.
This is a challenging time, but make sure you think about all of the financial angles. Your future prosperity depends on it.
What are some other financial issues you need to address during divorce?
Originally posted at https://moneyning.com/money-management/3-neglected-financial-issues-to-think-about-during-a-divorce/