Protecting Your Post-Divorce Finances
As a married couple in Washington, you and your spouse likely got used to a certain lifestyle and learned to manage your finances together. If divorce is in your imminent future however, you may have to make certain changes to ensure you can maintain your financial stability post-divorce.
The first step should be implementing a budget for your life after divorce and focusing on your immediate needs. You may find that you need a new place to live, a new vehicle and new insurance under your own name, on top of necessities such as food and gas. Once you have a few months of post-divorce life under your belt, you can turn your attention to long-term goals such as saving for retirement or college. It is also important that you keep aside money to cover the costs of the actual divorce.
Next, you will need to focus on dividing up the assets you and your spouse acquired during the marriage. Keep your emotions in check and look at the division process in a logical way. If you could benefit from having more liquid assets, keeping the house over a financial account may not be the best move, even if you are emotionally invested in your house. If you or your spouse decides to keep the house, you should refinance the home. Also consider that money in your qualified retirement account may be pre-tax, while money in another account may be post-tax. A spouse in a lower tax bracket may be more suited to take assets with more tax implications.
If you and your spouse have any debts, it is best to pay them off before the divorce is finalized. However, if that is not possible, you should remember that the lender considers joint debt to be both parties’ responsibility, even if your divorce settlement says otherwise. If your spouse defaults on money owed, that default could hurt your credit history. Therefore, even if a debt becomes one spouse’s responsibility, the other spouse should still have access to the account and make sure payments are being made.
Finally, it is important to clarify which parent will be responsible for paying for college, if you have children, and updating any estate planning documents. Older adults who are divorcing will also have to consider assigning new powers of attorney and health care directives so that they have someone other than their ex in charge of any medical or financial decisions.