Life Events

Divorce

Get the facts
In many cases, one spouse takes care of the finances and the other one knows little about them. If you receive investments such as stocks, bonds or annuities in your divorce settlement be sure to understand what you own and any particular restrictions there may be associated with payout.

Annuities in particular often have time period restrictions regarding when and how you can turn them into cash. It is in your best interest to do research and ask questions about what you own as soon as possible prior to the finalization of divorce. If you need help, seek the advice of a financial planner.

Important documents
Organize the important papers associated with your divorce. Keep your final divorce decree and settlement papers, including alimony, child-support agreements and any property sales you received in your settlement all in an easily accessible place. It is a good idea to make several copies of each, and in addition to your copies at home, keep a set of copies in a safe deposit box and give another to your lawyer.

Do not forget insurance
Health insurance is an important concern. You'll need to make sure that neither your health insurance nor your children's health insurance is interrupted during the divorce. Determine if you'll need to seek coverage on your own, either from your employer or through an individual policy. If you were previously covered by your ex-spouse's plan you could be eligible for COBRA.

Now is also a good time to review your disability policy. Chances are that your divorce has not affected your salary, and if you become disabled, you will still need replacement income. Whether or not you'll need this disability insurance depends on several factors, including your number of dependents (if any), your age, and your income needs.

This is also a good time to review your homeowners insurance. The person who keeps the house should own the policy. If you rent, or suddenly find yourself renting, you will want to review your current policy or purchase a new one to cover your personal possessions.

Change the name on Joint Accounts and Legal Documents
Change the names on any accounts or legal documents that may be registered to you and your ex-spouse as soon as possible. For example, brokerage accounts or car registration. You should also update your will and the beneficiary designations of your 401(k) or IRA.

Taxes
Getting the house in a settlement may seem fantastic at first, but there may be thousands of dollars in taxes associated with owning a home as well.

Transferring stocks and bonds from one name to another can be fairly simple and is not a taxable event. The sale of the stocks or bonds can result in substantial capital gains taxes if you've owned the investment for a long period of time. The profits on investment assets held one year or less are taxed at ordinary income tax rates. Gains from investment assets held for more than one year are taxed at a 20% capital gains rate. To determine the viability of keeping or selling a stock or bond you will need to consider your risk tolerance and your tax bracket and consult with your tax advisor.

Alert your creditors
Contact any creditors and inform them of your divorce. It is important to establish your own credit record. Be sure to close all joint credit card accounts.

Ask for help
Therapists and support groups can provide emotional support during this stressful time. For financial support and ideas on how to make sure you and your family's financial health is maintained following a divorce seek advice from your financial professional.

Availability of health insurance and disability income insurance varies by carrier and state.

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