Divorce affects the finances of both parties as they split. Sometimes one partner faces a much lower standard of living -- and dramatic lifestyle changes because of that. With the housing market down, interest rates falling and the costs for goods and services is increasing, there's an even bigger effect on couples. Here are a few tips in order to ensure your finances stay in order during this challenging time.
The task of dividing your assets is a crucial one. Typically, everything you and your spouse acquired from the day you were married is subject to division. The exceptions are individual inheritances, gifts to an individual spouse, and assets acquired before marriage. When assets are divided, the court considers each spouse's earning ability, the length of the marriage, and how much each spouse contributed to building household assets.
The exception to this are the nine "community property" states -- Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. Under the laws of these states, almost all assets will automatically be divided equally.
Notify others of your new name. If the divorce decree provided for a name change, get a new Social Security card, driver’s license, passport and credit cards. Notify your bank, investment account manager, all credit accounts, personal lawyer and accountant of the change. To change your name with the Social Security Administration (SSA), file Form SS-5 at a local SSA office. It usually takes two weeks to have the change verified. The form is available on the agency’s Web site, by calling toll free 1-800-772-1213 and at local offices (you can find these addresses at the SSA Web site).
Be sure to review and update your retirement plans. f there was a division of a pension, 401(k) or IRA, confirm that a Qualified Domestic Relations Order has been submitted to the fund administrator and implemented correctly. Also make sure that, as recipient of the distributions, you have established an account for the funds to be transferred to. If you were married for at least 10 years, you are entitled to make a claim against your former spouse’s Social Security when you are eligible for the benefit. And ex-spouse can receive either 100 percent of his or her Social Security payment, or 50 percent of the former spouse's entitlement. Check with the Social Security Administration for details.
Be sure to review your will or, if you don't have one, draw one up. You should consult an attorney familiar with your state's estate laws to ensure that your assets are properly distributed. Do not wait until the divorce is final. You should review and amend your estate plan at the same time you decide to commence a divorce proceeding. Also make sure to review beneficiary designations for pensions, 401(k)s, and life insurance policies. Federal law requires a spouse to be the sole beneficiary of pension or 401(k) benefits unless that right is waived in writing by the spouse.
If you find yourself faced with divorce, it is essential to protect your financial future. Enlisting the help of an attorney and carefully monitoring the process can ensure that your interests are considered and that you won't need to revisit the proceeding later on.