In a marriage, there are often clearly defined roles regarding the handling of finances. One spouse is typically responsible for financial matters, while the other may be either somewhat engaged in the decisions or completely unaware of what is going on. When a divorce occurs, California couples and others around the nation are thrust into situations where finances must be handled separately. While this may not be a concern to the spouse who had been dealing with the family budget all along, it can be a rude awakening for those who have never been engaged with finances before. No matter where a person falls on the financial spectrum, it is important to be proactive about how a divorce will affect an individual’s money situation.
One area of concern, particularly for older couples getting a divorce, is health insurance. If previously covered under a spouse’s plan, someone can continue that coverage through COBRA for 36 months. Also, it would be prudent to develop a budget for what someone’s finances will look like after a divorce is final. Listing out any income and expenses will help a person understand what the new situation will be going forward and highlight any areas of concern.
Another issue that must be addressed is updating an estate plan. Any documents, such as a will, power of attorney or healthcare directive, should be revised to reflect changes. Beneficiaries to any retirement accounts or life insurance policies also need to be changed. Any joint financial accounts need to be closed and opened as individual accounts.
If there are employer retirement accounts involved, a Qualified Domestic Relations Order is required by the Internal Revenue Service. Specific directions will be detailed on how to use retirement funds to pay spousal or child support. Certainly, decisions must be made on how the family home will be divided, as well as other personal property. Most, if not all, of these financial decisions have tax implications, and it is vital that those are considered when filing taxes following a divorce.
Going through a divorce can be a complicated process. It would be in someone’s best interest to seek the advice of a California divorce attorney. A trusted lawyer would be a valuable ally for anyone going through divorce proceedings.
Source: thestreet.com, “Post-Divorce Money Tips to Prepare for the Next Stage in Life“, Cindy Turkington, Feb. 21, 2018