Here's how to prepare financially for divorce
During divorce, couples need to analyze how best to separate finances while keeping each spouse as whole as possible financially. As emotions settle, split couples must face reality and prepare for a financial life separate from each other.
- Review your credit report. As early as possible in the divorce process, you should pull the most recent copy of your credit report from the three main credit bureaus: Experian, Equifax and Transunion. You can also download your credit report for free from www.annualcreditreport.com. Make sure that everything is accurate and be certain that you understand your own individual credit and accounts and those of your spouse.
- Open new individual accounts. This is important to do as soon as you make the decision to divorce and before it is final. It will be easier to get bank accounts and credit cards as an individual while you still have joint accounts. And you will usually get a lower interest rate than you will after the divorce is final.
- Close all of your joint accounts. Once both you and your spouse have opened individual accounts, close all of your joint accounts. This will avoid either of you getting credit that will impact the other. And it makes a line between joint and individual responsibility for the couple’s finances as the divorce is finalized.
- Review your will and estate plan. Make sure your beneficiaries after the divorce will still have your best interests at heart. If your spouse or one of his or her relatives were beneficiaries, then you will probably want to change that after the divorce. Make certain that your will and your financial plans reflect the new realities of your new individual status.
- Create a new budget. The divorce may change both the income and expense sides of your personal budget. Make sure you allocate enough for court-mandated child support or spousal support. Remember to be very conservative in your budgeting. You should be able to have money left at the end of the month rather than month left at the end of your money.
- Seek professional tax and financial planning advice. Divorces are complex and often have unanticipated financial consequences. Finance professionals will help you navigate these uncharted waters and help you maximize your financial benefits and minimize your tax and other obligations.