Before your divorce goes through, it will be wise to check up on financial matters. It will be better to assess the state of your financial life before the split rather than after.
Find out where you stand financially. Beyond your salary and your bank accounts, how much do you have in the way of retirement savings? What will your monthly income be? What investments do you hold? Will you retain ownership of any real estate, and assume the mortgage payments yourself? Will you be selling any assets or ownership interests?
You should document everything about your personal finances. Everything you can think of. Whether you scan it or copy it, you should have as complete a picture of your financial life as possible.
The picture of your financial life should also detail your credit & insurance. Do you know your credit score? Today, a good credit score is considered anything north of 690. If you have a score in the mid-600s, you have fair credit. Below 630, you have poor credit.1
Track your credit before & after your divorce. There are three major credit reporting agencies that assign you credit ratings: Equifax, TransUnion, and Experian. Through Credit.com, you can see two of these three credit scores for free, updated each month. You may also request a copy of your credit report every 12 months from the three reporting agencies; you are entitled to it, by law. Ask all three for such a report, if you haven’t already. If your ex-spouse attempts to add some unauthorized debt in your name, this is one way to know about it.1
Do you have your own health insurance? If so, how much do you pay for it per month? If not, you may have a challenge to secure it – hopefully, your health or employment situation allows you to get coverage without many obstacles. Apart from health coverage, other types of insurance have no doubt protected other people and important items in your household. Who owns these policies? The beneficiary designations on the policies will undoubtedly need to change.
What should you do about taxes? If you are divorcing after April, should you and your spouse file one more joint return? This calls for a chat with your tax professional. Filing jointly could of course save you money compared to filing singly, but it also means you are jointly responsible for everything on that 1040 form.
If you remain legally married and living with each other when a calendar year ends, the two of you must file your federal tax return for that year as a married couple – your filing status will either be married filing jointly or married filing separately. If you think you will receive a refund, you and your former spouse will have to communicate to see how it will be divided – the IRS does not allocate refunds to divorced spouses by any kind of formula.2
If you will have primary custody of your children, the IRS expects that you will claim the exemption for dependent children on your 1040 form. If you have multiple children, it is allowable for you and your former spouse to divide the per-child exemptions as you see fit. If you paid some or all of the medical expenses for one of your children, you can deduct those expenses even if your ex-spouse has primary custody of that child.2
Most importantly, assess what your financial potential will be after the divorce. An “equal” settlement is not always an equitable one, as one spouse may be left with much greater potential to build and retain wealth than the other. That is the most important long-term issue to address, and it should be addressed well before a divorce is finalized.
Ronit Rogoszinski, CFP® may be reached at
Advisory services are provided by SlateStone Wealth, LLC, a registered investment advisor. SlateStone Wealth has gathered the information presented from sources it believes reliable, however the accuracy and completeness of any sourced data is not guaranteed.
1 – ajc.com/feed/business/personal-finance/the-important-financial-lesson-you-wont-learn-in/fCRRNr/ [8/21/16]
2 – irs.com/articles/filing-your-taxes-after-divorce [9/15/16]
Ronit Rogoszinski has been demystifying investment strategies for individuals, families and business owners for over 25 years. Specializing in transitioning widows and widowers, pre-retirees and divorced individuals through major life changes, Ronit’s expertise is translated to actionable, prudent strategies that are customized to each individual’s unique situation. As a result, Ronit has become a trusted advisor to her clients, developing lifelong friendships while partnering in the management of their financial plans.