A Checklist For Managing Finances After A Divorce

Contributed by: Jacki Roessler, CDFA®

As a divorce financial planner, my clients often ask what financial tasks should be addressed immediately and which ones can wait. Post-divorce life can feel overwhelming. To achieve long-term financial success, I recommend sorting your financial tasks into 3 categories: those that need immediate attention, those that can wait 3-6 months, and those that should be tabled until more time passes. Although each case is different, there are a few items that always seem to hover at the top of my “Do it now!” list.

Secure spousal support through life insurance

If you’re receiving child support or alimony payments, in most cases your divorce decree would state that your ex-spouse needs to maintain “adequate” term life insurance coverage to secure your interest. However, what most clients don’t understand is that the divorce decree is only binding on you and your ex-spouse. If he or she changes the beneficiary or stops paying the premiums, your child support and alimony could be at risk. Your ex-spouse might be in violation of the divorce decree, but that doesn’t matter much if they are no longer alive. There are steps to take to prevent that from happening. Ask your former spouse to make you the owner of the policy. Only the owner is notified when a premium payment is missed and only the owner can change the beneficiary. If your spouse doesn’t agree, contact the insurance carrier to see if they will copy you on quarterly or even monthly statements so you can take immediate legal action if needed.

Remove your ex-spouse as a beneficiary

Suppose that based on your agreement, your divorce decree says your ex-spouse won’t receive any share of your retirement accounts. Upon your death, if you forget to change your beneficiary designations, your ex-spouse will still receive your retirement account, regardless of what your divorce decree states. As noted in item 1 above, your divorce decree isn’t binding on third parties, such as insurance carriers and account custodians. It’s only binding on you and your ex-spouse. Rather than expose yourself or your heirs to estate litigation, confirm that you’ve changed your beneficiary designations on all retirement accounts.

Get your QDRO

The QDRO (Qualified Domestic Relations Order) is the only legal document that will transfer interest in a qualified (i.e. employer sponsored) retirement plan or pension between spouses pursuant to a divorce. The problem is that most couples wait several months (sometimes significantly longer) to get their QDRO drafted. Why does it matter? If your ex-spouse (the account owner) dies, remarries or retires prior to the plan administrator approving your QDRO, your awarded benefits could be severely diminished or even eliminated. Timing is critical.

Partner up with a qualified financial advisor

Last but certainly not least, I recommend that clients without investment or financial planning experience find an experienced and trustworthy advisor to work with going forward. There are multiple moving parts after the divorce is final. Clients need to open new accounts, transfer assets, obtain health insurance, make sure QDRO are in place, and design a new investment portfolio strategy. The transition process can seem daunting. Enlisting the aid of a financial advisor/advisory team that has experience working with post-divorce transitions can ease the pressure. That partnership will help you complete the “Do it now!” checklist.

Jacki Roessler, CDFA®, is a Divorce Planner at Center for Financial Planning, Inc.® and Branch Associate, Raymond James Financial Services. With more than 25 years of experience in the field, she is a recognized leader in the area of Divorce Financial Planning.

The Most Important Question for Every Divorcing Client: How much do you spend?

Contributed by: Jacki Roessler, CDFA®

How much money did you and your spouse earn last year? I bet you can come up with an answer or a pretty close approximation at a moment’s notice. Now, what if I ask you how much you spent last year?

Long pause and nothing more than a vague idea, right? Let me assure you, you are not alone.

When I sit down with clients who are contemplating or in the process of divorce, the most important question I ask is “have you completed a budget yet?” It’s extremely rare for someone to say yes. No one likes the dreaded “b” word. Yet, after nearly 25 years of being a divorce financial planner, creating a budget (let’s call it a spending plan) for the future is the one foolproof way I know for clients to take control of their financial well‐being and have less stress and money anxiety in the future.

On a global level, if you don’t know what you spend every year, how can you make the big decisions that will be facing you in your divorce such as “should I keep the house” or “what amount of alimony can I agree to?”

On a smaller scale, sometimes we don’t realize we’re overspending on discretionary items such as dining out, holiday gifts and personal care. Seeing it on paper is an eye‐opening experience and a powerful tool to get spending under control.

Where should you begin?

Follow this link for my favorite budgeting worksheet or find one online that you like. If you pay for most expenses with credit cards, you have a simple place to start. Pull out a years’ worth of statements and tally up the totals in each category; housing, medical, food, groceries, dining out, vehicle costs, travel, etc.

Next, consider items you don’t charge on credit cards, for example, mortgage, tax and insurance payments which are generally automatically debited from a bank account. Other items that can be overlooked are those that are deducted directly from your paycheck such as Federal and State taxes, FICA, health insurance premiums, retirement account contributions and healthcare savings accounts.

Another place to look for spending “clues”? Not sure what your annual property taxes are on your home or what you donated to charities in the past? Look at your income tax returns for the past 3 years to give you some insight.

Once you’ve completed this time consuming task, stop and give yourself a high‐five! Creating a spending plan is a lot of work.

Next, give your completed spending plan to your divorce financial advisor and your attorney. They’ll provide valuable feedback about items you’ve missed and/or things you may need to scale back on. Discussing your spending plan together is also a good way to share your financial priorities with your professional team. Most importantly, your spending plan is a necessary tool your attorney needs in order to advocate for you in your divorce.

Jacki Roessler, CDFA®, is a Divorce Planner at Center for Financial Planning, Inc.® and Branch Associate, Raymond James Financial Services. With more than 25 years of experience in the field, she is a recognized leader in the area of Divorce Financial Planning.