Financial Issues

What am I not thinking about?

Ok, so you are getting divorced.  You have decided who gets the kids on which weekend, who is paying child support to who, and how much, and you have split all the assets down the middle.   What’s left?  What else should you be thinking about?   While every divorce is different, there are a few issues that seem to be common, but not many people think of them unless they are working with a Divorce Planner.   Here is a list of some common, and some not-so common financial issues to think about.

• Have I updated my will?
  •  This should be done at the time of separation.  While it is true that you may still want all of your post-divorce assets to revert back to your ex-spouse if something were to happen to you, it’s not likely.   Most people don’t think about updating their wills for many years after a divorce.  Usually, it’s not until they get remarried.    As an added bonus, when you are updating your will, you will most likely also want to update your living will.   After all, do you still want your ex to be the one who gets to decide if they pull the plug or not?

• Do I have a life insurance policy on my ex?
  • Why would you want a life insurance policy on your ex?  Well, if that ex is paying you child support for the next 10 years, what are you going to do if something happens to them?   Many of my clients rely heavily on the additional income that is child support.  If that income were to stop coming in because of untimely death, they would be a in a heap of trouble trying to make ends meet.  While many judges will order that a child support payment be backed up by life insurance, it’s not the judge’s responsibility to think of issues like this.

• Can I use spousal support or property settlement payments to qualify for a new home loan?
  • That depends on how much you are getting and how long the payments will last.  Most lenders like to see these payments have at least 36 months left on them at the time of application.   If you are getting a 36 month payment, that will not be enough time to get your divorce settled and your loan application in the works.  Sometimes, just asking for a 37 month payment will make the difference between approval or denial.
    • As a side note, just because your ex was awarded the house, doesn’t mean that your name was taken off the loan.  You may not qualify for a new place if you are still responsible, according to the bank, for the note on your old place.  Make sure that whoever is being awarded the house, can refinance the mortgage into their name.    If they cannot, then insist that house be sold.

• Have I canceled all of the credit cards associated with my social security number?
  • Just because there is still a balance on a credit card, doesn’t mean that you can’t cancel that card.  I recently had a client who’s ex took on all of the debt, but my clients name was still associated with the debt.   Of course, the plans were to pay off the debt over time, but there was nothing in place to guarantee that.   The ex could still add additional charges to the credit card and might still have a balance on that account 20 years for now.  I advised my client to cancel the card.  Since her name was still on the card, she could act alone and close the account.  No more charges could occur.  Of course, the card still had a balance that needed to be paid off over time, but at least my client’s credit history was eventually going to get cleared up.

These are just a few of the financial issues that might come up during a divorce.  There is a lot more to unraveling a financial marriage than simply dividing the assets.   Find a CDFA™ in your area who offers a free consultation and get the advice you need.   You never get a second chance to write your decree.