MONEY

Landing on your feet financially after divorce

Mary Fox Luquette
MBA, CLU, ChFC

Divorce is never easy. Even in an amicable divorce it is difficult to separate that single joint life.

There are many areas that need to be addressed to ensure that there is complete separation of the property, the debts and future income. One of the first things that should be done once a decree of divorce has been completed is to make several copies of it and store it in a safety deposit box. This decree may be required documentation for the IRS, investment and retirement accounts, bank accounts and life insurance.

Most people realize that a new bank account must be established in their name. It is best to close the joint account and open a separate one. It is not the best solution to just eliminate one of the signers on an existing account. In addition, once the property separation has been settled, certificates of deposit, savings accounts, Christmas club accounts and other bank accounts should also be changed to the name of the actual owner.

Credit card accounts should be closed and new ones opened. This prevents an ex-spouse from incurring debts that both parties will need to pay off. It will also help establish a good line of credit for the newly divorced. Many people will remember to close the credit cards, but fail to also consider store credit cards, gas credit cards or other credit that may not be used on a regular basis. All of these items should be established as a separate account.

Investment accounts should be examined. It is important to determine who has the power to close it, take money from it or change the investment objectives. Once the divorce is finalized, the investment company will need a copy of the divorce decree so that they can make sure the account is properly structured.

Often people forget to change beneficiaries on their retirement account and their life insurance. This should be done as quickly as possible. If a child will become the primary beneficiary, it is wise to choose a custodian or guardianship for the account who will monitor the payout in the event of death. It is also a good idea to obtain a life insurance policy on the spouse that will be owned by the ex-spouse, especially in case of alimony payments and child support. Should the payer of the support die prematurely, the life insurance will continue to pay an ongoing income.

Social Security and the IRS should also be notified of the divorce. They may ask to see the divorce document as verification. In addition, make sure that you have adequate health insurance. If you were part of your ex-spouse’s plan, you will need to acquire health insurance on your own. Choosing your own accountant and financial planner will help in securing a solid financial footing.

Mary Fox Luquette, MBA, CLU, ChFC is a finance instructor in the BI Moody III College of Business at the University of Louisiana at Lafayette.