Copy Your Records
Make copies of all financial records in preparation of beginning the divorce process. It is much easier and less expensive to organize financial information before the discovery process begins. Records that should be copied include:
- Last three years personal and business income tax returns;
- Business records;
- Investment account statements;
- Employee benefit booklets;
- Pay stubs;
- Life insurance and annuity information;
- Credit card statements, and
- Receipts for purchase of larger items.
Obtain Copies of Credit Applications
Credit applications are a great source of information for assets, liabilities and income. Contact any creditors with which you have applied for credit in the past three years to obtain a copy of the credit application.
Verify Your Credit Score
Retrieve your free annual credit report from the three major credit bureaus (TransUnion, Experion and Equifax) by going to the website http://www.annualcreditreport.com/. Review each report for inaccurate information and contact the appropriate credit bureau to have them verify the accuracy of any incorrect claims.
Take inventory of all debts and categorize them as individual or joint. For smaller joint debts such as credit cards, have them moved into one spouse’s name immediately. For larger joint debts such as a mortgage, pay close attention to how it is handled in the property settlement and divorce decree. If one spouse is to receive the marital home, then he or she will need to refinance the mortgage into his or her own name. Creditors do not look at who is awarded the house in a divorce; they only consider the parties listed on the mortgage.
Social Security Benefits
A divorced spouse of a marriage lasting 10 years or longer is entitled to half of the ex-spouse’s Social Security benefit assuming the divorced spouse has not remarried before the age of 60. If the divorced spouse remarries after the age of 60, he or she can receive benefits on the ex-spouse’s or new spouse’s record, whichever is greater.
Spousal Support Tax Deduction
For spousal support to be deductible on the paying spouse’s tax return, it must be paid in cash, required under the divorce decree or written agreement, and cease upon the death of the ex-spouse.
Protect Your Spousal and Child Support
The receiving party of spousal and/or child support is exposed to the risk of loss of payments as a result of the disability or death of the paying ex-spouse. To protect against this, obtain disability and life insurance policies on the ex-spouse before the divorce is finalized. You should own the life insurance and pay the premiums. The premium expense should be negotiated in the divorce.
Review Beneficiary Information
Review the beneficiary information on all retirement plans (e.g. 401(k), 403(b), IRA, Roth IRA) and insurance policies (e.g. Annuity, Whole Life Insurance) before the divorce is final. Make beneficiary changes immediately after assets are re-titled pursuant to the property settlement and divorce decree.
If you have questions, please contact our Henssler Financial at 770-429-9166 or email@example.com to discuss your situation with a Certified Divorce Financial Analyst™.