SAN FRANCISCO (9/30/14)--If you didn't play a role in managing family finances during your marriage, you could be at a disadvantage if you're going through a divorce (
It's important for both spouses to understand their current financial situation and postdivorce needs. Address these items to stay on top of your money situation:
--Understand immediate cash-flow needs; if you'll need access to cash right away, look at liquid assets such as stocks, bonds, and mutual funds. If you won't need cash immediately, look at long-term assets such as retirement plan accounts.
Check for coverage gaps and ways to cut costs. Don't find out after a disaster that coverage was cancelled for lack of payments by your spouse. Remove your former spouse from your auto policy to protect yourself from liability if he or she is involved in an accident and is sued. Consider life insurance as part of the final divorce decree to cover financial obligations. If the spouse providing alimony and child support dies, this may mean a significant loss of income.
--Review the tax impact of investments. Even if two assets or accounts have equal value, their economic values could be very different once you factor in taxes. Keep unrealized capital gains on taxable investments in mind, since taxes will be due someday. Review the past three years to five years of taxes you filed as a married couple. This shows combined incomes and if there are tax assets that need to be considered in divorce negotiations. Tax assets, such as charitable contribution carry-forwards, provide a reduction in future taxes and should be considered an asset when splitting the marital estate.
--Handle these transfers with care. The divorce decree should classify these items in a specific way. Consult a tax adviser for assistance.
--Make sure you have information for all financial accounts. You and your spouse eventually will have separate accounts for most items, but you still might need access to accounts such as college savings plans for children.
--Cancel jointly held credit cards, pay outstanding tax liabilities, and refinance your mortgage if possible. Settle all liabilities before your divorce is final by either paying them off or by transferring them to the spouse taking responsibility for the debt.
--Check your will, all insurance policies, and financial accounts such as pensions and 401(k)s to change beneficiaries.
--Though some of these assets might not have financial value, they have emotional value. If you and your spouse shared profiles on social networking sites, now's the time to create individual ones. Make sure you have passwords to access the sites in the meantime. If you have an estate plan for digital assets if you die, change the digital executor if needed.
For related information, read "Breaking Up: Your Finances in a Legal Separation" and "Life Changes Trigger Financial Changes" in the
Home & Family Finance Resource Center