When a couple goes through a divorce, it can be difficult to sort through their finances and come to an arrangement. Reaching a financial agreement that satisfies both parties can be a huge relief, but there can still be loose ends to tie up once the papers have been signed. Below are some steps to take after the divorce is finalized to ensure that no additional issues arise later.
Designate New Beneficiaries
After a divorce, you must update the beneficiaries listed on your financial accounts including insurance policies. This ensures that your assets are passed to the right person after your death. Some states will negate a will upon divorce, which will prevent most assets from going to your ex-spouse. However, retirement accounts, life insurance policies, brokered accounts, and pay-on-death bank accounts may pass outside of your will, so it’s important to review the beneficiary details specified on these accounts.
Appoint a New Power of Attorney
Your estate documents, such as a will, living trust, and powers of attorney also need to be updated to designate a new beneficiary. Once you separate from your spouse, you need to assign someone else to act on your behalf if you are incapacitated, in both medical and financial situations. If you have already given power of attorney to your spouse, you must sign a declaration revoking it and send it to your spouse, as well as any institutions that have the form on file. Your spouse should return the original power of attorney, and you should execute a new one.
Close All Joint Accounts
When the divorce is finalized all joint accounts, such as credit cards, mortgages and other loans, bank accounts, brokerage accounts, and home equity lines, should be closed. Check your credit report to confirm that none of these accounts remain open. If there are outstanding balances, suspend the account to prevent any additional charges or debits. Going forward, you should review your credit report each year to make sure there are no irregularities.
Update Tax Withholdings
A divorce will also affect your tax filings, so you need to complete a new W-4, as well as any state and local forms, to update your marital status and number of exemptions. This will affect the amount of your withholdings, and you may have to make estimated quarterly payments on any non-W-2 assets, such as investments, real estate rental income, capital gains, or alimony. Income tax is not taken out of these accounts, so additional payments need to be made in order to avoid penalties.
Assess Your Finances Regularly
Divorce can have a big impact on your financial reality, so it’s important to regularly review your finances to make sure you have a clear understanding of your finances. You will have to make adjustments to your spending to accommodate your new situation. Dramatic changes such as avoiding spending out of fear, or overspending to celebrate your freedom, can have ultimately unsatisfying consequences. Hiring a financial planner or using free online tools can help you come up with a plan to maintain healthy spending habits.
Review Investment Accounts
Once your assets have been divided, you may need to make some changes to your investment portfolio. You may find your portfolio is either too aggressive or too conservative for your new financial situation. Your assets after the divorce may place you in a different tax bracket, and revising your investment strategy may better meet your needs. A financial planner can help you manage your current assets and help you decide what changes make the most sense for your portfolio.
Baltimore Divorce Lawyers at Huesman, Jones and Miles, LLC Help Clients Manage Financial Changes
The divorce process can be very complicated, especially if a couple has considerable assets to divide. The experienced Baltimore divorce lawyers at Huesman, Jones, and Miles, LLC can help you navigate these complexities and ensure that every detail has been settled while protecting your interests. With offices conveniently located in Hunt Valley, Maryland we serve Maryland family law clients throughout Baltimore County, Carroll County, Harford County, Howard County Towson, Bel Air, Westminster, Essex and Columbia. Call us today at 443-589-0150 or contact us online for a free consultation with a professional, dedicated Baltimore divorce attorney.