March 8, 2017

Moving On - What To Do Once Your Divorce Is Final

Our Moving On checklist will help you make sure that you haven't left any critical post-divorce actions undone.
Dawn Doebler, MBA, CPA, CFP®, CDFA®, Senior Wealth Advisor

Your divorce is finally final and you’re ready to move on. It’s understandable that you’ll want to put all of the legal work, paperwork and distraction behind you and get back to living your life.

However, too many women make the mistake of not following through on critical post-divorce actions that can have significant financial consequences. All too often, women tell us they just don’t know what they need to do.

Surprisingly, many of the post-divorce actions in your divorce decree don’t require legal representation, meaning your lawyer won’t be directing you or providing you with reminders. You and your ex-spouse will be responsible to get these things done.

That’s why we developed our Her Wealth Moving On checklist. It’s designed to be very thorough and to help you think through the next steps. Not all of these actions will apply in every case, but our goal is to list all of the things you should consider so nothing is missed.

The checklist is arranged into four sections based on actions:

  1. Division of property and executing the divorce decree
  2. Child support
  3. Tax management
  4. Estate planning

For example, when it comes to dividing property after a divorce, having properly written documents for the transfer of retirement assets is critical to making the transfer free from income tax.  If your situation includes pension plans, you need to pay attention to the details related to the execution of the asset split because the rules differ according to each plan’s regulations.

You should update your will and Powers of Attorney and remember to change beneficiary designations on IRAs, 401Ks and insurance policies because whoever you have named on those pieces of paper will get that money, not who you designated on your will.

I have worked with clients who found out too late that the ex-wife was getting their spouses’ IRA money.

Particularly in the case of minor children, there may be a need to create a Testamentary Trust and designate a Trustee to ensure proper inheritance and financial management in case one of the parents passes away prior to the children reaching adulthood. 

Actions That May Require Professional Guidance:

In our Moving On checklist, we list the actions that are more technical and may require the expertise of financial professionals like a CPA, financial advisor or insurance agent. For instance, if you are receiving alimony and you are not working, this qualifies as income. You may be eligible to make IRA contributions based on that income subject to IRA income limits.

You should also review your investment strategy now that you are responsible for making those decisions yourself. Take some time to consider your financial goals to determine if your current allocation is in line with them. It’s also important to consider any potential tax ramifications before making changes to your portfolio. You may want to consult with a financial advisor before making these changes just to be sure.

Actions To Do On Your Own:

Finally, the Moving On checklist outlines the things you can do over time especially if you are changing your name like applying for a new Social Security card and passport or putting your bank accounts and credit cards in your new name.

There’s a lot to consider. We know because we have been through this process many times with many clients. Our Moving On checklist will help you to move on to the next phase of your life confident that you haven’t left important issues undone.

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Shawn: Now you hear all kinds of deals about leasing cars, how can you negotiate a better deal if you want to lease?

Nina: Okay, well many people don't realize that they can actually negotiate the sticker price on a leased car in the same way that you would do that if you're buying a car. And since when you lease -- when you're, you know, your lease payments basically cover the depreciation, the difference between the sales price and the residual value. So it's definitely in your best interest to try to reduce that sales price as much as possible because then you'll pay you know, smaller dollars over the life of the lease. Make sure you pay attention to the down payment at the lease signing. And so here's an example, you might see an ad that says you know, lease payment is only 1.99 a month and that sounds like a great deal for thirty six months. The catch is, is that it might require a $3,600 down payment. So, if you amortize the down payment, then actually that 1.99 special, becomes 2.99. So, you really have to kind of look at total costs. 

And then lastly, dealerships use the term, money or lease factor, when they're calculating your financing costs and a lease factor is not the same as an interest rate. So, you have to make sure the dealer converts that lease factor into a comparable interest rate so you know what your financing charges are. 

Shawn: At the end of the day, does one method wind up being more expensive more often than the other, or can we tell that?

Nina: You know what, it really depends on how long, if you're going to hold the car for a long time, you're better off buying. But if you know, and if you're not, if you just really enjoy driving and you want to have a new car, then go ahead and lease. I mean, there's pros and cons to both, to be honest with you, it's not one size fits all.

Shawn: Alright Nina, great. Happy Thanksgiving to you. Alright, Nina Mitchell is with The Colony Group, for more go to wtop.com and search Her Wealth.

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Dawn Doebler, MBA, CPA, CFP®, CDFA®, Senior Wealth Advisor

Dawn’s experience spans more that 25 years providing wealth management, financial planning and corporate finance solutions for clients. As an MBA, CPA, Certified Financial Planner (CFP®), and a Certified Divorce Financial Analyst (CDFA®), she is uniquely qualified to understand the challenges and financial needs of clients from executives to entrepreneurs, as well as single breadwinner parents. Dawn is a weekly contributor to WTOP radio.