By: Sijun Li
Divorce is one of the most hectic processes that one can ever go through – and both emotionally and financially.
Studies show that the divorce rate in the United States still hovers around 50 percent.
With recent reports revealing that retirement planning in the U.S. is already inadequate, it’s crucial that divorcing adults protect their assets during the separation process.
Going through a divorce is a delicate time and can make it more challenging for individuals to adequately plan for their futures.
There are necessary steps to take protect oneself from any divorce-related financial problems.
The financial experts at Miss Money Bee have compiled a checklist of financial steps to take during a divorce:
1. Budget – Adults should cut back as much as possible on spending while divorce proceedings are still ongoing. The legal process is expensive, and attorney fees certainly add up. Each person should gather their financial resources and come up with a money management plan that focuses on downsizing their current living expenses.
2. Credit Reports – Go on the three major credit bureaus (TransUnion, Equifax, Experian) and review your credit report. Make sure everything is accurate with your individual account as well as your spouse’s. If there’s anything that looks suspicious, make an appeal right away so it doesn’t get in the way of opening any individual accounts.
3. Written Agreements – If there are credit cards in both names, an agreement should be reached with the creditor to establish who pays what off. This should be in writing and signed. This is an important step for adults in safeguarding their respective credit scores and being eligible for new credit lines post-divorce. If one spouse who is responsible for paying the balance falls behind or fails to pay, both individuals will see their credit decline.
4. Retirement Plans – By law, a consumer is entitled to half of their spouse’s retirement funds. This money can go toward retirement funds, housing, relocation expenses, etc. Early withdrawals usually comes with a 10 percent penalty fee, but can be avoided. Check out the IRS regulations regarding that here: Divorce and Retirement Assets: Getting the Money Without Getting the 10% IRS Tax Penalty
5. Speak with financial experts – When it comes to dividing property and retirement assets, it can be helpful for couples to speak with financial professionals, including advisers, housing counselors and tax preparers. This is because the assets they retain will have an impact on their long-term finances and taxes, and consumers should be aware of the consequences of maintaining ownership.