A divorce is an ending.
Don't forget it's a beginning, too.

Emotions can run high during a divorce, so it pays to try to keep a cool head — and follow a few simple steps to help protect yourself and your finances. A little work early on may save a lot of headaches later.

This Action Plan is intended to help you through this challenging time — and hopefully minimize financial missteps along the way. Please be aware it's just an overview, not a comprehensive blueprint covering every situation.

FIRST STEPS
Actions to take	Open your own checking account Stop pooling your money with your spouse's Build your own credit file Organize financial paperwork to keep legal costs down Create a budget based only on your income Update beneficiaries for investments, pensions, insurance Prepare a new will, as a divorce may nullify wills done during marriage
NEXT STEPS
Actions to take	Revisit your financial plan to incorporate this change Consult a professional financial advisor Consult an attorney

Neither AARP nor AARP Financial Inc. provide legal or tax advice. Please consult an attorney or tax advisor for information pertaining to your particular situation.

 

back to top

Things to Watch Out For

Even when both parties are trying to be fair, it's easy for one party — usually the less financially sophisticated one — to find him or herself challenged after a divorce because of some common mistakes. Here are some of the biggest you should watch out for:

1. Know your expenses

   This is always an important exercise, but it is critical when going through a divorce. View it as an opportunity to establish a basic financial budget for your new life.

2. Accurately Value Assets

   Is the car due for a major service? Does the house need structural work? Make sure you know the near-term expenses before accepting the stated value of durable assets. Also make sure you can bear the costs of upkeep on just one salary.

3. Pay Attention to Taxes

   The IRS has special rules for many situations, and the ending of a marriage is no exception. Make sure you know whether you should be filing jointly or separately during the last year of marriage — and if any special handling is required.

4. Get experienced Help

   There are always challenges, even in an amicable divorce. Make sure the person you're relying on for advice and guidance is qualified to give it. Consider working with a Certified Financial Planner (CFP) as many are also certified in divorce planning.

5. Obtain an Objective Opinion

   Don't accept your ex-spouse's word when it comes to the value of assets to be divided. You should get professional appraisals of property or investments.

6. Be Aware of Children's rights

   In some states, children in college may demand financial support for tuition. You should be aware of the laws where you live.

7. Recognize Costs Before Accepting an Asset

   Can you afford the mortgage on your own? What happens if you toss in car payments on top of it? Don't accept responsibility for an asset if you cannot manage its cost. You'll probably be happier in the long run.

8. 50/50 Split Isn't Always Fair

   One party may be entitled to more than half — or some other uneven split — of the current marital assets. This is dependent on a variety of factors such as the future earnings potential of each party and the contributions to jointly owned assets. This is a more complex topic than can be covered here, but just know that "equal" is not always "fair." Seek legal advice for help.

9. Unsecured Debt

   Debt incurred during your marriage is considered jointly owed. If one spouse agrees to take it on after the divorce and then doesn't pay, the debt is still considered jointly owned and the creditor will seek payment from both of you.

10. Alimony and Child Support Are Linked

    There are rules you should know. Alimony can't end within six months before or after your child turns 18, for example, or it's considered Child Support, which would make it taxable retroactively to the start of the payments.

11. Insure Alimony/Child Support payments

    You can get insurance for almost anything. This might be a good one to consider, so that you receive your payments even if your ex-spouse is no longer able to pay.

12. Consider Your Long-Term Security

    Although a settlement may seem fair at the time it is created, it's entirely possible your perception will change years down the road — especially if you don't consider tax implications or potential penalties created by withdrawing assets from retirement accounts. To help ensure you receive an equitable split of assets, look at the long-term impact of various settlements before deciding what is right for you.

These may be complicated topics that are best handled with the advice and guidance of an Estate Attorney and/or Tax Advisor. If don't have the help you need, you may be able to find it through AARP at: AARP Legal Services Network (https://www.aarplsnbyge.com/lsn/home.do) or AARP Tax-Aide (http://www.aarp.org/money/taxaide/).

Neither AARP nor AARP Financial Inc. provide legal or tax advice. Please consult an attorney or tax advisor for information pertaining to your particular situation.

The Financial Advisors are investment adviser representatives of AARP Financial Inc., an investment adviser.