Preparing for divorce: Tips for protecting your financial health

Returning to the Workforce
Many women who have taken time off from their careers decide to return to the workforce after a divorce. If you need assistance getting back on your career path, research job listings online, attend networking events, check out nearby university career centers, or attend night classes to help you catch up. You can learn more about this topic with our article, Returning to the Workforce.

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If you're contemplating divorce, you want to be sure you have a firm grasp on your financial situation. If you do decide to proceed with a divorce, these steps can ensure that you are prepared for some of the financial changes that are likely to be on the horizon. If not, they are still a good way to play a more active role in managing your money.

1. Get support.
Even in the best of circumstances, divorce is complicated, and it can quickly get expensive if you're not careful. Consider seeking professional help from the following:

Attorney: An attorney can provide you with invaluable advice about issues such as alimony, child custody and settlements. But remember that while your attorney is there to give you legal advice, you still must be prepared to make all of the decisions.

Financial advisor: For help getting your finances in order and then figuring out how to divide your assets, you should consult a certified financial advisor. He or she will also be able to guide you through long-term financial planning, which might address issues like debt reduction, education funding, retirement planning and estate planning.

Therapist: If necessary, a therapist can provide much-needed emotional and moral support for you and your children.

2. Create a budget.
It can't be stressed enough: Setting a budget and then revisiting it regularly helps you stay on track financially. Keeping a record of your earnings and expenses on a sheet of paper or electronic spreadsheet helps you see the big picture of your financial situation. After recording your current finances, complete another worksheet that will help you envision how your finances will look after your divorce is complete.

3. Take stock.
The court will require a record of all assets and liabilities that you and your spouse have jointly and separately. List all bank accounts – yours and your spouse's – plus any other assets the two of you have, such as stocks, bonds, real estate, mutual funds and workplace retirement plans. Do an inventory of household possessions, including vehicles, appliances, electronic equipment and furniture. Make note of side businesses that generate income. Once you've accounted for all assets, slot each of them under one of three categories: marital property (property acquired after the marriage), your belongings (including things you brought into the marriage) and your spouse's belongings. You'll also need to make a list of any liabilities, such as your mortgage, car payments, student loans and your kids' tuition.

The court will ultimately decide how to equitably divide marital property. But keep in mind that individual state laws differ on the meaning of "equitably" and most states do not automatically define it as "equally."

4. Have cash on hand.
If you haven't filed divorce papers yet – and you're still living with your spouse – now is the time to make sure you have cash on hand. Legal fees, court costs and new living expenses can drain any account. Keep in mind that the money that used to support one household will now have to be divided into two.

5. Ensure you have credit.
Women who are getting a divorce often struggle to obtain credit because theirs is often tied up with their spouse's. Make sure you get your bank and department store cards in your own name – and not just as an authorized user on your spouse's cards. Doing so can also ensure that your spouse won't be able to cancel your cards and cut off your credit.

6. Review your insurance.
Not having health insurance when serious illness strikes can cause significant financial distress. Therefore, it's important to ensure that you have adequate health, disability and life insurance coverage after your divorce. If you are currently covered under your spouse's employer-provided plan, you'll likely keep that coverage for at least 36 months under COBRA (Consolidated Omnibus Reconciliation Act). However, COBRA premiums tend to be expensive, so you'll need to account for it in your budget.

If your employer offers a health plan, consider signing up for it. The group policy will likely be less expensive than COBRA or one you purchase on your own. Although employers typically only allow health coverage enrollment once a year, they may let you sign up for it midyear if you're going through a divorce.

Also, if your spouse will pay child support, make sure that he or she has enough life insurance to cover you and your children in the event of his or her death.

7. Know the power of 10.
If you are nearing the 10-year mark in your marriage, or have surpassed this milestone, there are a few key items you should be aware of:

Alimony: For marriages of 10 years or longer, courts in some states retain the right to order that alimony be paid to the lesser-earning spouse for as long as needed – if the higher-earning spouse has the ability to pay.

Social Security: Marriage of at least 10 years makes you eligible to collect derivative Social Security benefits based on your ex-spouse's earnings when you reach retirement age. Those benefits are equal to half of the amount your ex is eligible to collect. Note that you must not be married to someone else at that time to collect.

Military pay: The 10-year mark also helps you if your spouse is in the military and will be eligible for retirement pay. If you were married for at least 10 years while he was on active duty, you can get your portion of retirement pay paid directly to you by the military finance office.

Building a new future
Divorce – even in the best of situations – is never easy. By organizing your finances, playing an active role in the divorce proceedings and staying on top of your budget, you can give yourself a feeling of control and feel more confident about what lies ahead.

Need more information?
Visit tiaa-cref.org for broader Financial Education, including a variety of resources to help you improve your financial well-being.

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