It goes without saying, divorce is an extremely difficult and emotional journey. It can be overwhelming and it will most likely affect and change many aspects of life including finances. Financial preparation for divorce is crucial in order to move forward in your divorce. Separating finances with two spouses can be messy. In order to do so, each partner needs to prepare in order to ensure security and stability both during the divorce proceedings and after the divorce is finalized.
There are certainly things both parties can do to financially prepare for divorce. Here are some tips for those going through this sticky situation.
Gathering Financial Documents
One of the first steps to do is to gather all financial documents, including tax returns, all accounts including savings, checking and investment accounts, pay stubs, property records (home, land, vehicles) credit card statements, debts, and any retirement account statements such as 4014K plans, IRA’s, or pensions.
This is important for each party to fully understand what they own as individual accounts as well as accounts held together. This is most definitely a daunting and time-consuming task; however it is very important in order to entangle financial ties. In addition, all this information … Read More... “Steps to Take to Financially Prepare for a Divorce”
I generally begin my articles for our Family Blog Web Site with a definition of the topic or subject that I am addressing, and this month’s article will not deviate from that practice. Finance is defined by Webster’s New World Dictionary as being “the science of managing money”. And, Financial Planner is defined by Wikipedia as “a practicing professional who helps people deal with various personal financial issues through proper planning, which includes but is not limited to these major areas: cash flow management, education planning, estate planning, investment planning, risk management and insurance planning, tax planning, estate planning and business succession planning (for business owners). The work engaged in by this professional is commonly known as personal financial planning. In carrying out the planning function, he or she is guided by the financial planning process to create a financial plan – a detailed strategy tailored to a client’s specific situation, for meeting a client’s specific goals.”
Last month, Justice Souter of the United States Supreme Court issued a unanimous decision in the case of Kennedy v. Plan Administrator for DuPont Savings and Investment Plan. A dispute had arisen between husband’s estate and his ex-wife over receipt of his Savings and Investment Plan proceeds. A SIP is an “employee pension benefit plan” similar to a 401(K) plan subject to federal ERISA laws. Early on in the marriage, husband had named his wife as the beneficiary to his employer’s SIP plan. The parties divorced and the divorce decree language said that the wife was “divested of all right, title, interest, and claim in and to . . . any and all sums . . . the proceeds [from], and any other rights related to . . . retirement plan, pension plan, or like benefit program existing by reason of [the husband’s] past, present or future employment.” However, the husband never executed a form to remove the wife as his beneficiary of the plan nor did he submit a Qualified Domestic Relations Order (QDRO) to the employer covering the SIP. He did, however, submit a QDRO covering his pension.