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Divorce Checklist: Essential Steps to Plan for A Divorce

Author Daniel Smith
Contributor Jorge Sanchez, MD

Divorce can be a harrowing process. Dealing with the loss can be unbearable to many, especially when children are involved. Adding to the emotional stress are the significant financial ramifications that come with divorce.

On average, each spouse is expected to spend $15,000 to go through the process in the United States. And if it’s a contentious divorce, that price can quickly increase tenfold. There are also income declines to consider.

On average, women experience a 41% decline in income, while men experience a 23% drop. Finally, there is the division of assets and spousal support to consider.

While, on average, physicians have a relatively low divorce rate, being proactive and prepared can provide far better outcomes than waiting until it may be too late.

In this post, we’ll explore some factors to consider in the face of divorce. This divorce checklist aims to help you prepare for and navigate the legal, economic, and personal aspects of the separation so you can be well-equipped to face the challenges ahead.

Click on the image to view the complete infographic.

Assemble a Divorce Team You Trust

In the face of divorce, one of the first steps to take is to put together a divorce team that can support you through the process, including a team of experts, friends, and family.

Having a support network by your side is invaluable during a complex process such as divorce.

Divorce Lawyer

When searching for a divorce lawyer, it’s essential to consider their qualifications and experience.

Look for an attorney with a strong track record in divorce cases and one familiar with the local family court system. Their familiarity with local court procedures and personnel can be advantageous.

Some questions you might consider asking a prospective attorney include:

  • What is your experience with cases similar to mine?
  • How do you approach client communication, and what can I expect?
  • What will be the legal strategy if my case goes to trial?
  • Can you provide references from previous clients?

You can also ask friends, family, or colleagues for recommendations and read online reviews to understand the attorney’s reputation.

Remember, an attorney should be passionate about what you’re going through. You want someone who cares about representing you and doesn’t see you as just another number.

Credentials

A Certified Family Law Specialist (CFLS) has passed a rigorous exam and has extensive experience in the field, making them an excellent choice when dealing with complex divorce issues.

Lawyer Fees

Understanding the fee structure of your divorce attorney is crucial to avoid surprises later on. Some divorce lawyers charge a flat fee for uncontested divorces or specific tasks, while others may charge an hourly rate. Make sure to discuss the lawyer’s fee structure upfront and ask for an estimate of the total cost for your case. Remember that a more experienced attorney might have a higher hourly rate. Still, their knowledge and efficiency could save you money in the long run.

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Financial Planner

A financial planner can help you organize and sort through your financial assets and understand which investments you should keep and which ones you should let go of. They can also help manage assets received in a divorce settlement.

Additionally, a financial planner can assist in creating a budget for the transition from one household to two, alleviating some of the financial strains of divorce.

Their expertise can guide you in making informed decisions about asset division, ensuring a fair distribution that supports your financial stability post-divorce.

Accountant

A tax accountant can provide tax advice and minimize the negative financial impacts of divorce both in the short and long term. They can provide invaluable advice on the tax implications of different divorce settlement scenarios.

Before starting the divorce process, you must understand your tax situation.

If your spouse has always handled your taxes, you should request the previous 3-5 years of tax returns from your account. This will also help you have a complete picture of your income, aiding you in alimony negotiations.

Therapist

Numerous studies have underscored the vital role emotional support plays during the tumultuous times of divorce. This support network, including friends, family, and professional counseling, can significantly ease the emotional burden and promote better adjustment during and after divorce.

A therapist can provide you with valuable advice and emotional support. While you can get advice and support from your relatives, hiring a professional ensures that you get consistent, objective, and unbiased advice.

Friends and family

Friends and family could be a great source of emotional and mental support during challenging times, such as divorce. You might be able to do this alone, but being able to lean on loved ones makes the process much more manageable.

Address Child Custody

Perhaps the most difficult challenges come with divorces where children are involved. That’s why if you have children, deal with custody issues first.

Understanding the different types of custody arrangements is also crucial. Joint custody allows both parents to share decision-making responsibilities, while sole custody grants one parent primary authority.

Additionally, distinguishing between legal and physical custody is essential, as the former pertains to decision-making rights regarding the child’s welfare. At the same time, the latter relates to where the child resides.

Talk with your partner and try to agree on who will be primarily responsible for the kids outside of court. While a judge and jury are generally fair when determining which parent will have custody, in most cases, you, as a parent, know your child(ren) best.

Also, creating a parenting plan that outlines the rights and responsibilities of each parent can significantly ease the transition for all involved. If you and your spouse cannot agree, the court will make this determination.

Both parents must be mindful of the long-term impacts of divorce on children when making decisions. Whether addressing the custody happens through mediation or a court, the children’s well-being should always be a primary concern.

Prepare to Divide Assets

The first step to the division of assets is to identify the type of property law that your state enforces. Some states enforce community property laws, while others implement equitable division.

Community property

Community property laws consider all property acquired by a married couple during their marriage to be marital property and will award the spouse half.

States with community property laws include:

  • Idaho
  • Washington
  • Wisconsin
  • California
  • Nevada
  • Arizona
  • New Mexico
  • Texas
  • Louisiana.

At the time of this writing, some states, including Alaska, Florida, Kentucky, South Dakota, and Tennessee, have laws to allow spouses to elect community property as a form of property ownership.

For instance, a typical scenario might involve deciding who gets to keep the family home or how to divide a joint bank account.

These situations can become complex, mainly if one spouse has been the primary earner, significantly contributing to the accumulation of assets. It’s crucial to understand your state’s laws governing asset division to ensure a fair distribution.

Equitable Division

Equitable division law considers specific properties to be owned by spouses separately and, therefore, are not subject to division. Factors used to determine equitable distribution include:

  • Length of marriage
  • Standard of living during marriage
  • Financial contributions of each spouse to the earning power of the other spouse
  • Overall health (mental and physical) of spouses
  • The education level and earning capacity of each spouse
  • Custody of children and housing
  • The income brought to the marriage by each spouse
  • Prenuptial agreements
  • Outstanding debts
  • Tax consequences of settlement
  • Other special circumstances

Consider a scenario where one spouse has a higher earning capacity, and the other has been a homemaker. The division of assets may need to account for the financial imbalance to ensure a fair settlement.

In equitable division states like New York, the aim is for a fair, but not necessarily equal, division based on various factors such as each spouse’s earning capacity, the length of the marriage, and the standard of living established during the marriage.

This nuanced approach requires a thorough examination of each spouse’s contributions to the marriage, both financial and non-financial, to arrive at a just division of assets.

Assets and liabilities subject to equitable distribution

All marital assets and liabilities are subject to equitable distribution. Marital property is any assets acquired or accumulated by either spouse during the course of their marriage. It does not include premarital acquisitions, inheritances, and gifts from third parties.

Assets obtained using marital resources after the date of separation can also be considered marital property. Assets that have appreciated in value due to actions taken by one spouse during the marriage may be partially categorized as marital property.

Marital debt does not include individual debt acquired before the marriage, such as student loans acquired before marriage. Marital debt includes loan agreements issued that spouses signed.

When assets are split in a divorce, they are not considered a gift. The division of assets is a non-taxable event and does not need to be reported on gift tax returns. Note that if a retirement account is split, you may receive a 1099-R showing a non-taxable rollover of the assets.

The basis of any property split in divorce remains the same as it would have been if you had remained married.

For example, if you are awarded stock that you and your spouse purchased at $100/share, the cost basis of the stock would remain the same.

The same is true for your home – the purchase price you and your spouse paid will be your cost basis when you sell the house, even if the home had increased in value during your marriage.

You must also consider the future tax implications when dividing assets.

Consider a couple with $100,000 of Stock A with a cost basis of $50,000 and another $100,000 of Stock B with a cost basis of $80,000.

If one spouse takes Stock A and the other takes Stock B, and they both decide to sell the stocks immediately, one spouse will have a taxable gain of $50,000, and the other will have a taxable gain of $20,000.

The table below shows some examples of marital assets and debts that could be subject to division in a non-community property state.

Marital Assets Marital Debt
  1. Real Estate
  2. Automobiles
  3. Investment and Savings Accounts
  4. Retirement Plans, IRAs, and Pensions
  5. Cash Value of Life Insurance Policies
  6. Furniture and Fixtures in All  Residences
  7. Businesses Owned by One or Both Spouses
  8. Marital Debts
  1. Mortgage balance on the home
  2. Loans payable to relatives or friends
  3. Unpaid bills at the time of the hearing (Such as those from stores, credit cards, doctors, dentists, etc.)
  4. Loans from banks, savings and Loan associations, or any lending institutions

Manage Debt

Another crucial aspect of the divorce checklist is managing joint debts.

Start by ordering a free credit report and assessing all outstanding debts, such as mortgages, credit cards, and loans. This step is vital as it provides a clear picture of the shared financial obligations that need addressing during the divorce process.

To protect your credit and prevent potential issues, cancel any joint bank and credit accounts and open new accounts in your name alone. This step can help safeguard your financial future by preventing your spouse from incurring additional debt in your name.

Be prepared to negotiate the division of these debts during the divorce process. Create a list of debts incurred during the marriage and obligations that each person brought to the marriage.

Refrain from paying debt and expenses that belonged to your spouse before marriage with separate assets. This ensures a fair division of debts and prevents any unintended financial complications.

If you reside in a community property state, the debts made during your marriage are community debts. That means that those debts are both your and your spouse’s responsibilities.

When it comes to community property debts, determining who should pay and in what amounts is, in many cases, best left to the court.

Finally, monitor your credit throughout the process to detect any financial inconsistencies or fraudulent activity by your spouse. This proactive measure can help prevent financial disputes and secure a smoother divorce process.

Alimony

Alimony, or spousal support, is a financial provision one person pays to their former spouse following a divorce or separation agreement. It’s based on assessing the receiving spouse’s financial needs and the paying spouse’s ability to contribute.

To determine if someone qualifies for alimony, their financial needs are evaluated, subtracting their income from various sources – like property, employment, and other income-generating assets.

Alimony arrangements are usually temporary, providing the lower-earning spouse a transition period to adjust to the new financial circumstances post-divorce.

However, long-term or permanent alimony may be awarded in some cases, especially in lengthy marriages or when one spouse has significant financial or medical needs.

Usually, alimony ceases if the receiving individual remarries or either ex-spouse dies. The alimony amount might also be adjusted if the financial circumstances of either party change significantly.

Alimony arrangements should be paid in cash, and the ex-spouses can’t cohabitate.

Suppose the person receiving alimony moves in with someone, especially a new romantic partner. In that case, the amount they receive might be reduced or terminated.

To protect themselves financially, the person receiving alimony should consider getting a life insurance policy on the person paying it. This is prudent, as alimony ends if the person paying it dies.

Following the Tax Cut and Jobs Act of 2018, alimony payments for arrangements entered into after December 21, 2018, are no longer tax-deductible for federal tax purposes for the payer, and the receiver doesn’t have to report it as income.

Note that some non-conforming states still allow the payer to deduct alimony payments, and the receiver must pay state taxes on the income. This is a significant shift from previous tax laws and can impact the financial planning of both parties involved in the divorce.

Existing divorce agreements before this change in law are not affected.

Child Support

Both biological and adoptive parents are legally obligated to provide financial support for their children until they reach the state’s age of majority, typically around 18 years old. However, this may extend if the child has special needs or is pursuing higher education.

The right to receive child support is vested in mothers and fathers if they are the custodial parent. Determining child support involves thoroughly evaluating both parents’ financial circumstances, including their income, assets, and other relevant factors.

Regrettably, many child support cases result in unpaid support because one parent believes the parent with custody isn’t using the support appropriately for their children’s needs.

This is a widespread issue, with only about half of all court-ordered child support being paid, and of that, just about half is paid in full.

Despite this, child support is a legal obligation, and failing to fulfill this responsibility can result in legal repercussions.

It’s worth noting that step-parents are not under a legal obligation to support their spouse’s children from a previous relationship.

However, they may choose to do so voluntarily. Even in cases where non-custodial parents are denied visitation by the other parent, they are still obligated to pay child support.

For tax purposes, child support payments are neither tax-deductible for the payer nor considered taxable income for the recipient, differentiating it from alimony.

It’s essential to keep accurate records of child support payments as these can be required by the court or for other legal purposes.

It’s also important to keep thorough records of which payments are alimony and which payments are child support for support agreements entered into prior to January 1, 2019.

Paperwork and Documentation

A successful divorce heavily relies on thorough documentation. Being well-prepared with all the necessary documentation will significantly streamline the process, making it less daunting.

Begin by gathering personal information like legal names, Social Security numbers, and birth certificates for both you and your spouse and your children, if applicable. The court will require this information during the divorce proceedings.

Moreover, assembling financial documents is crucial. Collect bank statements, credit card statements, tax returns, and paycheck stubs to help determine the division of assets, debts, alimony, and child support.

Also, obtain documentation for shared assets like real estate, vehicles, and investment accounts.

In addition to financial records, compile any relevant legal documents, such as prenuptial or postnuptial agreements, wills, and powers of attorney.

These documents can significantly impact the court’s decisions during the divorce process. It might also be beneficial to have copies of marital contracts or agreements if any exist.

Maintaining an organized and thorough collection of paperwork and documentation will help ensure a smoother divorce process.

Consulting a legal professional is advisable if you need help determining what documents to gather or how to proceed with filing the divorce papers.

They can provide a checklist of necessary documents and guide you on properly filing them, avoiding common mistakes that could delay the divorce process.

Filing the Divorce Papers

Familiarizing yourself with your state’s requirements for filing for divorce is a vital step toward ensuring a smooth divorce process.

Each state has its own set of rules and protocols, and understanding these requirements can help prevent legal complications down the line.

Most states mandate that you file for divorce in the jurisdiction where you or your spouse reside. It’s crucial to adhere to these residency requirements to avoid any legal hitches.

You must file the appropriate papers with your local court to initiate the divorce process.

This typically includes a petition or complaint for divorce, which outlines the reasons for the divorce and any requests for property division, child custody, and financial support.

It’s essential to complete these papers accurately and according to your local jurisdiction’s requirements. Once the documents are filed, your spouse will be served with a copy of the petition and given a chance to respond. They may either agree to the terms or contest them in court.

Ensure you follow the specific timeline and protocol for serving these papers to ensure the process proceeds smoothly.

Here are some additional pointers to consider:

  • Accuracy and Completeness: Ensure all the information in the divorce papers is accurate and complete. Any discrepancies or missing information could lead to delays or complications.
  • Legal Assistance: Consider consulting with a legal professional to guide you through filling out and filing the divorce papers. They can help ensure all required documents are correctly completed and filed.
  • Document Everything: Keep copies of all documents filed with the court and any correspondence between you and your spouse regarding the divorce proceedings.
  • Avoid Common Mistakes: Common mistakes, like failing to provide complete financial disclosures or not adhering to the filing timelines, can cause significant delays. Being meticulous and adhering to the guidelines can help avoid such pitfalls.

Post-Divorce Adjustments

There are steps you need to take even after the divorce has been finalized. These include revisiting your retirement plan, social security, and retirement asset division in general.

Retirement Plan Modifications

Your retirement plans may also need to be updated after a divorce. It’s essential to understand and comply with the terms outlined in the divorce decree and settlement agreement.

Here’s what you can do to modify your retirement plans:

  • Review your divorce agreement for details on the division of retirement assets, such as pensions, 401(k)s, and IRAs. The divorce agreement will specify exactly which assets are to be transferred to your ex-spouse.
  • Contact the retirement plan administrators to notify them of the divorce and provide the required documentation, which may include a Qualified Domestic Relations Order (QDRO) if applicable.
  • Update your beneficiary designations on your retirement accounts to reflect your current wishes. Beneficiaries are not automatically updated when you notify your plan administrator of your divorce.

Qualified Domestic Relations Order (QDRO)

A Qualified Domestic Relations Order (QDRO) serves the purpose of dividing retirement assets between former spouses. Pension plans and qualified plan assets can be allocated using QDROs.

In this process, the ex-spouse receiving the benefits is referred to as the “alternate payee,” while the individual transferring their interest is known as the “participant.”

The QDRO must specify the amount or percentage of the participant’s retirement benefits earmarked for the alternate payee.

The complexity and cost associated with a QDRO can vary widely. For instance, a QDRO can be relatively straightforward when transferring assets within a defined contribution plan maintained by a large employer.

However, the process can be more complex if the assets held are within a defined benefit plan. This is because pension benefits are typically calculated based on a specific formula, making it challenging to determine the precise amount to allocate to the recipient spouse.

It’s worth noting that one wouldn’t need QDRO to transfer funds from one spouse’s IRA to the other’s IRA. Nevertheless, individuals must adhere to IRA rollover distribution rules, which include potential taxation and penalties for premature distributions if the recipient is under 59 1/2 years of age unless the funds are deposited into their IRA within 60 days.

Social Security Retirement Benefits

An ex-spouse can collect Social Security retirement benefits even if the other ex-spouse remarried and is still working if:

  • The marriage lasted ten years or longer
  • The ex-spouse who is seeking the benefit is 62 or older
  • The ex-spouse who is seeking the benefit is unmarried
  • The ex-spouse seeking the benefits is not entitled to benefits or lower benefits based on his or her own earnings record.

If the ex-spouse is full-retirement age, he or she will receive 50% of the worker spouse’s benefit (known as the “primary insurance amount”). However, at the age of 62, he or she would only be entitled to receive 37.5% of the ex-spouse’s benefit.

Frequently Asked Questions

What is the process of dividing assets in divorce?

The asset division process during a divorce can be intricate, often hinging on the case’s unique circumstances alongside the state’s governing laws.

The initial step involves identifying the type of property law enforced in your state – community property law or equitable division. Community property states consider all assets acquired during the marriage as marital property, typically dividing them equally among the spouses.

Contrastingly, equitable division states evaluate various factors to ensure a fair, though not necessarily equal, distribution of assets. These factors could encompass the length of the marriage, the standard of living during the marriage, each spouse’s financial contributions, overall health, educational levels, earning capacities, and the custody of children. The division also extends to debts, apportioning marital debts based on state laws and individual circumstances.

Engaging a financial planner or a legal professional proficient in handling divorce cases is advisable. Both professionals can help you thoroughly understand the ramifications of asset division so you can make informed decisions and protect your financial interests during and after the divorce.

How to initiate the divorce process in different states?

You must meet specific requirements depending on your state to initiate the divorce process. Most states have residency requirements, meaning you must file for divorce where you or your spouse live. Be sure to learn your state’s requirements before getting started.

How do you cope with the emotional aspects of divorce?

Divorce can be devastating and bring about a range of negative emotions, such as loss, anxiety, disappointment, and anger. Painful as they are, these feelings are natural and expected when going through a drastic change such as divorce.

While there is no easy cure for these negative emotions, there are some healthy ways to cope with them.

The first is to seek solace among friends, family, and professionals. A strong support network can significantly alleviate the stress associated with divorce.

A therapist can offer a structured avenue to process the emotional tumult, providing objective, unbiased advice and coping strategies. It’s an invaluable resource for working through the emotional complexities that divorce inevitably brings to the surface.

Being surrounded by friends and family where one can share feelings and concerns without judgment can bring a meaningful positive impact as well.

Besides professional and personal support, self-care is a pivotal aspect of navigating through the emotional aspects of divorce. Engaging in activities that promote mental well-being, such as exercise, meditation, or hobbies, can lessen the emotional impact of divorce.

Remember to be patient with yourself and actively seek support as you navigate through this process.



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