For many who have gone through a divorce, it is a difficult concept to accept—but the real work starts after the divorce is granted. Untangling years of joint finances as well as meeting Court ordered obligations and establishing new financial avenues to meet your needs in the future is waiting. Refinancing or selling a home, and finding a new home, moving in or out is waiting.
Refinancing a vehicle in your own name or finding new car insurance is waiting. You may need to get your own health insurance as most policies will not allow an ex-spouse to remain insured absent COBRA insurance which is expensive and only for a limited time. You may need to change the beneficiary on your life insurance or obtain life insurance—you get the idea.
There is still a lot to do. If you can start separating finances or refinancing homes or vehicles while going through a divorce, it may not be a bad idea. HOWEVER, be certain you work with your attorney to do this legally and advantageously—or you will find some serious problems arise.
“Equalization” is a word used to refer to an amount one spouse pays to the other to balance all the assets and debts of the marriage. For divorces with homes and retirement plans, there is often an equalization amount ordered by the Court so that each Party ends up with roughly half of the value of the assets of the marriage.
The Court will likely designate how that equalization is to be paid. Sometimes there is cash and the amount to pay will be specified and a check or wire transfer or direct deposit must be made into the other Party’s account. You will want to know how you will pay or be paid by the other Party and when (“within 30 days”, “when the house sells”, etc.).
Sometimes retirement accounts are used to equalize assets and debts. If the retirement accounts are going to be used to balance everything, it is important to know that dividing these accounts can be a complicated process.
Untangling Joint Bank Accounts and Dividing Financial Accounts:
Any joint bank accounts will have to be closed or one party’s name removed from the account. Many banks require both Parties to either be present or by telephone to close or be removed from an account. Parties have to cooperate and work together to get it done.
What happens with the funds in that account should have already been determined during your divorce and whoever is to receive those funds, must receive them. This may mean writing checks or wire transfers or direct deposits into an ex-spouse’s other account. Keep printed paper records of ALL transfers of funds as proof of financial transfers seem to disappear more often than one would imagine.
If investment accounts (stocks, mutual funds, etc.) are to be divided, the administrator of the investment account will have paperwork for the Parties to complete. The Court Orders should provide exactly how to divide the account (by percentage or an exact dollar amount).
Individual Retirement Accounts (IRA) and Thrift Savings Plan (TSP) accounts require paperwork from the administrator to be completed and returned and may require certified copies of divorce orders to divide the account.
The IRA funds need to be transferred into a separate IRA in the other Party’s name to avoid taxes and penalties. 401(k) and other 401 accounts require specialized paperwork called a Qualified Domestic Relations Order (QDRO) to divide them and this means hiring a third party to prepare the QDRO—as most attorneys do not prepare them.
If a pension is being divided in the case, a QDRO or Domestic Relations Order (DRO) will be required. The QDRO or DRO will be filed with the Court and then sent to the pension administrator who will hold onto it until the pension starts paying out—so they will know how much and when to start payments to each Party.
Even military retirements require specialized paperwork that designates the marital share and the factors by which the marital share is multiplied and divided. Some attorneys can provide this as part of the divorce, for others, a third party must prepare the military retired pay division order.
Untangling Joint Debts:
Separating joint debts when they are on credit cards is difficult. The best way to do this is to first freeze the card so no further charges (other than the creditor’s finance charges) can be added. Then each Party transfers the amount they have been allotted to a new card. Once the joint card has a zero balance, it must be permanently closed.
Parties often have to coordinate and cooperate to get this done. Problems arise when one Party does not pay or transfer their obligation. This leaves a joint debt unpaid that could harm the other’s credit score. That is why it is important to have this payment scheme spelled out as part of your divorce orders.
Working with your attorney during the divorce to separate the debts in ways that avoid each Party having to pay a portion of a joint debt, is the best way to avoid post-divorce debt wars. Sometimes, though, it is not possible to assign debts and ensure they get paid. Some people ignore Court Orders or actively seek to thwart court Orders. Joint debt remains a very real risk for many who are experiencing financial fallout from a divorce or have a less-than-trustworthy ex-spouse.
Changing the Billing Address/Passwords, etc. for Monthly Obligations:
Car loans, utilities, insurance policies, credit cards, and really anything that requires payments will need to be transferred to the Party that has the payment obligation. This may require Court Orders that specify passwords and access codes and billing information to be provided to the other Party. It is better to have a specific divorce decree detaining as much as possible just in case the opposing party does not wish to cooperate.
Selling the Home/Refinancing the Home:
If the home is to be sold, the Party remaining in the home has a lot of work to clear it out and ready the home for showings. The realtor will have to work with both Parties to list the home, so both should expect a deluge of electronic signature documents and disclosures. If the realty market is good, your realtor will probably tell you to sell it as is.
If not, your realtor can recommend what must be done. If how maintenance and repairs would be paid for and reimbursed was not provided in your divorce orders, absent an agreement with your ex-spouse, repairs and maintenance will not be reimbursed. So, if you pay for repairs, you may not get the money back. Moving out means you must have a place for belongings (storage? A new home or an apartment?) and you must make arrangements to collect your belongings.
If possible, work with your ex-spouse to coordinate efforts and help each other. After all, selling the home often brings substantial money to both Parties and relieves both of the debt.
If you have been awarded the home and have a period of time in which to refinance the home, do not wait. Begin immediately by contacting lenders and brokers and start the process which can take many months and promises much aggravation.
You will be collecting financial documents and updating everything—just like you had to do while going through the divorce. A quit claim deed will have to be signed by the ex-spouse and must be present at closing. Providing the quit claim deed to the title agent at the closing is the best route to protect all involved.
Refinancing a Vehicle: If a vehicle debt is in joint names, it will have to be sold, paid off, or refinanced to remove the other Party’s name. Paying off a car is a nice idea but out of reach for many. Selling a car is also a nice way to be rid of debt, but then the car is gone and a new one must be purchased. Also, selling a car for which more is owed, than it’s worth is a losing proposition—as is trading in an upside-down car.
It makes no sense to trade in a joint vehicle that is upside down and get a new car for which the old car payment is included in the monthly obligation. That is often how out-of-reach, way too-expensive car payments arise. However,
Refinancing can be difficult because the amount owed on vehicles is often less than the value. Once accomplished, though, the car is in only one name and that is what the divorce Court wanted. Start early. Find a lender. Work with your bank. Refinancing a vehicle may take several attempts, but most succeed eventually.
Change Your Will/Life Insurance
Unless you want your ex-spouse to be rewarded upon your death, change your will, and change the beneficiary of your life insurance. While the divorce is pending, these cannot be changed; but you can be prepared to change them immediately upon the divorce being granted. Contact the life insurance provider to change the beneficiary upon a certain date or just find out what needs to be done to be ready to change the beneficiary. Find an attorney who can draft a new will—or one that can create an estate plan for substantial assets—so your wishes upon your death will be carried out as specified.
At The Law Office of Jeanne M. Wilson & Associates, PC, we are often asked by our Clients to remain on their case until everything is “wrapped up”. The very nature of divorce means that game playing is not unexpected, and sometimes those games come through a lack of cooperation and a desire to hurt the other person. Leaving loose financial ends can definitely hurt especially when planning for a new future is derailed by old debts surfacing, ruined credit scores, and incomplete deeds. We stay on our cases until our Clients let us know they can “take it from here”.
Contact Us Today!
If you are looking for a trusted, reliable, honest divorce attorney here in Colorado Springs, Jeanne M. Wilson is the top choice. Not only has she been awarded several honorable awards in the local community over the past several years, but her reputation also itself proceeds with her. Simply see what all her past clients have raved about her and gather, firsthand, how productive and thoughtful her representation in the Family Law courts is for her Clients. Give Jeanne M. Wilson a call today to see if she is the right fit for your current divorce case. Jeanne is here to help!