The Money Side of Divorce
What to know before you sign, and what to do after.
Divorce asks you to make some of the biggest financial decisions of your life at one of the hardest times to make them. Your attorney handles the legal side. This guide covers the money questions worth asking along the way, so the settlement you sign works for the life you'll actually be living.
Take it one section at a time. Check things off as you go, and bring your questions to your attorney, a tax professional, or a financial advisor.
Before you sign: get the full picture
You can't divide what you can't see. Start here, ideally before settlement talks begin.
List everything you own together and separately. Bank and investment accounts, retirement accounts, pensions, the house and any other property, vehicles, a business, and valuables.
List everything you owe. Mortgage, home equity line, car loans, credit cards, student loans, and any personal loans.
Gather the paperwork. Recent statements for every account, the last three years of tax returns, pay stubs, pension and benefits statements, insurance policies, and deeds and titles.
Check your credit report. It's free at annualcreditreport.com and shows joint accounts you may not know about.
Build a realistic budget for life on your own. Housing, insurance, transportation, and everyday costs on one household's income. This number drives what you ask for.
Talk to your attorney before moving money. Many states put automatic orders in place once a divorce is filed that limit moving, spending, or hiding assets.
Open an account in your own name if you don't have one, so you have access to money for daily life.
Not all dollars are equal
Two assets with the same balance can be worth very different amounts after taxes and costs. An even split on paper isn't always an even split in real life.
Compare assets after tax. $100,000 in a savings account is spendable today. $100,000 in a 401(k) or traditional IRA will be taxed when you withdraw it. Investments with large gains carry tax when sold.
Divide retirement accounts the right way. Workplace plans like a 401(k) or a pension usually need a court order called a QDRO to divide without taxes or penalties. IRAs are divided by a direct transfer. Ask your attorney who will prepare these, and make sure it happens.
Get pensions valued. A future pension is a real asset, even if it doesn't show a balance today.
Think hard before keeping the house. It can feel like stability, but it comes with a mortgage, taxes, insurance, and upkeep on one income. Selling before or after the divorce can also change the tax you owe on the gain.
Understand how support is taxed. Under current federal rules, for divorces finalized after 2018, alimony is not taxable to the person receiving it or deductible for the person paying it. Child support is never taxable. State rules can differ.
Ask what happens if support stops. If you'll rely on support, ask about life insurance on the paying spouse to protect it.
Benefits to ask about
Some of the most valuable things in a divorce aren't account balances.
Health insurance. If you're covered through your spouse's employer plan, you may be able to keep that coverage through COBRA for up to 36 months, usually at full cost. The plan generally must be notified within 60 days of the divorce. Compare it with an individual plan.
Social Security. If your marriage lasted 10 years or more and you don't remarry, you may be able to collect benefits based on your former spouse's record starting at age 62. It doesn't reduce their benefit. This can matter if you're close to 10 years.
Life insurance and other workplace benefits. Find out what coverage you have through your spouse and what you'll need to replace.
After it's final
Signing the agreement doesn't finish the job. These steps make sure it actually happens.
Follow through on every transfer. Retitle the house, vehicles, and accounts the agreement assigns to you. Confirm that retirement orders were filed and the accounts were actually split.
Separate joint debts. The divorce decree doesn't bind your lenders. If your name is still on a joint card or loan, you're still responsible to the lender. Close, refinance, or remove your name.
Update your beneficiaries. Retirement accounts, life insurance, and bank accounts pay whoever is named on the form, not what your will says. Don't assume the divorce updated them.
Redo your own estate documents. Name a new power of attorney, healthcare decision-maker, and executor, and update your will.
Update your tax setup. Your filing status depends on whether you're married on December 31. Update your paycheck withholding, and if you receive alimony, plan for it.
Update your name and contact details on accounts if either changed.
Rebuild your budget and savings around your new income, including an emergency fund sized for one.
What can wait
Once the divorce is final, give yourself time before decisions that are hard to undo. It's fine to say, "I'm not ready to decide that yet."
Buying a new home. Rent or stay put until you know your real monthly costs.
Big changes to investments. Settle in first, then build a plan around your new goals.
Large purchases or loans to family. Wait until your budget has been tested for a few months.
Combining finances with someone new. Take time before joint accounts, co-signing, or adding a new partner to the title of anything.
If you have questions
If something in here raises a question, I'm happy to talk it through.
Melissa Blaszczyk, Calibri Financial (845) 978-6201 · melissa@calibrifinancial.com
This guide is for general education only. It isn't legal or tax advice. Divorce and tax rules vary by state and situation, so check with your attorney or a tax professional about your own circumstances.