Just when it was safe to go back in the water….The news of Al and Tipper Gore’s impending divorce after 40 years of marriage has made a lot of old married couples look at each other in a new light. Unspoken is the question – Could it happen to us?
I, for one, surely hope my spouse and I can continue to travel through this hectic life and arrive at retirement ready to implement all our grand plans together. After all the ramen dinners, scraping for that first down payment on a house, playing rock-paper-scissors to see who changed the next diaper, I’d like to think when we reach 40 years of marriage we would be high-fiving each other….not turning our backs.
But, given that 50% of marriages end in divorce, I guess it’s best to be prepared. And thus, in the next few posts, I’m sharing a few gems I’ve learned from my divorcing clients. In this week’s post, I’ll give some tips for those of you, female or male, who may be thinking about divorce, worried about divorce or who just want some motivation to get more organized…
Get Your Financial Papers in Order
In many ways, this is actually the easiest step in any divorce process, and yet is often left too late. Everyone should have their financial papers in order, no matter what their marital status. Of course, there’s usually one spouse that knows where everything is already and one that has no clue. Don’t be the one that has no clue…
1. Find the bank, brokerage and retirement account statements.
And I mean, ALL the accounts – not just the ones with your name on them. If you’ve never seen a statement for your spouses’ 401k, now’s the time to get a copy. I know, I know, this could actually be a sensitive conversation, so now is also the time to make a list of items you think might exist but can’t verify…it will come in handy later.
And if you’re just doing this to get organized….
THE ORGANIZING BONUS? You can now easily provide the total value of your assets when you buy that vacation home in retirement.
2. Find the tax returns.
Assuming you filed jointly, you had to sign these returns. Where are they? If prepared by a CPA, they can get you a copy. If done in TurboTax or filed by hand, the IRS certainly has a copy! The tax return is usually where the rubber hits the road in terms of spousal income, so you want to know this number ahead of time.
THE ORGANIZING BONUS? You can now respond quickly to the IRS when they audit your return from five years ago… (Okay, not exactly a happy bonus, but a time-saving one nonetheless)
3. Request credit reports.
For various reasons divorce is often damaging to your credit score. Make sure you know your score pre-divorce and scour (and I do mean scour) the credit report for any red flags, unfamiliar accounts or delinquent payments. Make sure you resolve any discrepancies or issues on your own credit report pronto. You can request a credit report from www.experian.com
THE ORGANIZING BONUS? Improve your credit scores so lenders expedite that low-interest loan on your vacation home in retirement.
4. Inventory your physical assets.
Ugh. This might take a while, but knowing what you own, the estimated value of each, and identifying which assets were brought into the marriage versus bought after the marriage will facilitate an equitable split (notice I didn’t say equal) when the time comes. Oh, and by physical assets I mean things like furniture and cars and the Fiesta ware you inherited. Inventorying your other type of “physical” assets comes later, post-divorce and is a blog post for another day and probably a different kind of writer.
THE ORGANIZING BONUS? This comes in VERY handy for insurance purposes when your house burns down and you have to move to the vacation home early.
5. Understand all of your Employee Benefits.
Especially if you are on your spouse’s plan. This would include health insurance plans, pension plans (who has those anymore anyway?), flex spending plans, life insurance coverage, etc. These things cost money if you have to provide them yourself in a post-divorce world.
THE ORGANIZING BONUS? Wouldn’t you want to know this anyway?
Maybe after you do all of these steps to get your financial papers in order, the temptation to divorce your spouse is lessened (hey, the majority of divorces happen because of arguments about finances). But if you’re still on the fence, watch for the next post on Preparing a Divorce Budget….