The start of a new year brings a time of self-reflection and optimism for many, but did you know it also brings the highest rate of divorce out of any month in the year?  Research shows that divorce filings spike in January and that searches for “divorce” and related phrases like “family law” and “child custody” jump, on average, 50 per cent from December to January, and continue to swell through March.  Given that we are now in the thick of divorce season, the points enumerated below may serve as a handy reminder of some important financial things to do after a divorce.  

Retitle your assets: Conduct a thorough review of your assets and ensure all accounts are in your individual name. Ideally, your joint accounts were frozen once you began the divorce process, and now, your share of those assets should be safely ensconced in an individual account. Any remaining joint accounts should require written approval of both parties to transact business in the interim until the joint account is closed. 

Although we generally recommend judicious usage of credit, this is the time to apply for a new credit card in your individual name, and to notify your prior credit card issuers of your divorce.  The prior credit card accounts should be frozen, as should lines of credit (including home equity lines) and margin accounts.  Any joint account that remains open can turn into your liability, so remember to keep an eye on your credit report and respond promptly to any irregularities.  

Revisit your estate plan: Does your will include your ex? Don’t leave it up for debate. This is crucially important. In many states, Pennsylvania, California, Texas and Arizona among them, a final decree of divorce (or in some cases, just the initial filing) is sufficient to ensure that your ex will be treated, for purposes of your Will, as if he or she predeceased you. But - and this is a big but - some states with this presumption, like Pennsylvania, still provide a means for a divorced spouse to challenge the presumption and request a legal or elective share. And still other states, though the minority, uphold the Will as the governing instrument for the disposition of probate assets at death, whether or not a divorce has occurred. Conversely, if you do wish to leave something to a member of your ex’s family (a stepchild, e.g.) that gift might, as in Arizona, for example, be revoked under the same provisions that would exclude your ex-spouse.
 
Even more importantly, there are other pieces of your estate plan that may not be governed by the default rule at all.  Be sure not to forget to change beneficiary designations for retirement benefits, and insurance, too, and to examine your Financial and Health Care Powers of Attorney and Living Will.  You probably want to name new Agents under your Powers of Attorney, in which case, you may also need to name new successors. Last, if you’re entitled to a portion of your ex-spouse’s retirement benefits earned during the marriage, you’ll need to complete new beneficiary designation forms for those accounts.    

Rerun financial projections: A call to your wealth or financial planner can provide peace of mind. Some researchers estimate that divorcing individuals would need a 30 per cent increase in income to maintain the same standard of living they had prior to their divorce, due to the costs of maintaining two households. This is unsettling, indeed. Your wealth planner will be able to advise you whether you should be spending a little less, need to be saving a little more for retirement, or can withhold a little less for taxes. Initially, your wealth planner should insist that you pay attention to your income and outflows to calculate your new budget and establish reasonable expectations and parameters. A wealth planner will be able to explain how new cash flows resulting from your divorce will affect your financial situation and your income tax liability.

For instance, if you’re paying or receiving child support, your income and deductions will remain unaffected; however, payments of alimony represent income to the receiver, and are deductible to the payer.  If you liquidated a substantial amount of appreciated assets in the course of your property settlement, your wealth planner may be able to opine as to whether you will be liable for those capital gains. 
Your wealth planner should also encourage you to spend some time thinking about your financial goals:  have they all changed?  Have some remained the same?       

Reexamine your investments: Your financial situation has changed, your goals have changed, and more than likely some of your investments should change as a result. Here’s where a deep bench is your greatest ally.  An investment advisor who will collaborate with your wealth planner is able to build a portfolio based not only upon his or her expertise in conjunction with current market climates, but also one that is specifically tailored to address your changed situation, meet your new needs and mitigate risk to a degree you can live with.   

Review your insurance: Life insurance, sure, but what about disability, property, casualty, umbrella, and long term care insurance? Are you covered? And, just as importantly, is your spouse? Your ex-spouse should be required, by a well-drafted property settlement agreement, to carry life (and possibly disability) insurance on him- or herself. The insurance should name your children - or an irrevocable trust for the benefit of your children, with a mutually agreeable Trustee - as beneficiary, as least until your youngest child has attained age 21 or graduated from college. A comprehensive insurance review will help you strike the balance between the amount of coverage that prudence dictates you should carry and the amount you can and/or are willing to spend.  You’ll sleep better, and it might save you money in the long run.

About the author:
Mary-Noelle Rasi provides advice on complex issues in the realm of estate and wealth planning. In working with clients, Mary-Noelle draws upon her decade of experience practicing law in the areas of estate planning and taxation, wealth transfer, business succession planning and planned and charitable giving. Prior to joining Glenmede, Mary-Noelle practiced law with Blank Rome LLP in Philadelphia, Pennsylvania, after which she spent a year as a Wealth Planner with PNC Wealth Management. Mary-Noelle earned her Juris Doctor from Rutgers School of Law and her Master of Laws in Taxation from Temple University James E Beasley School of Law. 

She is also an adjunct professor with Villanova University School of Law’s Graduate Tax Program, where she co-teaches Fundamentals of Testamentary Transfers, and with Temple University James E. Beasley School of Law’s Graduate Tax Program, where she co-teaches Succession Planning for the Family Owned Business. Mary-Noelle holds a Bachelor of Arts degree in social work and a Bachelor of Fine Arts degree in photography from Wilkes University in Wilkes-Barre, Pennsylvania, and studied fine art at the Universidad Laica Vicente Rocafuerte in Guayaquil, Ecuador. Prior to practicing law, Mary-Noelle worked in disaster relief and recovery with various non-governmental organizations.