Do’s and don’ts

Going through a divorce takes planning, patience, and knowledge.

← Getting Divorced

Do and Don'ts overview

Getting divorced isn’t something most of us know how to do until we have to. It can be frustratingly tedious. We are here to help you remain focused on the end goal.

9 divorce do’s

Start discussing the details.

Start discussing the details.

Going through a divorce takes planning. Study up on the laws in your state, specifically ones having to do with dividing assets and spousal or child support. Another thing to consider, is how you will be living during this transition and what you want life to look like when everything is finalized. One thing that will make life easier is having a financial advisor who will work directly with your divorce lawyer or mediator. This will come in handy when it comes down to the actual divorce settlement. Your financial advisor will be in your corner to safeguard your retirement plans and help you with mundane tasks like determining your budget post-divorce and strategizing future investments.

Round up all records.

Round up all records.

Gather up important documents like bank statements, loan applications, tax returns, any wills/trusts, real estate deeds, and vehicle registrations. Other considerations: Obtain updated real estate appraisals (less than 6 months old), and current year-to-date pay stubs for both spouses. Make sure to get copies of any records indicating property that is separately owned, such as an inheritance or family gifts. Do your best to gather at least 3 years because you will need that for legal proceedings involving the financial disclosure. Also, if either of you own a business, you will need year-end profit and loss balance sheets.

Know what you owe.

What is the most common surprise among divorcing couples? Hidden debt. Your best move would be to seek advice from a legal expert regarding how much of the debt is your responsibility, including debt incurred through jointly issued credit cards or loans, even when you may not have benefited from such debt. Make sure to acquire a full credit report to avoid any surprises.

Annual credit Report.com provides free credit reports every 12 months from each of the 3 credit bureaus. It might be a good idea to close any joint credit accounts so your personal credit rating wont be affected by an ex-spouse.

Catalog household goods.

Catalog household goods.

Unfortunately, it is not uncommon for divorcing spouses to hide assets from one another. Be sure to take photos of valuables such as art, antiques and jewelry just in case.

Get your fair share.

Get your fair share.

Every state is a little different, but depending on the length of your marriage, you could be entitled to half of all of the assets acquired during the marriage. It is important to understand those laws in your state. There are most likely certain assets that you have no interest in, but you could potentially use those to trade for other things you do want. You could even be entitled to some type of reimbursement if you helped if you helped to put your spouse through medical school, graduate school, or law school.

Keep close tabs on legal fees.

Keep close tabs on legal fees.

Get your ducks in a row when it comes to paperwork and important documents. This will be a huge help when you start working with your lawyer. Doing some of the leg work ahead of time will save you in the long run, especially since your lawyer is being paid at an hourly rate.

Check Social Security benefits.

Check Social Security benefits.

When you are ready for retirement, you might want to use your ex's earning history instead of your own. It is possible you would get a larger social security benefit than what you would get based on your own earnings history.

Refresh registrations

Refresh registrations

Any accounts that are jointly owned will need to be updated. This change typically requires specific documentation. If this is something you are unsure of, you can always reach out to your financial advisor before making any adjustments.

Revise your legacy documents.

Revise your legacy documents.

Update your will and estate plan. Don't forget to look at who you have listed as beneficiaries on insurance policies and retirement accounts.

6 divorce don'ts

Don't feel like you have to hold onto the house

Don't feel like you have to hold onto the house

This might be tough to hear since your home probably has some serious sentimental value to you, but keeping the house doesn't always make the most sense financially. The last thing you want is to feel overwhelmed with paying the mortgage, property taxes, and unexpected expenses that will inevitably come up. Make sure you have taken these things into account if you do decide to keep the house.

Don't ignore potential tax consequences

Don't ignore potential tax consequences

Make sure you understand how decisions made in divorce could lead to a higher tax bill. You may need to consult an accountant or tax advisor to figure out what makes the most sense for your situation.

Don't forget about health insurance

Don't forget about health insurance

You may need to look into other options for you and/or your children when it comes to health insurance if you are being covered under your spouse's policy. Check into potential options like Consolidated Omnibus Budget Reconciliation Act (COBRA) provisions of your health insurance to maintain your existing coverage for a short time period.

Don't forget that splitting retirement accounts may require specific documentation as well as a court order.

Don't forget that splitting retirement accounts may require specific documentation as well as a court order.

It could result in a taxable distribution from the account.

Don't roll over all of an ex's retirement account into an IRA if you need some of the money for divorce expenses.

Don't roll over all of an ex's retirement account into an IRA if you need some of the money for divorce expenses.

If your divorce settlement allocates assets under a qualified domestic relations order (QDRO), under current law any withdrawal a QDRO alternate payee takes from a 401(k) or 403(b) is exempt from the 10% early withdrawal penalty- even if you're under age 59 1/2. If you think you'll need money for unavoidable divorce expenses, and you cannot pay them with any other money, you may want to make a withdrawal before you do a rollover. Of course, you will owe income tax on what you withdraw.

Otherwise, if you are under the age of 59 1/2 and roll the money into an IRA and then need access for divorce costs, you'll be subject to income tax on the withdrawal amount, and on top of that, 10% early withdrawal penalty.

Don't spend lavishly during your divorce out of spite or vengeance

This might impede the division of assets and be looked at as an advance on your share of asset division.

Do’s and Don’ts

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Know where you’re starting from

A pivotal first step as you move toward divorce can be working to fully understand your current financial situation:

  • The updated value of all assets owned individually or jointly
  • Your respective current incomes

One thing at a time

Divorce is never easy and can consume enormous amounts of time and energy. Be prepared for the process to take longer than you want it to. Nevertheless, being prepared ahead of time can help you move through the process.

Going through a divorce can feel like an endless list of tasks and to-dos. Like all big projects, it can be helpful to break things down into digestible pieces. Working through the tasks methodically and keeping deadlines in mind can help you stay on track.

Resources to help you stay organized

FidSafe offers a safe, easy, no-cost way to store, access, and share digital copies of your family’s most important documents.

FIDELITY / TOOL

We’ll help you gather important legal and financial information, so you can have a complete picture of your assets.

FIDELITY / CHECKLIST (PDF)

Clarity begins with a conversation

Contact Fidelity today for 1-on-1 guidance during life’s big decisions. We believe in making the complex simpler, because we want you to be confident about the decisions you make—next week, next year, and beyond.