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Cutting the financial knot during divorce

On Behalf of | Sep 26, 2022 | Divorce

Custody, support and property division are among the issues you must address in a divorce. Knowing about your finances and assets is an essential first step before you deal with these matters.

Joint ownership

Long-term marriages have more assets that are commingled and need untangling. This is an especially important matter in a high-asset divorce.

The couple’s home is usually their largest asset. If the house is sold, there may be a large capital gain on the property.

Both spouses usually hold the mortgage during their marriage so one spouse may need to come off to avoid liability. Banks typically require refinancing if one spouse intends to keep their home and that spouse will have to meet eligibility requirements.

If a spouse’s name remains on the home and other assets, they remain liable for taxes, maintenance, lawsuits or anything that happens even if they were not awarded these assets in a divorce. Until your name is removed, consider obtaining an umbrella insurance policy for jointly held assets.

Joint bank and brokerage accounts

After divorce, you should open individual or trust accounts and close any joint accounts. This requires new checks, relinking and direct deposits or ETF payments.

Cancel joint credit cards or you may be held liable for your spouse’s purchases. Unlink joint accounts that are linked to other individual accounts.

A court may need to issue a qualified domestic relations order for retirement accounts. This will allow dividing this asset and placing half in the other spouse’s name.

Divorce also requires reviewing listed beneficiaries on IRAs, retirement savings accounts at work and 401(k)s to assure that its beneficiary is not your former spouse, unless that is what you want.

Individual accounts should have a transfer on death listed. This will assure that the account goes to the person you intend if you die.

Credit reports

Establish your own credit if your spouse dealt with most of your finances and bills or if credit is in their name. Check credit reports and assure that your name is no longer on anything owned by your former spouse, so your credit is not impacted by a missed payment.


Review the beneficiaries on your life insurance policies to assure they are the individuals who should receive the policy proceeds. You may need to create a trust if you name your minor children as beneficiaries.

The spouse who pays child support often obtains term coverage until the children are adults. The spouse receiving this support should be the policy beneficiary.

Property and casualty insurance, especially homeowner’s insurance, is often listed in one spouse’s name. If you obtain property in the divorce, be sure that the policy is also in your name if there is ever a claim.

After you separate, you should also inventory your personal property. You may need less coverage and qualify for a lower premium. Moving to a smaller home or apartment requires less property insurance.

Auto insurance rates may also increase because of the loss of the marriage discount. Be prepared to remove stacked coverage because the household may not have two vehicles.

Finally, a divorcing spouse who is covered under their soon-to-be ex’s health insurance policy may need to look for other coverage, which may be expensive. Dependents may also require coverage.


Divorce may increase or lower your taxes, depending on your status at the end of the year. Married spouses receive more tax breaks, which may be lost in a divorce. Also, your tax withholding may be too low after you divorce and filing as a single taxpayer may increase your tax liability.

Spouses must also determine who receives interest and property tax deductions. Only one spouse can list the children as dependents.


Divorce usually means a spouse is facing expenses with fewer assets. Divorced spouses also need to come up with a new plan to cover retirement if they relied on their former spouse’s retirement assets and Social Security income.

Planning should include a new budget. Consider giving up perks such as vacations, streaming services, and other purchases. Keeping the family home may be too costly. Determine ways to finance future costs such as health care or your child’s college education.

Attorneys can advise you on practical options to assure you are financially protected. They can help protect your rights.