10 Financial Steps to Take Once Your Divorce is Complete

You are now entering a new chapter in your life, and dealing with finances after divorce is a crucial part of this transition. Decoupling your finances, updating your budget, and taking steps to protect your family are just a few of the challenges you may encounter. 

Navigating post-divorce finances can be complex, but by following a few essential steps, you can establish a solid financial foundation for your new life. 

1. Close Joint Accounts & Credit Cards

If you have joint bank accounts or credit cards with your former spouse, it's important to close them now that your divorce is complete.

Check with your financial institution on what paperwork they need to begin the process. Sometimes the bank just needs confirmation from both parties to change account ownership, transfer funds, or close out the account.

Simply zeroing out your joint account balance will not close it and may incur fees. 

For joint credit cards, pay off the remaining balance and then close the account. If the credit card is in your name and your former spouse was only an authorized user, you can simply remove them.

2. Refinance Or Sell Jointly Held Property

When it comes to jointly held debt like mortgages or car loans, you have three options: pay off the debt, refinance the loan, or sell the property. 

Refinancing can be tricky. You'll need a divorce decree to remove your ex-spouse from ownership. You'll also need to qualify for the loan as a single borrower. This may be difficult due to changes in income from court-ordered payments and shifts in your credit situation.

If refinancing isn't possible and you can't pay off the debt, selling the property may be necessary.  Consult with your financial advisor first to explore all your options and make a plan for the proceeds of the sale. 

3. Monitor Your Credit

It can take time to complete the division of assets and uncouple your finances. While this progress is ongoing, you should keep an eye on your credit. Verify that information on your credit reports is being updated to reflect changes such as closing jointly held credit cards and loan refinancing. If you aren’t seeing these updates, you may want to contact lenders or credit bureaus directly.

Keeping a close eye on your credit can also help protect you when your former spouse (or anyone else) attempts to use your credit as their own. If you are concerned your ex-spouse may try to open new accounts or take out loans in your name, you can freeze your credit. 

4. Update Beneficiaries

Your former spouse was likely your primary beneficiary on most of your financial accounts. In fact, if you live in a community property state, your spouse might have automatically been assigned as the beneficiary on your retirement or investment accounts. 

Now that you are divorced, you’ll need to update the beneficiary on all the accounts you hold, including:

• Retirement accounts

• Investment accounts

• Bank accounts

• Life insurance policies

• Annuities

You can set any beneficiary you want for your accounts, but be sure to keep the tax implications in mind. For instance, the IRS has strict guidelines on how funds in an inherited IRA can be managed and who qualifies as an eligible designated beneficiary. 

5.  Update Billing, Deposits, & Contacts

In addition to updating your beneficiaries on all your accounts, you’ll also want to update other pertinent information, such as ACH payments, deposits, and contact information. This is a key step in managing finances after divorce

For instance, if your electricity bill was in both your and your spouse’s names, you may need to update the utility account or create a new one.

Additionally, if you've changed your phone number, moved, or altered your last name since your divorce, make sure all providers have your updated contact information.

6. Purchase Life Insurance

If you or your former spouse were to pass away suddenly, would this leave you or your children in a financial bind? If the answer is yes, then it’s time to consider purchasing a life insurance policy. 

For those who have children or others dependent on their income (e.g., aging parents), a life insurance policy on yourself can protect your loved ones and provide them financial security if you pass away. In contrast, those receiving alimony or child support payments may want to consider taking out a term policy on their ex-spouse to ensure financial stability.

7. Re-Balance Your Budget

If you haven’t done so already, and even if you already have, now that your divorce is complete you should reevaluate your monthly budget. 

Did your divorce decree include alimony or child support? These payments or deposits should be added to your budget. Additionally, the splitting of assets, changes in tax withholding, increase/decrease in living expenses, etc., also need to be factored in as you balance your budget. 

Due to increasing expenses, changes in income, and new court orders, you may need to rebalance and update your budget multiple times within the first few months or years after your divorce. 

8. Revisit Your Long-Term Financial Goals

Finances after divorce can bring with it significant changes in your financial goals. Perhaps your finances took a substantial hit and you need to build up your savings again or pay off debt. Or maybe you now have more financial freedom to retire early or launch a new business. 

If you haven’t already, contact your financial advisor to discuss your future plans, set new goals, and get guidance on how to build a stable financial foundation now that you are divorced. 

9. Update Your Estate Plan

Finances after divorce can include updating your will, power of attorney, beneficiaries, and more. Other aspects of your estate plan that may need to be revisited include: 

• Trusts

• Life insurance policies

• Funeral arrangements

• Charitable contributions

• Executor and trustees

• Guardianship for minors

Updating official documents may require the assistance of your financial advisor, a lawyer, notaries, and other professionals. Don’t put off updating your estate plan – if the worst happens, you want your loved ones to be well-prepared.

10. Hold Onto All Paperwork

A final and very important step post-divorce is to hold on to all paperwork associated with the decoupling of your finances. In addition to having a copy of your divorce decree, save documents related to 

• Splitting of assets

• Closing joint accounts

• Statements showing alimony and child support paid/received

• Property deeds and titles

• Property appraisals

• Retirement accounts statements

• Tax forms

• Tax returns

It's also wise to save a copy of your original marriage license. Even though you are now divorced, this document can help you qualify for Social Security benefits later in life. 

Saving all these documents might seem overly cautious, but it's better to be prepared if future issues arise or your former spouse takes you back to court. 

The Aligned Perspective: Post-Divorce Finances

Navigating your financial life as a fresh divorcee requires the complete separation of finances from your previous spouse. From closing joint accounts and updating beneficiaries to revisiting your long-term financial goals and estate plan, there are several financial steps to consider post-divorce.

Finding your footing can be difficult. A financial advisor can help you navigate this new terrain. Even if you had an advisor before divorce or a specialized one during divorce, it’s important to find a professional who is focused on your current needs and can provide advice for years to come.