12 Essential Steps to Prepare for Your Post-Divorce Future
By Jane Lubowitz Rosenstadt, Esq.
As many can attest, going through a divorce can be overwhelming. There is so much to be done in the process of ending a marriage, so much emotional energy spent, that by the time you reach the finish line of finalizing your separation or divorce, you may feel that you have little energy left to prepare for the next stages of your life.
However, with this major hurdle behind you, it is now essential that you take the practical steps necessary to put your financial and legal matters in order for the future. Among other things, accounts must be updated to reflect your new marital status; steps must be taken to ensure that you are in compliance with your obligations under the agreement; and named beneficiaries of your assets may need to be changed.
With these concerns in mind, we have prepared a checklist to guide you as you launch your new life.
1. Health Insurance: If during your marriage, you were covered under your ex-spouse’s medical insurance, and you have not already done so, it is essential that you take immediate steps to obtain insurance. You want to make sure there is no gap in your coverage once your divorce becomes final and you are no longer covered under your ex-spouse’s plan. Research your options to determine the most cost-effective insurance plan to meet your needs in the future, whether through your own employment, a private plan (visit New York’s health plan marketplace at https://nystateofhealth.ny.gov/) or through COBRA, as a temporary solution. Because divorce constitutes a “loss of coverage” situation, you need not await the annual open enrollment period to join a new plan. Rather, you can purchase a new health insurance policy right away.
2. Accounts and Credit Cards: If you haven’t already done so, establish checking, savings, brokerage and credit card accounts in your own name. If your agreement provides that joint accounts should be closed, take the steps necessary to do so. Be sure to cancel all joint credit card accounts.
3. Real Estate/Homeowner’s Insurance/Utilities: If title to your home was changed into your individual name by a deed, you will need to verify that the STAR property tax exemption is still in effect. If it is not, you must file for it again. Similarly, update your homeowner’s insurance policy and your utility contracts (gas, electric, cable, telephone, internet, cellphone) to reflect your sole ownership. Conversely, make sure that your name is removed from any policies or contracts on property for which you are no longer responsible.
4. Payment of Taxes: If you are receiving maintenance payments, you will be required to pay income taxes on the payments that you receive (unless your agreement specifically provides otherwise). Consult an accountant, who can set up quarterly estimated tax payments so that you will not be overwhelmed by a large tax debt at year end, and then make sure that you set aside enough money to cover those quarterly estimated payments.
5. Life Insurance: To the extent that your agreement requires you to maintain insurance on your life for another’s benefit, make sure that you have the appropriate policy or policies in place and that the named beneficiaries and the death benefit amounts are in compliance with the agreement. Conversely, if your spouse is required to maintain a life insurance policy for your benefit or that of your children, obtain a copy of said policy and request periodic statements to verify that the premiums are paid in full on an ongoing basis and that the policy remains in effect.
6. Change of Beneficiaries: Unless you are obligated under your agreement to maintain your ex-spouse as the beneficiary of the proceeds of certain assets upon your death, consider whether you wish to remove your ex-spouse and name another individual(s) as the beneficiary to receive the proceeds of any of your accounts, plans or policies (i.e. brokerage accounts, IRAs, 401(k)s, pensions, other retirement accounts etc.). If so, file the paperwork necessary to make such changes.
7. Last Will and Testament: In all likelihood, your ex-spouse was named in your will as a beneficiary to receive a part or all of your assets upon your death. In the event that you no longer intend your ex-spouse to be the beneficiary of such assets, contact an estate-planning attorney as soon as possible to assist you in revising your will.
8. QDROs (Qualified Domestic Relations Orders): If your agreement provides that you or your spouse shall share your pension or other retirement asset(s) with the other, creating the need for a qualified domestic relations order, or “QDRO”, be sure to follow up with your attorney, mediator, the court clerk and/or retirement plan administrator to verify that the order has in fact been filed with and executed by the court, and has then been filed with and approved (or “qualified”) by the administrator of the retirement plan. In the case of a 401(k) or other defined-benefit contribution plan, verify that the funds were in fact transferred into a new account in the name of the receiving party. In many cases, there will be forms that you or your spouse must complete and sign in order to receive the funds from the other party’s retirement account. Furthermore, it is your responsibility to inform the plan administrator in writing of any change to your address.
9. Automobiles: If your agreement provides that ownership of an automobile be transferred to or from your name, don’t delay in making the trip to the Department of Motor Vehicles to complete the paperwork necessary to bring about the transfer of title. In addition, cancel joint auto insurance policies and obtain your own policy.
10. Name Change: Divorce judgments in New York State contain language authorizing parties to resume use of a prior surname. If you wish to change your name following your divorce, you will need to present a certified copy of your judgment of divorce authorizing such change to the appropriate government agencies (e.g. Social Security Office; Department of Motor Vehicles; U.S. Dept. of State) and complete each agency’s required paperwork in order to assume use of the new name.
11. Information and Documents Pertaining to Your Children: Following your legal separation or divorce, be sure to update your children’s schools, doctors and medical insurers with any new contact information for either you or your ex-spouse so that you will continue to receive important information, notices and invoices. Obtain for your possession originals and/or copies of all important documents relating to your children, such as their birth certificates, Social Security cards and health insurance cards. Make certain that your children’s passports are maintained in a secure place either by you or your spouse.
12. Record-keeping: Set up a system for keeping track of expenses. If there are certain costs relating to your children that you share with your spouse under the terms of your agreement, such as out-of-pocket medical expenses, babysitters or tutors, keep records and/or receipts of your payments in a designated folder to enable you to do the accounting with your ex-spouse whenever necessary. When it comes time for you to file your taxes, be in a position to know how much maintenance you paid or received so that you have the correct information available for inclusion on your tax returns. Know whether you or your spouse has the right to claim a child as a dependent in any particular year.
By addressing head-on the matters on this checklist, as well as any other particulars that may apply to your situation, you will gain the peace of mind of knowing that you have protected yourself and your family, and you have complied with your obligations under your agreement.
The mediators at Divorce Mediation Professionals are available to help you, should you have any questions.