I found Christie Gammill’s article in this winter’s Texas Family Law Section newsletter interesting in reminding attorneys that the divorce only ends the litigation but doesn’t end the “to-do” list for the client. Here is the list of action items that a divorced party may still need to address once the decree is entered. Ms. Gammill points out that a person doesn’t need to face this list alone. He or she can employ professionals to accomplish many of these tasks.
1. Financial Planning
· Review your financial goals with your advisor, including an updated cash flow analysis
2. Banking / Brokerage / Advisory Accounts
· Update your accounts by notifying the appropriate entities of account authorization changes and your name/address change, including banks, schools, utilities, and insurance companies
· Sign and execute the processing of any forms necessary to change the account registrations
· Name Change – obtain new Social Security card, Driver’s License, credit cards, passports etc.
3. Revise/transfer titles on personal assets – House(s), Automobile(s), Boat, and Other Non-Financial Assets
4. Retirement Plans/Accounts
· Qualified Domestic Relations Order or “QDROs” these pertain to qualified plans such as 401(k)s, 403(b)s, Pensions, Profit Sharing Plans, Keogh’s, and Money Purchase Plans
o Submit certified original QDRO along with necessary pages of your divorce decree to the respective company for approval. Once the QDRO is approved you will receive a letter stating it is in good order (or not).
o Once the plan administrator processes the QDRO, a new shell account is setup within the company’s plan for the benefit of the non-employee spouse and the percentage or dollar amount awarded is transferred into the new account.
o Once the funds have been divided and deposited into Alternate Payee’s account, he or she will receive documents via mail or e-mail to rollover or distribute the funds once the account has been segregated.
o If you haven’t begun working with a financial advisor, you may engage one to aid you in this process
· Non-Qualified Plans- includes but not limited to: IRAs, SEP IRAs, Simple IRAs, Roth IRAs, and Annuities
o The holding firm or brokerage account will typically require their own papers and/or a letter of instruction from the original account holder to divide or transfer the account into someone else’s name.
o Annuities can be complex and the implications of a transfer or ownership should be carefully evaluated before assigning to another party or transferring to an ex-spouse*.
o Be certain to obtain tax advice regarding consequences of transfers and liquidations of non-qualified plans. These will have a cost basis that will be important to keep track of in the future.
o The brokerage firm will typically have its own IRA Rollover/Distribution Form to transfer funds incident to divorce. Your ex-spouse will need to sign the forms, and you will need to provide certain necessary pages of your decree to the brokerage forms. It is recommended to have these papers ready to go at prove up of the divorce.
· Follow up diligently on your Divorce Transfer Paperwork to ensure it is moving along and properly processed.
5. In Health, Life, and Other Insurance
· COBRA—allows you to stay on your ex-spouse’s employer sponsored health insurance up to 36 months after divorce. The will premium will be equal to 102% of current Employer cost, which may be a temporary solution to finding private health insurance. Stay informed of changing health care laws and options.
· Private Health Insurance—consult with a health insurance broker who will spend time helping you in regards to medical conditions, premiums, physicians, and deductibles.
· Life Insurance: You will want coverage at least equal to present value of future stream of payments of Child Support and Alimony or Property Settlement/distribution. You will also want to update beneficiaries on policies owned by you.
· Property/Casualty Insurance: This is a great time to shop your existing/new coverage for auto, umbrella and homeowners/renters insurance.
6. Social Security
· You may be eligible for up to 50% of your ex-spouse’s Social Security Retirement Benefit if you were married for 10 years or longer. If you are unmarried, your benefit would be the greater of 100% of your own benefit, or 50% of your ex-spouse’s benefit at full retirement age. The earliest non-widow retirement benefit may be as early as age 62 and will have an applicable benefit reduction and may be permanently reduced.
7. Real Estate
· If you or your ex-spouse is required to re-finance the mortgage or take your name off of the mortgage, you will want to work with your attorney to get the appropriate documents signed and executed.
8. Wills and Trusts
· Update plans for your estate. Wills, Trusts, and Powers of Attorney will need revising.
· If you have minor children: Special trusts need to be created for certain assets such as IRAs and some annuities. You may also need to revisit guardianship choices.
· Review options with Mortgage Planner regarding qualifying for a new home purchase or the refinance of a current home·
· Determine if vacating spouse will be compensated and how this will be structured/what types of loan programs are available.·
· If child support and/or alimony will be used for qualifying for new loan discuss current lender guidelines with a Mortgage Planner
10. Professional Team of Advisors
Build a team of people to help you work through financial issues
Family Law Attorney – Team Leader: Custody, Property and Alimony expert; preparation and execution of legal documents. Will oversee timely payments on financial obligations or cooperation in the signing of any of the aforementioned documents
Financial Advisor – partners with other experts during your divorce; post-divorce financial planning and asset management and risk management. If you did not have the primary relationship with your advisor during your marriage, you may consider interviewing one of your own.
CPA – income tax preparation and analysis for current and future personal and business tax returns; returns may be particularly complicated during the year of divorce
Estate Planning Attorney – new wills, trusts; see through trust if you have minor children
Health Insurance Broker & Mortgage Broker – assist in the areas above
*it is recommended that you seek advice from a financial professional before making any changes to an annuity contract and you consult your tax advisor as well.