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Once you and your spouse decide to go your separate ways, you’ll need to work out a plan for splitting finances in divorce. It’ll help protect your money during divorce and give you a better idea of your post-divorce finances.
If you live in one of the following community property states, you’ll split the assets you’ve acquired during the marriage 50/50:
Otherwise, you and your soon-to-be ex will need to come to an agreement on how to split your investment accounts, credit card debt, mortgage and more.
With joint bank accounts, both spouses can deposit and withdraw money. That also means that each spouse has the legal right to drain the account on a spending spree.
Before you start the divorce proceedings, it might be a good idea for you and your spouse to divvy up the funds, close the joint account and open new accounts separately. You’ll eventually need to factor these funds into the settlement, but separate accounts eliminate one spouse from cleaning out joint bank accounts.
If you’ve already started the divorce process, a judge may freeze the accounts, restricting either party from accessing funds without court approval.
Bring the following with you to the bank to close your joint account:
Here’s how to give the bank the OK to close your joint bank account when you’re splitting finances in a divorce.
Auto loans are a form of debt. Even if the loan is in the name of one spouse, you might still be responsible for the debt, especially in a community property state.
If neither one of you want to keep the vehicle, you’ll need to sell the car to settle the loan. But if one spouse plans to keep the car, they’ll have to refinance the loan to remove the other spouse’s name.
Gather the following documents to remove your spouse’s name from your car loan:
Refinancing your car loan in your own name typically follows the same process as taking out a new car loan. Here’s what to expect:
Take a look at your credit cards and see which accounts are only in your name, have a joint account holder and have an authorized user.
Authorized users can easily run up your credit card bill, but the debt is solely the credit card owner’s responsibility. On the other hand, for joint accounts, any misuse of the card negatively affects both owners.
During a divorce, you and your spouse should decide how to handle any outstanding debts. After you’ve determined who is responsible for what accounts, you should remove any authorized users from your credit cards. For joint credit cards, it’s a good idea to pay them off or transfer the balance, and then close the accounts.
You’ll typically need to answer a few questions to verify that you’re an account owner before the issuer can process your request. This might include providing your:
Here’s a snapshot of how to close a credit card account when splitting finances in a divorce.
The divorce process can wreak havoc on your credit score, especially if your soon-to-be-spouse goes on a spending spree with your credit card or bank account funds. Here are three things you can do to protect your credit score:
You can either cancel your insurance policies or update an existing one and remove your spouse as a policyholder. For car insurance, you might see a rate hike.
Dealing with life insurance during a divorce is a bit more complicated. You can maintain a joint policy and establish a payment schedule, or cancel the policy altogether and take out a new plan.
Another option is to transfer the policy to one spouse. But since you’ll no longer benefit from the policy at payout, you’ll need to work out some type of compensation for premiums that you’ve paid in the past, as well as the potential increase in premiums on your new plan.
You’ll generally need the following info to cancel your shared policy:
Here’s a numbered checklist on how to cancel a joint insurance policy:
You and your spouse should also discuss your living arrangements and whether one of you plans on staying in the marital home.
If you have a mortgage together, you’ll need to decide if you plan on selling the home or refinancing it in one of your names. If you’re currently renting, you’ll need to consider whether you’ll break the lease and how you’ll split the penalty fee. If one of you wants to stay on the lease and the other doesn’t, you’ll also need to discuss signing a new lease agreement with your landlord or management company.
Refinancing a mortgage follows a similar process to your first mortgage. You’ll generally need to submit the following documents:
Here’s an overview of what the mortgage refinance process looks like:
Since most retirement accounts are only in one person’s name, you’ll likely only need to update your beneficiary on your accounts. Many retirement accounts allow you to add, change or remove beneficiaries online. You can also mail in the relevant form to make the necessary changes.
To add a new beneficiary on your retirement accounts, you’ll likely need to provide the following information:
If you update your beneficiary before your divorce is final, you’ll likely need to submit a hardcopy requesting to add a beneficiary, which may require spousal consent. But once you’re no longer married, you can generally complete the entire process online.
Here’s how to change your beneficiary:
Your retirement service may also require you to mail in a physical form to verify this change. Some documents also require a notarized signature. Contact your retirement agency for your specific procedure.
During a divorce, you and your spouse share the burden of any debt that you took out after you were married. Any student loans you had before the marriage remain solely your responsibility.
For student loans you took out under both your names while married, you’ll need to either split the debt or determine who’s responsible for paying it. The person keeping the debt will then need to refinance the student loan under their name.
When you apply to refinance your student loans, you’ll typically need to submit the following:
Here’s a rundown on how to refinance student loans under your name.
When you and your spouse go your separate ways, you’ll want to revisit any legal documents you’ve signed together, including your last will and testament, trusts and powers of attorney.
Each state has a process that governs how to make changes to legal documents. For example, to amend a will, you’ll need a codicil, while some situations may merit a completely new will.
Here’s a rough idea of what’s involved with updating or replacing your last will and testament.
Consider hiring an online divorce service to help with your divorce legal forms.
The divorce process is already financially draining. You can get ahead of it by separating your finances. Here are three expert tips to keep in mind:
While you may have once shared finances when you were married, you’ll need to separate your finances during and after a divorce to protect your assets and credit score. Take a look at our comprehensive divorce guide for more information about what else is involved when filing for divorce.
Get more questions about divorce and your finances answered here.
While you can set aside money to use before a divorce, you must disclose your assets during the divorce proceedings. A court views money earned during the marriage as marital property, which requires that you split the funds in your divorce settlement.
If your name is not on the original credit agreement, you’re not legally responsible for the debt. But in a handful of community property states, the court (and creditors) may view that debt as marital debt, which means you’d still be on the hook for repayment.
Equitable distribution is a way to divide property. Instead of dividing everything straight down the middle, a court will consider several factors when splitting finances in a divorce, including how long you’ve been married, each spouse’s expenses and how much each person contributed financially during the marriage. You can learn more with our guide to equitable distribution and divorce.
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