6 Critical Financial Steps to take when Facing the big "D"

"This is not my favorite subject, but I thought it would be a good post because I am surprised at how often I get past clients who are hesitant to discuss divorce with me, their loan officer, until things are so far down the road that any financial advice I can offer is a mute point. I try to create a friendship with each client and sometimes that means each couple so that could be part of the angst. That said, there are a lot of necessary financial issues that need to be discussed when confronted with the big D. So if you found this blog doing research and you are uncomfortable talking to an expert that you and your ex previously worked with (CPA, estate planner, loan officer, real estate agent), I would say reconsider. They are people you have worked with and can trust. They have fiduciary responsibilties to their clients and would be violating ethical codes of conduct if they shared information with anyone. If you still don't feel comfortable, make sure you discuss the financial ramifications with professionals that you can trust."

1. Check your credit report jointly so that you can see who is on what accounts and what steps need to be taken to split liabilities. Visit annualcreditreport.com. Clicking on the hyperlink will take you to the FTC.gov website, and you can link to annualcreditreport.com from there. There is some good info on the FTC's web page and it allows you to confirm that we are not phishing for your info. You can only check your credit free, once a year. If you apply for a mortgage at Compass Lending Solutions we can also provide you with a copy of the report that we obtain.

2. Cut ALL financial ties and make a clean definitive break from your ex. Don’t let your credit be unnecessarily destroyed. Hope for the best, but plan for the worst. Cut these ties quickly and be adamant about closing all joint accounts. If you own a home together, a refinance may be necessary to divide equity or remove the vacating spouse from the mortgage loan. Sometimes accessing a 401K can be beneficial to payoff joint debts so that a clean break can be made. This should be considered carefully and with some discussion with a tax advisor.

3. Create a budget after the divorce. This goes for BOTH parties. It’s very important after a divorce that you confront your financial needs and your current financial limitations. Will you be getting alimony? Paying alimony? Google Docs has a free customizable budget template that you can access by clicking here.

4. Talk to multiple professionals, not just your attorney. Most attorney's are specialists in a specific field. If you are getting a divorce, you are probably talking to a divorce attorney, who may or may not be a specialist in the secondary financial aspects to consider. Should you file jointly or separately, who gets to write off the kids, the house, the business expenses? These are questions for your CPA. When you own a home, a simple conversation with a good loan officer can provide the answers and options that may be available to you.

5. Make a plan for long term financial goals (retirement, children’s college funds and weddings, etc.) These are all important items that beg for help from a professional advisor and need to be included in your budget.

6. Update beneficiaries on retirement accounts and life insurance policies. If you have children, you may want to discuss this with an estate planner. Creating a trust can be very beneficial in some circumstances to ensure that any monies are directed towards your children without the control of an ex-spouse or someone who you think you can trust. Again, we align our company with like-minded trustworthy experts who we can refer you to if requested.