More than a million times each year in this country, couples call it quits. The price can be high.
Emotionally, divorce turns lives topsy turvy, as the lives of everyone involved — wife, husband, children, other family members, even friends — can change dramatically. Even in the most amicable break-up, it is not uncommon for the wounds to take years to heal.
On top of the emotional distress that can accompany the end of a marriage, finances are often thrown into disarray. If you have just gone through a divorce, there are some important issues you need to address. Unfortunately, it is not uncommon for at least one ex-spouse to delay or ignore taking action... either because of the emotional pain involved or a desire to retain some tie with his or her ex-mate.
However, to protect yourself and begin building financial security for the future, you should think about the following:
- Revise your will. Relationships and responsibilities have changed. Your will usually determines how your estate is to be distributed at your death. Review it immediately to make sure it reflects your new situation and objectives so that, in the event of your death, your assets can go to the people you designate. Talk to your attorney about your options.
- Sever all unnecessary financial ties with your ex-spouse. Your divorce decree may mandate child support, alimony or life insurance on one of your lives for the benefit of the other or children. Other than these requirements, it is generally a good idea to disentangle yourself financially to reduce your liability. Start by contacting lenders and making sure all joint credit cards have been canceled and new ones have been issued in your name only. Otherwise, in many states, your liability for your ex-spouse's bills will continue.
- Update your retirement plan beneficiary designations. As with life insurance, survivor benefits will be paid to the person you named in your qualified and non-qualified plans. Even if you obtain title to the funds as part of the divorce, this does not automatically change the beneficiary. Since the beneficiary is almost always a spouse, review your named plan beneficiary to make sure it reflect the changes in your life. Talk to your New York Life agent for help or contact retirement plan administrators directly.
- Review your overall retirement situation. Divorce can scramble your retirement nest egg, separating you from assets that may have taken years to accumulate. You may want to start "power saving," accelerating the amount of income you put aside, if you hope to retire on schedule. If you are not already doing so, this may also be a good time to start making maximum contributions to your employer-sponsored 401(k) plan and your own IRA. You may want to consider supplementing these with annuities.
- Review your life insurance, especially ownership (if not addressed as part of the divorce) and beneficiary designations on your existing coverage. These cannot be changed by your will, but require that you complete a change-of-beneficiary form with the insurance company. It is not uncommon for people to neglect this task; then, decades later, the "wrong" spouse receives life insurance proceeds at the insured's death. That's why it's better to address the issue now. Your New York Life agent can help you with these changes on your New York Life and other policies. This is also a good time to review your total life insurance needs. Especially if you have children, your responsibilities to them continue, and you may need additional life insurance.
Divorce creates new relationships and new responsibilities, as well as uncertainties for the future. Taking the above steps will help reduce some of that uncertainty, at least in your financial life.
This material is for informational purposes only. Neither New York Life nor its agents provide tax, legal or accounting advice. Please consult your own tax, legal or accounting professional before making any decisions.
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