The emotional impact of a divorce dissipates with time. The anger, shock, and loneliness that surface become less pronounced as the months pass. Many divorcees marry again, finally finding happiness with their new partners.
While the hurt feelings and despair eventually go away, the financial impact of a divorce can last for years. It’s critical that you give careful consideration to the specific terms of your settlement agreement. Bad decisions made today can cause major money-related headaches you’ll regret for years to come.
What Will Happen To Your Assets After Divorce?
Most couples have at least some assets they need to consider when calling it quits. They may not own multiple homes nor have millions in stocks and bonds, but they likely have a house, one or two cars, a 401(k), jewelry, and other possessions. Assuming these assets were acquired after marriage, they are considered part of the couple’s marital property. As such, they should be included in the settlement agreement.
Make a list that includes all of your assets. Write down anything that has a significant value. That includes your vehicle, IRA, pension, and even your laptop and television. Before you can make smart decisions about what to fight for and what to give up, you need to know what you own.
Next, consult a divorce attorney about how marital property is handled in your state. Some states, such as California and Texas, are known as community property states. They split everything down the middle. Other states, like North Carolina and Wyoming, follow an “equitable distribution” protocol. The courts try to split the assets as fairly as possible based on the spouses’ respective ages, how long they were married, and many other factors.
Are You The Beneficiary Of Your Spouse’s Life Insurance Policy?
One asset that is often neglected during divorce is life insurance. Spouses often have policies that name each other as the beneficiary. The wife’s policy will name her husband; the husband’s policy will name his wife. When couples split up, they typically remove each other from their respective policies.
This area becomes more complex when one spouse is paying child support or spousal support to the other spouse. Judges will sometime order that the paying party take out a life insurance policy on himself or herself naming his or her spouse as the beneficiary. In the event that the paying party dies, the policy’s death benefit would ensure that the payments continue.
Even when a judge issues such an order, it’s usually a good idea for the receiving spouse to take out a life insurance policy on the other person. That way, if the paying party fails to stay current on the payments – thereby risking forfeiture of the policy’s death benefit – the second policy will remain in effect.
Finding Your Own Health Insurance Coverage
Prior to a divorce, an entire family may be covered by one spouse’s health insurance policy. After divorce, the spouses must maintain their own policies. (Their children can remain on first spouse’s health insurance.)
If the first spouse works for a company that employs 20 or more people, the other spouse can qualify for coverage through COBRA (Consolidated Omnibus Budget Reconciliation Act). However, it’s important to realize that the coverage ends after 3 years; COBRA is a temporary solution.
Some states allow divorcees to qualify for COBRA coverage even if their ex’s company employs fewer than 20 employees. For the latest rules regarding this issue, consult your divorce lawyer.
Divorcees who are covered by their ex’s health insurance must eventually find their own coverage. It’s advisable to do so as early as possible. As time passes, there is an increasing risk that an individual will develop a serious illness. If that happens, he or she may have difficulty finding affordable health insurance when COBRA coverage ends.
Paying For Your Kids’ College Education
Divorcing couples that have young children often neglect to plan for their kids’ education costs. It’s understandable. The costs associated with college tuition, student housing, and books may not be brought to bear until years down the road. As such, the costs are often treated as a lesser priority during the couple’s settlement negotiations.
Having said that, it is important for divorcing couples to make provisions in their settlement for the future cost of their kids’ education. With college tuition already exceeding $25,000 a year at many universities, many families must begin saving as soon as possible. Leaving the matter unaddressed all but guarantees the funds won’t be available when needed.
Divorce can create financial havoc in the lives of all parties involved. Plan conservatively and consult your divorce attorney regarding the best way to secure your financial future after you and your spouse go your separate ways.