8 Financial Steps to Prioritize During a Divorce

June 21, 2024 Susan Hirshman
Learn what financial steps to prioritize during a divorce, including calculating net worth, freezing certain assets, reviewing beneficiaries, and more.

Divorce impacts many areas of life, including your finances. Though every divorce is unique and there isn't a "one-size-fits-all" strategy, there are important financial steps you can prioritize as you start the divorce process. Ahead, we'll look at 8 financial steps you can take to help limit the impact divorce has on your future.

1. Assemble a team of trusted professionals

Before making any financial decisions, identify your own team of trusted professionals to help you navigate any complexities in the divorce process. A team might include professionals such as a divorce attorney, accountant, estate attorney and financial advisor, depending on your specific needs. Ask friends and/or family members for recommendations.

2. Gather and organize important documents

Locate and make copies of important documents such as insurance policies (life, health, auto, and homeowners), property deeds, car titles/lease agreements, mortgage or home equity loan documents, federal and state tax returns from the past three years, and if applicable, wills, trusts, prenuptial agreements, and other estate planning documents (power of attorney, health care proxy, etc.).

3. Calculate your net worth

Gauge your financial health by determining your net worth. To calculate your net worth, subtract what you own (your assets) minus what you owe (your liabilities).

To get started, take inventory of the assets you and your spouse own (bank accounts, investment accounts, employer retirement and other executive compensation accounts, real estate, personal property, safe deposit boxes, etc.), then subtract your assets from your liabilities (mortgages, car loans, student debt, credit card debt, etc.).

This doesn't have to be a perfect calculation but be as comprehensive as you can so that you're well informed and prepared for any property and support negotiations.

4. Determine your overall living expenses

Calculate your monthly budget by subtracting your monthly expenses (fixed and lifestyle expenses) from what you make (your monthly income).

List your fixed expenses (food, utilities, mortgage, insurance costs, etc.) and lifestyle expenses (vacation, entertainment, clothing, memberships, etc.) and subtract those expenses from your current net income. If you're the spouse that will need future support, having a clear number of what it costs to run your current household and maintain your lifestyle (and your children's, if applicable) is a critical figure for negotiations and future decisions.

Furthermore, if you're a non-working spouse and your health insurance is covered through your spouse's employer plan, investigate what your options/costs for health care insurance would be and add that number to your fixed costs.

5. Decide who pays for which expenses

The divorce process typically takes some time, and in the waiting period before the divorce is finalized, you'll have bills and expenses to pay. Determining who pays for which expenses until the final division of property occurs is handled in a separation agreement. In the agreement, outline who will pay for which expenses, how often, and reevaluate as needed until the divorce is finalized.

6. Open, review, and update accounts

Open a new individual checking account in your name and consider opening a new savings account as well. Use the new checking account for any purchases, deposits, and automatic payments going forward.

Remove your spouse as an authorized user on a credit card taken out in your name and/or remove yourself if you're an authorized user on their card. If you have a joint credit card account, you'll both likely have to contact the credit card company to cancel it.

You may consider obtaining a credit report from the credit bureaus to ensure there are no anomalies with your credit, and if you're concerned about your spouse opening new accounts in your name without your consent, you may consider freezing your credit.

Be aware of the ownership titling and holdings associated with each account. For joint investment and bank accounts, if you're concerned about your spouse withdrawing funds, you may consider informing the institutions that you're divorcing and request they freeze the account, as well as requiring your approval on any future transactions until a property settlement is determined.

Review and update your will and any other estate planning documents as necessary with an estate attorney.

7. Update passwords and beneficiaries

Consider changing your passwords and PINs on individual accounts, cards, subscriptions, and important logins to help secure your privacy.

As many accounts are paperless, if you don't have the passwords to access the accounts, list them as an open item to be filled in later.

Review all your individual account beneficiaries to ensure you have the proper beneficiary designations on your retirement plans, individual investment accounts, life insurance policies, and estate planning documents.

8. Create a new financial plan

Work with your financial advisor to prepare a financial plan so you can understand what your financial situation will look like today and in the future. As you walk through the divorce process and negotiations, you may need to make several updates to your plan as things change. Having a clear financial plan can help you make informed, data-driven and disciplined decisions during this very emotional time. 

The information provided here is for general informational purposes only and should not be considered an individualized recommendation or personalized investment advice. The investment strategies mentioned here may not be suitable for everyone. Each investor needs to review an investment strategy for his or her own particular situation before making any investment decision.

All expressions of opinion are subject to change without notice in reaction to shifting market conditions. Data contained herein from third-party providers is obtained from what are considered reliable sources. However, its accuracy, completeness, or reliability cannot be guaranteed.

Examples provided are for illustrative purposes only and not intended to be reflective of results you can expect to achieve.

The information and content provided herein is general in nature and is for informational purposes only. It is not intended, and should not be construed, as a specific recommendation, individualized tax, legal, or investment advice. Tax laws are subject to change, either prospectively or retroactively. Where specific advice is necessary or appropriate, individuals should contact their own professional tax and investment advisors or other professionals (CPA, Financial Planner, Investment Manager) to help answer questions about specific situations or needs prior to taking any action based upon this information.