0183: What happens after signing a divorce settlement? (Part 2)

Visit us at divorceandyourmoney.com for the #1 divorce resources in the USA and get personalized help. Learn about coaching services here.   Thank you for listening! Find a transcript of this episode below.   In this episode, we're trying to answer the question, what happens after you sign a divorce settlement, because the conception is that the divorce is over, but that's not true. There's still, unfortunately, a lot of work that needs to be done even after you have signed the divorce settlement. Because of that, I want to give you a sense of some of the things you need to be thinking about as soon as that settlement is signed because you can't just give up and call it a day. There's a lot that needs to happen after you sign the settlement and before and after the judge finally signs off on it. If you didn't listen to the previous episode, I strongly suggest you do.                                   The two main tasks I group into these categories, the first being ensuring that you get, you receive, and also give up everything that you agree to. The second is that you need to update all of your accounts to make sure they reflect your new reality. Now, I'm going to get into what both of those things mean in depth in a moment. But the point is, is there's still a lot to do. I'm going to give you a process and a list of things to search for. For people who I go through in the coaching sessions, we oftentimes have a post divorce checklist and a post divorce summary of things you need to be thinking about the day your settlement is signed.                                   First thing you do, step one, so you've signed the settlement, what do you do? You study it. What do I mean by study your settlement? Well, you need to gather a notepad, gather your calendar, and put yourself in a quiet room, get some highlighters, some different colored pens, however you take notes, and start making a list of everything that needs to happen as part of the divorce. You need to go, sentence by sentence, and make a note of everything you need to keep track of. If something is supposed to happen on a certain date, might be a house needs to be sold by June 30th, well you need to start putting on the calendar, "June 30th, house must be sold." Or if you get the kids' custody, if you alternate holidays every other year, well, you're going to need a multi-year calendar and start thinking about, "Oh yeah, here's the holidays every other year," and start planning those things out. Or if certain things have to happen on certain days of the week or certain times of the month, if you're expecting a payment or you have to make a payment every month on a certain day, you need to make those things and write those things down so they don't get lost. You need to start keeping track of them. These are going to be integral to your life, going forward, until they aren't.                                   Another thing that you might need to think about as you go through your settlement, if you have to split retirement accounts, I have lots and lots of episodes in the archives about retirement accounts and QDROs and things like that. If you need to spend money or need to split the retirement accounts to get the money into the appropriate places, well, you might need a QDRO, a Q-D-R-O, QDRO. If you need one of those, those often take several months from the time that you get them to the time they're actually executed upon.                                   Something else you need to think about. If you need to transfer money somewhere. All of these things, you're going to need to make a note of every little item that needs to happen as part of the divorce process to make sure that you're organized in there.                                   The way that I like to do it is I actually ... It depends on your system, but oftentimes what I'll do with people is we'll go through your settlement, I'll read every line item, exactly how I described, and I'll put a little Word document together where we say, "Date, June 17th, 2018, this thing has to happen." Or "July 2019, this thing has to happen." We'll put it on one, or two, or three pages, however many pages it takes, and just list them out. Because I actually use a lot of my calendars just in a Word document format because it's easier for me to read than the normal calendar, but it's a great way to just keep everything organized. I can look and I say, "Hey, we're in the middle of August, and so, oh yeah, in two weeks, I have this thing that I need to do." If I don't and two weeks go by and that thing doesn't happen, maybe you were owed something, maybe something else, you need to make a note of that and figure out what to do. Anyways, I think you get that point.                                   The first step was comb through your settlement and keep it all organized. The second step is to set up your new life. This is a step that a lot of people fail to handle properly in part because there's just a lot of moving parts to it and, quite frankly, some of the stuff involved in it is not the most fun thing in the world. That said, it is essential that you take care of these things. In fact, whenever I'm faced with a long, boring, and arduous process, now I don't always recommend this and you shouldn't do it too often, but I will treat myself to a nice bottle of wine or a nice, expensive drink. Now, I don't drink that much, but if I'm going to drink and I got to do some work, I'll get something expensive, treat myself, something pretty good, and I'll say, "All right, I'm going to get through this, but at least I'm going to have a couple of glasses of something nice as I go through these things that I don't necessarily want to do, but they are important.                                   What's the first thing on that list of setting up your new life? Checking your credit report. Credit report is a very important thing to monitor. You need to make sure that everything on it makes sense. Whether you have $100 or $100 million, I strongly suggest you check your credit report. I've sat down with people of all income levels and many, many times you will find surprises on there or things you've forgotten about, and it's an essential thing that you should be doing.                                   When you look at your credit report, of course with anything, you have to make sure that the information on there makes sense. But another thing that you should be thinking about is you should keep an eye out for every joint account. Any account that has your spouse's name on it with your name, you need to be closing. You cannot have joint accounts open. Well, you can have joint accounts open, but it's very dangerous to keep joint accounts open after you are divorced. Here's why.                                   Believe it or not, I've seen examples like this happen. Let's say you have a house with a home equity line of credit and both of your names was on this home equity line of credit, but there was a zero balance, so you never used the home equity line of credit. You just had it, should you need it. Well, a couple of years goes by and, all of a sudden, you start getting collection notices in the mail. It turns out that you never took your name off that home equity line of credit. Your spouse, your ex-spouse for two years at this point has already ... or needed money for something, who knows what, and decided to draw down your home equity line of credit and took a bunch of money out. Guess what? They didn't pay it back, or didn't pay the interest, or didn't pay it as agreed. Who's on the hook for that? You are, even though you haven't used that account yourself, even though you've been divorced.                                   Those little things happen all the time. If you have any joint credit cards, any joint loans, any mortgages, anything with your name on it and your ex-spouse's name on it, close it. Or at least have a very clear process for how you're going to close it to make sure that those accounts don't stay out hanging out outstanding.                                   Now, in conjunction with closing some credit reports and credit accounts, you need to open new accounts. If you have a joint bank account, for instance, well, as soon as you can feasibly close that joint bank account, you should. But at the same time, you're going to need a place to put your money. You need to start opening accounts of your own. I speak with many of you, particularly the stay-at-home parents, but many of you who don't have accounts in your name, it's okay. Not a big deal. Now is the time to start doing that. There's no judgment. There's no problem. You just need to walk into your nearest bank. You don't have to have a relationship with them. You just have to have an ID, it has to be convenient for you, and start opening up your new accounts. Most banks are very accommodating. You just find a place that works for you.                                   Same with credit cards and credit accounts. I've sat with many of you before and we walk you through the process of getting a credit card. Getting a credit card, there's a thousand different options. You have to complete what can feel like a daunting application process. But oftentimes, you just need to do it. I will walk through with you how to open a credit card account. Or you can do it yourself and just kind of do the research and figure out a credit card that is good for you.                                   I know people whose families made millions of dollars a year and they got divorced, and one of the spouses never had a credit card before. We were just like, "Hey, let's sit and figure out how to apply for that so that you can have that at your disposal." I know people who don't make very much money and are super savvy in that regard and that isn't an issue for them. But wherever you are, make sure that you have some of the basic financial things taken care of.                                   Now, shifting gears a little bit, you need to update your will and estate planning documents. As I said, you might need a glass of wine for some of these things. This is definitely one of those topics where a nice glass of wine makes it a little less painful to deal with. Will and estate planning documents. I've talked about this on the podcast before, but estate planning is basically just so everyone knows is estate planning is the process of planning for what happens if something happens to you, meaning if you die or if you're in capacitated. Unfortunately, it'll probably happen to us in one way or another at some point, and so the question is what do you want to happen with your stuff, who do you want making decisions, et cetera, et cetera. There are a lot of questions involved in that that are not necessarily the most fun to think about, but they are important.                                   I want you to write down these four documents. You need a will, you need a health care proxy, you need a power of attorney, and potentially a trust. These four things can be very useful to you. If you want to find someone who can help you with this, you should look for an estate planner near you. I work with estate planners as well, but you should look for a local one. Many of them have fixed fee packages for the basics. It oftentimes costs a few thousand bucks, but it's essential. You need these four documents. You should certainly be asking about these four documents. I'm not going to get into all the intricacies. There's people who spend 70 years, 50, 60, 70 years of their career just doing these things, so I'm just going to tell you to look them up. The will, the power of attorney, health care proxy, and trust. They can be very helpful to you and they are essential for you after divorce.                                   Now, if you already have these documents, you need to update these documents. Most of the time when you are married, these documents are written in the context of giving everything to your spouse to manage and to handle, which, while you're married, oftentimes makes the most sense. But now that you are divorced, these things will need to be updated and you need to go through them. Find a local estate planning attorney to help you. It doesn't have to be expensive, but everyone needs to get those basics done, and if you already have them done, to update them after the divorce process.                                   Next thing you need to do is check the beneficiary on every account. What does that mean? Well, your bank account, your investment account, your retirement account, your pension plan, everything has a place it'll go when you die. You need to make sure that those things are still within your wishes. You might want to give everything to your kids.                                   Oh, I should also mention something important. As I said about the will, the same applies to some of these financial accounts. Many of these financial accounts default to your spouse when you were married. If you don't update them and something were to happen to you, believe me, it happens every day, your ex-spouse will end up with a bunch of stuff that you had no intention for them having, and it could be many, many years or decades later. Just take care of this thing now. You got to look at every bank account, every investment account, every retirement account, and ask the institution that manages it for the beneficiary designation. That's what the term is called. Who is the beneficiary of this account if something were to happen to me? They will give you an answer. It's a very common question. You need to make sure it's within your wishes. You can make it your children. You can make it friends. You can make it a brother, a sister. You can make it anyone. But most of the time, you don't want to keep it as your spouse.                                   Next thing on your list. If you haven't already, you should speak with a financial advisor. Now is a great time to get a financial plan together and one that may work well for you. What you do is you find a local financial planner. Now, I have in the archives I think a seven or eight part series only on the financial planner. If you get the quick start guide, which has all the podcast episodes in it, there is a huge multi-hour series on financial advisors because it's a very important topic. You should check that out. But also, you can ask your friends. I'm sure one of your friends has a financial advisor that they work with. They could be local, they could be online only. There's lots of great financial advisors out there that can help you, regardless of your situation. You should find one. Talk to them. Just because you talk with a financial advisor does not mean you have to hire that person, but it's worth having an initial consultation in that regard to see with one or two or three, to see if one of them may work with you.                                   Finally, speak with an accountant. The year after you get divorced, a lot of things change. What do I mean by that? I mean your tax status changes, you might be moving houses, you might have other things that are changing in your life, and particularly even if you just do it for one year and one year only, this is one of those years where it makes a lot of sense to speak with an accountant in this area and just to explain what's going on, make sure there's no major tax things that you need to be aware of, make sure your life is set up properly. An accountant can really help with that and those things. I strongly encourage everyone, particularly the year after they get divorced, to add an accountant to their team and their list, just to make sure they're not running afoul of any rules and that they maximize their ... or I should say, minimize the amount that they pay in taxes in the following year.                                   A lot of stuff in there in regards to what to do in between signing a settlement or right after you sign a settlement, but this is very important information. It's a lot of stuff to take care of and think about, but you can do it. It's just step by step. That's what I always say. Sometimes someone will say, "Well, what's the next step?" I'll give them the next step. Then they'll say, "Well, what's the step after that?" Most of the time, my response is going to be, "Don't worry about it. We'll get there when we get there. For now, we got to focus on one step at a time and you knock them out from there." It's not much more complicated than that, but you have to kind of do these things to make sure that you take care of the rest of your life from a financial perspective.