3 key areas of personal finance that all divorcing couples should know

The months of January through April, also known as tax season, bring heightened attention to personal finances. When a couple is going through the divorce process, the focus on finances and related aspects of their life should be given extra attention. There are three key areas of personal finance that divorcing couples should focus on during the divorce process:

1. Maintain the Status Quo

The court wants a couple to maintain the status quo, as much as possible, during a divorce proceeding, pending the finalization of the case.

Judges generally want couples to continue to pay for things and share time with children, if they have any, as if they had not filed for divorce; especially if the family remains under the same roof. After all, the couple is still husband and wife until entry of the divorce judgment.

Many divorce attorneys will enter orders that prohibit either party from making beneficiary changes to insurance policies and retirement accounts until a settlement is reached, either by consent or trial. This practice typically ensures that no assets are dissipated before the finalization of the case.

2. Power of Attorney

Prior to a case closing, divorcing couples certainly do not have to provide their soon-to-be ex-spouse with power of attorney for financial or medical reasons. Documents that would allow one's spouse to make financial or medical decisions can be revoked during the case. And depending on the relationship between the divorcing couple, if one spouse is no longer comfortable allowing the other spouse to stand in their place as a proxy, the revocation of such powers should be considered and dealt with during the divorce process.

3. Estate planning, insurance and division of assets.

A couples' judgment of divorce should cover issues pertaining to estate planning, health insurance, life insurance, and the division of retirement accounts.

If one spouse is ordered to maintain life insurance on their life to secure child and spousal support or the pay out of other assets, the judgment of divorce should clearly spell out these obligations, as well as the fact that the designation should be reaffirmed after entry of the divorce judgment, if necessary.

Whether a couple created an estate plan during their marriage or not, creating one after entry of a judgment, reflective of the divorce settlement as well as wishes upon death, is always a good idea.

If a couple has children or one spouse remarries, the need for a new estate plan is of the utmost importance to avoid confusion, probate battles and will contests that could arise in the future. A newly created estate plan will provide the now divorced couple with peace of mind and will ensure affairs are in order after the dissolution of the marriage.

Published: Mon, Mar 23, 2015