Protecting Your Money in a Divorce

3. Take inventory of assets and debts

With your attorney’s help, ask for a full disclosure of all joint and individually owned financial assets so you know where your money is and where it goes. Make copies for safekeeping of loans and credit card accounts, as well as home equity lines, past tax returns and business debts. You’ll also want to get a handle on “nonmarital assets” — things considered to belong to only one spouse, such as property brought to the marriage, inheritances and gifts given specifically to one person.

4. Use a financial adviser

Input from a financial adviser during the divorce process can provide a clearer picture of what your financial life will look like after the divorce and help you map out a financial plan. Their advice can help you consider factors such as asset division, alimony or spousal support arrangements, tax implications and the potential impact on long-term financial goals.

5. Sort out mortgage and rent payments

Mortgage companies and landlords expect payments to be made regardless of your personal situation. You may want to move to your own place as soon as possible, even before a divorce, but that might hurt your claim to the home (and you will still be responsible for at least half the mortgage payment). Sometimes the two spouses can reach an arrangement about who keeps the home, but often it makes better financial sense to sell it.

6. Be prepared to share retirement accounts

Just because your name is on a 401(k) or IRA doesn’t mean it’s not up for grabs. These funds may be considered “marital property” and subject to negotiation. The eventual division of 401(k)s, 403(b)s and pensions will be governed by a legal document called a QDRO; the carving up of IRAs is addressed in the divorce decree. And don’t forget to update your beneficiaries on your retirement accounts, since you don’t want to inadvertently leave assets to your ex-spouse after a contentious breakup.

7. Change your will

As you prepare for a divorce, or immediately upon its settlement, adjust your will accordingly. In most states, former spouses are automatically excluded from serving as trustees or estate administrators or from receiving under your will. It’s also prudent to update other important documents, such power of attorney and health care proxy.

8. Understand community property vs. equitable distribution

Before you and your spouse go your separate ways, you’ll need to divide up marital assets, such as real estate, savings, investment accounts and retirement savings accounts. How your property will be split up depends on what state you live in.

If you reside in a community property state, whatever assets you obtain or accumulate during the marriage will be split equally, roughly 50/50. However, any assets that either you or your spouse brought into the marriage are excluded from this type of settlement. Community property states are Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin.

In contrast, if you live in an equitable distribution state, the court will divide marital property in a manner it considers fair, though that doesn’t necessarily mean equally. Which spouse gets what is based on their overall needs and particular circumstances. The court looks at roughly a dozen factors when deciding how to split assets.

If you’re unable to reach agreement with your spouse as to how the assets should be divided, consider using an objective, third-party mediator, such as a retired judge or an expert in family law, to decide what’s equitable. 

Go to this AARP web page for more tips specific to later-life divorce.