Divorce: The Financial Checklist for Protecting Yourself

# Divorce: The Financial Checklist for Protecting Yourself

Divorce unwinds what marriage joined financially — but the unwinding is far more complex than the joining. Retirement accounts require a specific court order to divide. Tax filing status changes with implications for withholding and deductions. Beneficiary designations on life insurance and retirement accounts don't automatically update when you divorce in most states. Every financial account, insurance policy, and legal document requires active review.

**Separate your credit.** Open individual checking and savings accounts. Remove your spouse as an authorized user on your accounts; request removal from any joint accounts. Monitor your credit report — joint accounts continue to affect both partners' credit until paid off or refinanced.

**Document everything.** Gather statements for all accounts: bank, investment, retirement, credit cards, mortgages, and loans. This documentation is required for the marital estate inventory. Anything you cannot document may be difficult to claim.

**Do not move or hide assets.** Courts take asset dissipation seriously and can award additional shares of the estate to the other party when assets are hidden or depleted.

Employer-sponsored retirement accounts (401(k), 403(b), pension plans) cannot be divided by a divorce decree alone. They require a **Qualified Domestic Relations Order (QDRO)** — a separate court order that instructs the plan administrator to divide the account. Without a QDRO, the account passes entirely to the account holder regardless of what the divorce decree says.

Key QDRO points: - Must be drafted by an attorney familiar with the specific plan's requirements - The receiving spouse can roll their share directly to their own IRA without triggering taxes or penalties - Pension QDROs are more complex — they specify a share of the future benefit, not a current dollar amount - IRAs are divided by a different mechanism (transfer incident to divorce) — simpler but still requires documentation

**Filing status.** You are considered unmarried for the entire tax year if you are legally divorced by December 31. If divorced on December 30, you file as single (or head of household if you have a qualifying dependent) for the full year.

**Alimony.** Under current law (post-2018 divorces), alimony is neither deductible by the payer nor taxable to the recipient. This changed the economics of alimony negotiation significantly.

**Child-related tax benefits.** The child tax credit, dependent care credit, and head of household filing status can only be claimed by one parent per child. The divorce decree or a Form 8332 determines who claims the child each year.

**Capital gains on the home.** If the marital home is sold as part of the divorce, the $500,000 married exclusion may apply if sold before the divorce is final. Post-divorce, each spouse is limited to the $250,000 single exclusion.

**Beneficiary designations.** Update immediately after divorce — most states automatically revoke beneficiary designations for an ex-spouse, but federal law governs ERISA plans (401(k), 403(b)) and may not. An ex-spouse named as beneficiary on a 401(k) may still receive the account if not updated.

**Life insurance.** If you have children, maintain life insurance regardless of divorce. If your ex-spouse was the beneficiary, update the designation. If you were covered under a spouse's employer plan, you'll need your own policy.

**Health insurance.** Divorce is a qualifying life event for ACA marketplace enrollment. You have 60 days to enroll in a new plan after losing coverage.

**Update your will.** A divorce does not automatically invalidate your will in most states — it may only revoke provisions for the ex-spouse. Create a new will immediately.

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*Related: [Life insurance sizing](./life-insurance-how-much) — recalculate your need post-divorce. [Insurance gaps](./insurance-gaps) — the coverage review after a major life change.*