When you get divorce, you need to notify your employer. You need to give your employer a new, completed, Form W-4 (www.irs.gov/pub/irs-pdf/fw4.pdf), “Employee’s Withholding Allowance Certificate,” within ten days after the divorce or separation showing the new number of exemptions. Go to www.irs.gov/Individuals/IRS-Withholding-Calculator and run the calculator to see what your withholding should be.
If you move as part of your divorce, in addition telling everyone else about your new address, you need to mail a completed Form 8822 (www.irs.gov/pub/irs-pdf/f8822.pdf), “Change of Address,” to the Internal Revenue Center for your old address.
If you changed your name as part of your divorce, you need to notify: (a) the Social Security Administration by submitting a completed Form SS-5 (www.ssa.gov/online/ss-5.pdf), “Application for a Social Security Card”; (b) your employer, who may need to change company records, health or life insurance plans, or accounts regarding retirement or 401(k) retirement plans; and (c) your bank, credit card companies, and other financial institutions. You will need to change your driver’s license and passport. If you are going to change your name, change it across the board. Having yourself identified by different names in different records is a prescription for a headache.
Get Organized and Implement the Agreement or Judgment
Once you have the signed and entered judgment of divorce, carefully examine the judgment and agreement. Make list of steps required under the judgment and who is going to do them: there will likely be things for you to do, things for your spouse to do, and things for your attorney to do. Go over your post divorce checklist with your attorney to make sure it is accurate and complete. Do not assume that anything is going to be done automatically. If someone besides yourself was supposed to perform one of the steps on your list, follow up to make sure they did it.
Create a folder for each required step: one for the transfer of the house, one for the transfer of title to the car, one for the transfer of the retirement accounts, etc. Once you believe your list is complete, email it to your ex-spouse for their review. Make a folder for all communications with your ex-spouse. To the extent possible, communicate with your ex-spouse via email, print each email, and put it in your folder. If problems arise and you need to take steps to enforce the judgment, your record of notifying your spouse about what was supposed to be done under the judgment will be useful.
Schedule a date and time to conduct any exchange of personal property provided for in the agreement or judgment. Make a records of emails exchanged regarding the division of personal property. If your former spouse is not taking steps to remove personal property in accordance with the judgment, ask for permission to discard the items and set a deadline after which you will dispose of the property.
Make sure all property is distributed in accordance with the judgment or agreement. If there were automobiles to be transferred, take care of the title, registration, license plates, insurance, and any tax issues. If there is real estate to be transferred, take care of the deed work.
The transfer of retirement assets requires special handling. Such transfers usually require a special order, called a qualified domestic relations order, or “QDRO.” A QDRO is drafted by an attorney and entered by the court. It directs the administrator of the retirement plan to transfer funds or set up a special account for the receiving spouse. The QDRO must be acceptable to the plan administrator, even if it has been issued by the court. Each type of retirement asset, and each individual plan, has its own requirements for a QDRO. Funds in an IRA can usually be transferred without a QDRO by simply filing out a form provided by the plan administrator. Contribution retirement plans, such as 401(k)’s, require a QDRO instructing them to transfer funds to another plan. Defined Benefit Plans, such a pensions, require a QDRO instructing them to make monthly payments to the receiving spouse, the “alternate payee,” at the time of retirement. If the attorney who handled your divorce does not draft QDRO’s they may refer you to a specialist attorney whose practice is largely devoted to drafting QDRO’s for other attorneys.
Make sure that all necessary steps have been taken to secure your interest in your spouse’s retirement assets. If the work is not done correctly you may receive nothing when your former spouse dies, or you may have to chase after them for your share of the monthly retirement benefits, rather than receiving your share directly from the administrator of the plan. The plan administration will usually send a letter confirming their acceptance and understanding of the QDRO. Be sure to get such a letter and keep it in the appropriate file.
Submit the necessary paperwork to the child support enforcement office. If you are paying support through support enforcement, keep you own records of your payments. Never pay cash. Never accept cash. Keep records of your children’s medical costs, including insurance claims, co-pays, etc. Keep a record of any other expenses to be divided under the judgment or agreement. Execute IRS form 8332 to transfer dependency exemptions to non-custodial parent if called for by judgment or settlement.
If you paying or receiving child support or alimony and you have a substantial change in your income, seek a modification quickly. Modifications can usually be backdated only to the date of filing the motion for modification. If you are ordered to pay support in the amount of $1,000 per month and you lose your job or become disable you still owe $1,000 per month until the court changes the amount. If you wait a year before filing a motion for modification, you owe the $12,000. That debt can be enforced by contempt and it cannot be discharged in bankruptcy. In Georgia failure to pay court-ordered child support can land you in jail very quickly. Consult with an attorney immediately when changes occur.
Close the Financial Door on Your Marriage
In addition to the steps required by the settlement agreement or judgment of divorce, your post divorce checklist should include a number of steps to take automatically when you divorce.
• Close all joint accounts, including mortgage, line of credit, checking, savings, investments, rental agreements, and any online accounts. Make sure there are no outstanding checks or automatic withdrawals. If you leave money in a joint account, or continue using a joint account after the divorce, your former spouse can withdraw all the money in the account at any time.
• Change your online passwords. You do not want your former spouse snooping online, or have an angry former spouse wrecking havoc with your online world.
• Review all insurance (health, home, auto and life) and make any needed changes, including beneficiaries.
• Make changes to health insurance.
• Close joint safety deposit or post office boxes, and open new ones if needed.
• Change all credit cards, including retail store charge accounts. Open a credit card in your name alone and begin using it. This will build a record of using credit (and using it wisely). Obtain a new copy of your credit report. Challenge any inaccuracies.
• Change beneficiaries for any pensions or retirement accounts.
• Change all wills, advanced directives and powers of attorney. If you gave your former spouse a power of attorney you should ensure that it is revoked in writing. Destroy all copies of the prior power of attorney. Give notice of revocation to all third parties that previously relied on the power of attorney. If the power of attorney was recorded as part of a public record, a properly acknowledged revocation should be recorded as well.
• Change the name of the utility bills to reflect who is now responsible.
Do not assume that your former spouse is of good character and would never take advantage of a joint credit card or a joint account. Your divorce attorney can tell you plenty of stories about otherwise upstanding people who did vengeful things to their former spouses after a divorce. If you leave your former spouse as beneficiary on a life insurance policy or retirement plan, they will receive that money when you die. If that is not the result you want, be sure to change the beneficiaries. Remember that the terms of your settlement agreement or judgment of divorce must always be followed. If the agreement or judgment calls for your former spouse to be a beneficiary of your life insurance or pension, those provisions must be followed.
If you are receiving taxable alimony, you will need to make quarterly estimated installment tax payments on the alimony. If you do not, you may find yourself with an unmanageable tax obligation.
A good financial planner can help you optimize your currents finances and plan for retirement. The website of the Financial Planning Association, www.fpanet.org, and the Association of Divorce Financial Planners, www.divorceandfinance.org, contain a lot of useful information and can help you find a planner in your area.
If you were married for more than ten years, review your eligibility for social security based on your former spouse. If you are or may be eligible, you will need a copy of your marriage license as well your judgment of divorce. When you become eligible for social security, you can receive either 100% of your own benefit entitlement, or the equivalent of 50% of your former spouse’s entitlement, whichever is greater. You may also be able to receive benefits if your spouse dies while paying child support or alimony.
Divorce brings changes, stress, and often financial challenges. Taking the time to get organized and handle the changes in a systematic fashion will reduce the stress and help you get through the transition while building a solid financial base for your future.
The Law Office of Lee S. Ashmore
777 Gloucester Street
Brunswick, GA 31520