A Financial Adviser's Guide to Divorce Finalization: Tying Up the Loose Ends

(Image credit: Getty Images)

Editor's note: This is the final article in a three-part series about the three stages of divorce. Part one is I'm a Financial Adviser Who's Been Through Divorce: This is How I Break It Down for Clients. Part two is A Financial Adviser's Guide to Divorce Negotiations: Civil – or Not.

As we enter the final stage of your divorce journey, you can take a deep breath — the hardest part is now in the rearview.

You've gathered all the paperwork, chosen the proper legal path and come to an agreement with your former spouse on custody/support and how to divide assets and debts.

For this last stage — finalization — we take you through the loose ends that you'll need to tie up before closing the book on the divorce and beginning this next, best chapter of your life.

Stage Three: The Finalization

The ink is dry on your divorce decree. You're now single. Congratulations. After popping the cork on your well-deserved glass of champagne, you'll need to tackle some administrative business. Let's get started:

1. Update account ownership and beneficiaries

You and your spouse might have parted ways, but is that reflected in your financial matters? After finalizing your divorce, you should update ownership and beneficiaries on all accounts — including retirement accounts, traditional investment accounts, insurance, estate plans, etc.

If you're now the sole owner of your home, you'll need to update the deed to reflect the change. The same goes for the title to your car. It's also a good idea to change all the passwords to ensure that your finances are private.

Be vigilant: If something happens to you, do you want your former spouse to have control?

2. Implement the settlement

In stage two, you and your spouse determined how to split debts and assets. Now, you'll need to put those plans into action — transferring property, refinancing loans and rolling over retirement funds.

Unfortunately, this division could take time, so stay on top of your financial adviser. If you have workplace retirement accounts or pensions to divide, you'll need to prepare a QDRO (qualified domestic relations order), which is a court order determining how those retirement assets should be split.

This could be a detailed calculation, if pensions are involved, so you might consider hiring an outside party to help, although your attorney or Certified Divorce Financial Analyst can handle, as well.

Once the retirement assets are split, there is a little-known QDRO rule that allows the recipient to take a one-time penalty-free distribution if certain conditions are met (you'll still need to pay taxes, though).

3. Consider insurance options

If you were previously on your spouse's health insurance, you'll need to get your own policy. COBRA is an option, but it is expensive, so you should consider alternatives such as the Affordable Care Act.

Beyond health insurance, think about obtaining other types of insurance, including life insurance, long-term care and disability.

If you can't obtain insurance through your work, talk to an insurance broker you trust.

4. Create a new financial plan

As you begin life as a single person, you'll need to adjust and reassess your financial goals. This is a good time to sit down with a financial adviser to create a budget, develop a plan for retirement and begin building an emergency fund.

Unfortunately, many women tend to be overly conservative with their investments, and they miss out on the gains.

Rest assured, you can be more aggressive without gambling on your future.

Creditworthiness might also be an issue. If you're establishing credit in your own name for the first time, you might need to get creative.

When I was married, I only had joint credit cards. After my divorce, the only card I could qualify for was at Express (the clothing store), so I would buy a couple of items, then quickly pay them off.

This helped me to establish a credit history, and a short time later, I was approved for additional cards.

5. Update estate and legal plans

Is your will/trust updated? Do you need a new power of attorney or health care directive? You'll want to update all your estate and legal documents.

Lastly, life is not stagnant. If something comes up after your divorce decree is finalized, don't be afraid to revisit the agreement. Nothing is set in stone.

If you encounter an unexpected expense for the children, or if you or your former spouse's work situation drastically changes, you can file to have the original agreement amended.

Divorce isn't just an ending. It's a new beginning. Now that your divorce is over and all your accounts and documents are current, it's time to take all that challenge and hardship and turn it into something positive by building a life on your own terms.

I'll be here cheering you on.

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.