It’s an understatement to say that divorce is one of the most stressful events a person can go through. In the original Social Readjustment Rating Scale, for example, divorce was rated as the second most stressful experience a person could have, sandwiched between the death of a spouse and a jail term.[1]
As anyone who has experienced the divorce process will tell you, divorce is an emotionally, mentally, and physically exhausting experience.
According to some experts, divorce can adversely impact your physical health. “Relative to married adults, separated or divorced adults evidence substantially increased risk for death from multiple disease processes.”[2]
Aside from the physical, mental and emotional toll, the financial impact of divorce can also be devastating. As of 2021, approximately 50% of families living below the poverty line were headed by women with no spouse present.[3]
A PNC Private Bank® team can work with clients, as well as their attorneys, accountants or other providers, to address each client’s specific financial goals and provide appropriate solutions that align with their overall wealth strategy.[4] PNC Private Bank brings years of experience to individuals impacted by divorce, to empower them before, during and after a divorce by providing them with concrete steps to help them move toward their new future. Whether helping a client develop a budget, understand what is needed to retire or plan for a future legacy, our team-based approach can help them reach their goals.
During the often high-stress time around the settlement of a divorce, many tasks necessary to complete the process are overlooked. To that end, below is a checklist of tasks that are commonly forgotten after a divorce. This list may help identify areas that may be overlooked during this stressful time.
1. Update estate planning documents and beneficiary designations.
Although many states have laws that would prevent your former spouse from inheriting property under your will or trust, depending on state law it is possible that your former spouse could still serve as trustee or agent under a power of attorney. Further, laws barring a former spouse from receiving an inheritance under your will may not prevent members of your former spouse’s family from inheriting property if you had specifically named them in a will or trust. Also, some property does not pass pursuant to the terms of a will or trust. Rather, such property passes to the persons named in a beneficiary designation.
Common types of property that pass by beneficiary designation include, life insurance, annuities, retirement plans, individual retirement accounts (IRAs), and transfer on death accounts.
The law that prevents a former spouse from inheriting under your will may not remove your former spouse as a designated beneficiary. To avoid an undesired result following your death, be sure to update your will, trusts, and the beneficiary designations for your retirement plans, bank accounts, investment accounts, IRAs and life insurance policies. Laws vary greatly from state to state; be sure to consult an attorney in your state to obtain correct legal advice.
2. Open banking accounts in your own name.
At some time, you will receive funds that should not be held jointly with your spouse. You will need to open a bank account titled in your name alone. Your attorney will advise you when it is appropriate to do so. Your PNC banking advisor can assist you in opening this account.
3. Develop a heightened awareness of privacy and security.
Get a new email address and change your passwords. Don’t use a predictable password. Change your mailing address to a post office box to prevent important (and perhaps sensitive) correspondence from sitting unsecured in your mailbox. Obtain a copy of your credit report annually. Check your credit report for loans, accounts or inaccuracies tied to your ex-spouse. If you are concerned about unauthorized access to your credit, contact each of the credit reporting agencies and follow their procedures regarding fraud prevention.
4. Your name.
If you have changed your name or are changing your name as part of your divorce, you will need to update your bank accounts, credit cards, passport, driver’s license and other forms of identification. Don’t forget to change your name with all governmental agencies, such as the Social Security Administration. Remember, some states require a name change to be granted in the court’s divorce decree, which some financial services providers and governmental agencies will require before changing their records.
5. Assemble your financial team.
Divorce is the number one reason people change financial advisors. Re-evaluate your financial advisors. Are you comfortable with your existing team? Were they connected to your former spouse? Are your financial advisors fiduciaries? Do they have expertise with post-divorce financial planning?
6. Invest in yourself.
Forgive yourself and be patient. Work with a therapist if you haven’t already. Try something new.
7. Take responsibility for your finances.
Work with your financial advisor to create a budget. Do you have copies of your important documents? Do you know how much you’re paying for your expenses (both for normal living expenses and major expenditures)? Does your monthly cash flow support your monthly expenses? Your PNC Private Bank wealth strategist can help you develop a budget and chart your financial future through the creation of a comprehensive financial plan.
8. Understand taxes.
Now that you are single, you may be subject to new income tax thresholds. For example, many tax limitations, such as the ability to contribute to a Roth IRA or the ability to exclude capital gains from the sale of a primary residence, differ for married taxpayers filing jointly and single taxpayers. Also, income tax brackets differ for married taxpayers filing jointly and single taxpayers.
You may wish to change how much income tax is withheld from your paycheck by filing a new Form W-4 with your employer. If you have significant wealth, tax planning with respect to the federal estate tax will change, as you will no longer have access to the unlimited marital deduction.
Also, don’t forget to review the impact of your divorce on state and local income taxes. PNC Private Bank does not provide tax advice; be sure to review these matters with your attorney, accountant or other tax advisors.
9. Understand deadlines.
Signing a separation agreement or receiving a divorce decree does not necessarily mean that your work is done. Often the litigants in a divorce have agreed to do certain tasks by certain dates. For example, you may have agreed to divide a bank account or transfer an item of real estate to your former spouse by a certain date. If you have minor children, the dates you must keep track of, such as visitation schedules, holiday schedules, school events and the like, may multiply dramatically. Your attorney will provide you with a list of deadlines that you and your ex-spouse must observe. Failure to observe these dates can result in additional litigation and expense.
10. Get organized.
Develop a system to keep track of everything. It likely doesn’t matter which system you use, but you will probably need one.
Now that you are on your own, managing everything — child custody schedules, mortgage and credit card payments, work schedules and even the dry cleaning — may require a good organizational system.
Having such a system in place can help you keep track of all these details.
