Your divorce is final and you are ready to devote time, attention and energy in another direction. Certainly you deserve the opportunity to clear your table of divorce papers and empty your mind of legal words (and bills). It is almost that time….but take a minute to stop – are you delaying or ignoring important decisions and steps that can have lasting effects on your new future? You might want to make a note of these key considerations:
If you are receiving alimony – or as we call it in Texas, spousal support, this is considered taxable income to you. Similar to consulting work paid to you as 1099 income, no federal or state income taxes are withheld from the alimony you are receiving. Waiting to consider this until the annual tax bill comes due might leave you with a big surprise and not a happy one – taxes owed. Work with an accountant to estimate your tax bill before the income is all spent so you are prepared to pay if necessary. Surprises that hit your cash flow are not fun.
Yes, this is another legal area that needs attention and I know you had hoped to be finished with attorneys for a while. Just not yet. It is important to have new documents drafted naming those you want to care for you and your affairs if something happens to you. Important documents include will, power of attorney, healthcare power of attorney, HIPPA document, living will/healthcare directive. It is best to do this sooner rather than later as you can never plan when an accident or unexpected tragedy might occur.
Review and Change Beneficiary Designations
Life insurance, IRAs and Roth IRAs, 401(k) accounts – these all pass by beneficiary designation. Although many states have statutes in place that can protect an insurance policy owner by presuming the beneficiary would have been revoked by virtue of the divorce, it is best to make beneficiary decisions and changes intentionally.
Yes, there is a lot of it! There will be a time, years from now, when you will be asked to provide a copy of your divorce decree. And yes, you may event forget the date and have to refer to the decree yourself. Make a file of all your legal documents including the final decree and any QDROs that were filed. Keep copies of account statements and tax returns so that when your head clears and you wonder what you did with everything, you can find it! Organizing now will be a present to your future self!
This is a brief outline of some of the important steps I take my clients through during our post-divorce transition planning. I am here to help if you need guidance or have questions.