The Most Important thing you need to do after your divorce is final – READ YOUR DIVORCE AGREEMENT!
Sounds like a no-brainer right? But in my experience, I have found that many people never take the time to read their divorce agreement after the divorce. They come home from court, stick the agreement in a drawer or worse – in a box in the basement, and never look at it again. Out of sight, out of mind.
But not taking the time to read it, could have some serious short and long-term financial consequences.
Read Before you Sign on the Dotted Line
I hope you at least took the time to read your agreement before you signed it. One of my post-divorce clients recently confessed, that she never read the agreement prior to signing it and now she regrets it. Turns out her attorney forgot to add some necessary language and conditions about her child with special needs and they have been fighting ever since to rectify it. The cost at this point, far exceeds the original amount my client was looking for. Never sign your agreement unless you agree with and understand what it says!
Please, please, please, read any and all legal documents before you sign them. And if you do not understand something or do not know how something was calculated, ask your attorney for clarification. I have had several clients hire me at the end of the process, just to review the language surrounding the financial issues and to make sure it says what they agreed to. While it is best to include a CDFA™ from the beginning, this is better than nothing. Unfortunately, I usually find mistakes.
Read Again, After you have Signed on the Dotted Line
I keep my Separation Agreement (same as a divorce agreement in Massachusetts) in the top drawer of my desk for easy reference. Over the last seven years I have had to refer to it many times to confirm how we agreed to handle certain things. It seems ‘we’ forget very quickly what ‘we’ agreed to, but referring to the agreement has helped to avoid several disagreements.
Your divorce or separation agreement is your ‘reference book’ to life after divorce. The agremeent tells you things like how you agreed to split parenting time, schedules and holidays, and how you decided to pay for things after the divorce like medical bills and college. But it may also contain some very important Action Items with looming deadlines that need to be taken care of.
- Make an ‘Action Item’ list of what you need to do per your Agreement
If you do not want to be hauled back into court for contempt, the first thing you should do after your final court date, is to review your agreement and make a list of the things you or your ex are supposed to do as a result of the divorce.
Many times an agreement will say something like, “within 30 days of the signing of this agreement, Wife shall make all efforts to obtain a mortgage in her name…”. If you don’t make that effort within 30 days, your ex can file a contempt charge against you. The agreement may even call for the sale of the house if Wife fails to obtain a new mortgage.
Although this example may be a bit extreme, the point is, you need to do what the signed agreement says within the timeframe it provides. You may feel your agreement is not fair or that you got a lousy deal, but it is a legal document that can not be ignored.
Other common action items may be to close joint accounts, like a joint checking/saving account or a joint credit card.
True story – a friend of mine never closed his joint checking account, nor did he change the password. A disagreement over money ensued 4 years later and his ex-wife went into ‘his’ checking account and transferred $5000 to her individual account. Legally, she did nothing wrong, as her name was still on the account. It was morally wrong, but he basically had no recourse, even though her actions were not the intent of the original agreement.
- Do not assume your Attorney is taking care of everything
Most divorces involve a division of a 401(k) or similar type of retirement account, that requires a legal document called a QDRO. A Qualified Domestic Relations Order is typically not filed and approved by the courts prior to the final divorce – although it should be. There is usually a stipulation in the agreement that the employee spouse or their attorney will be responsible for presenting the QDRO to the Court. Unfortunately, this is not always done in a timely fashion and the non-employee spouse, who is supposed to receive a share of the 401(k), doesn’t follow up. She assumes her attorney is on top of it, but that attorney has already moved on to the next case.
The approval of a QDRO by the Plan Administrator could take several months and in some cases, up to a year or more. Why? Because no one is following up. What if your ex-spouse dies before the QDRO is approved? Unfortunately, you may not receive anything from that 401(k). What if your spouse has remarried, then dies and no QDRO is in place – their new spouse may receive the money, not you.
If you are the non-employee spouse, it is imperative that you stay on top of things to ensure you get what you are supposed to get in the division of assets. The only way to know what needs to be done, is to read your agreement.
How a CDFA™ can help
As a part of my services to my clients, my contract requires that I review the agreement, free of charge, prior to my client signing it. I want to make sure that all the financial issues we worked on throughout the process are properly addressed. I also want to make sure that my clients understand what the agreement really says.
Once the divorce is final, I continue to help my clients with the post-divorce Action Item list, helping them implement those items. The time after a divorce is often very difficult for most people. They are struggling to get back on their feet and are usually emotionally drained and may have even ‘checked out’.
If you are feeling this way, get help. There may be some things that require your immediate attention and ignoring them can have severe consequences.
Take back control of your life, read your divorce agreement and if necessary, consult with a CDFA™ to help you make the transition to your new post-divorce life.
be informed, be empowered, take control. Don’t let divorce blow your finances off course…let me help you calm the waters, with Solutions For Divorce.
Every divorce is unique and laws and practices vary from state to state. Be sure to consult with your attorney, financial professional, accountant and other professionals in your state to understand what applies to you and what is best for you and your family. Taking information out of context generally has negative consequences. This article is not meant to provide legal or financial advice.