Like rainy weather and the NCAA championships, divorce is seasonal. That’s according to University of Washington researchers who reviewed 14 years of the state’s divorce filings and found consistent peaks in March and August. Other states show similar patterns.
In addition to emotional stress, divorce can bring financial pain, particularly for people who have never made financial decisions alone. It’s important to tackle issues one at a time so you don’t become overwhelmed.
If your marriage is poised to break up — or has recently — take these steps to address the split’s financial aspects.
Protect your credit score. Until the divorce is final, you must keep up payments on any shared debt and expenses, such as mortgage and credit card payments or electricity and Netflix bills. Remember, a history of on-time payments is an essential ingredient in a strong credit score. Missed payments will hurt both of your abilities to secure more credit in the future.
Take inventory of shared assets. You can’t know whether you are getting an equitable share of the assets if you don’t know what’s on the table. Collect five years’ of financial data, including tax returns and statements from your shared investments or retirement savings.
How assets divide depends on where you live. Residents of nine states — Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin — follow the laws of “community property,” in which partners split all marital property equally, such as real estate and retirement assets. Almost all other states require “equitable distribution,” a fair — but not necessarily equal — division of assets.
Understand the retirement savings impact. During a divorce proceeding, the court could provide a “qualified domestic relations order” that determines the division of retirement savings. This might have further financial ramifications. For example, if you receive a portion of your spouse’s 401(k), you might want to roll it into an individual retirement account to defer paying taxes on the cash.
If your spouse has a pension, the way he or she elects to take it — and the qualified domestic relations order (QDRO) — could impact you down the road. A standard election means you’ll stop receiving a share when your ex dies; with a QDRO, you might be able to get a survivor’s pension, typically half of the benefits your ex-spouse received.
Lastly, consider updating the beneficiaries on your life insurance and retirement accounts, if you have previously elected your spouse.
Kevin Voigt is a staff writer at NerdWallet, a personal finance website.