What to do with your money during a divorce

During a divorce, protect your finances in three moves: get a full picture of what you own and owe, open accounts in your own name, and build a budget for one income. State law decides how property and debt get divided, so pair this checklist with advice from a family law attorney, mediator or legal aid office in your state.

Rules vary by state

How marital property and debts are divided, and how alimony and child support are set, depend on your state's law. Some states, like California, are community property states. A local family law attorney, mediator or legal aid office can tell you how your state works.

Your filing status depends on December 31

If your divorce is final by the last day of the tax year, you're treated as unmarried for that whole year. You'd file as single or, if you qualify, head of household.

Alimony and child support tax rules

For divorce agreements made after 2018, the payer can't deduct alimony and the person receiving it doesn't report it as income. Child support is never deductible or taxable.

Social Security can still count a long marriage

If you were married at least 10 years, you may be able to get benefits based on your ex-spouse's work record later in life.

Getting the full picture

Make a list of everything you and your spouse own and owe: bank accounts, retirement accounts, the home, cars, investments, credit cards, student loans and car loans. Note whose name each one is in and the current balance. This is your household net worth, and it's the starting point for any fair split.

Gather documents to back it up: the last few years of tax returns, recent pay stubs, and statements for every account. Pull your own credit report from AnnualCreditReport.com, which is free every week from each of the three bureaus. It can reveal cards or loans you didn't know existed.

Separating accounts and debts

Open a checking and savings account in your own name and move your direct deposit there. Don't drain joint accounts on your own. That can cause problems in your case, and your attorney or mediator can tell you what's allowed while the case is open.

Joint debts need a plan. Ask card issuers to close joint cards to new charges, and look into refinancing joint loans, like a car loan or mortgage, into one person's name. Your divorce agreement can say who pays, but the lender's contract still has both names until the account is closed or refinanced.

Building a one-income budget

Your costs won't simply be cut in half. Rent, utilities, internet and insurance often cost nearly as much for one person as for two. Write down every bill you'll pay alone and compare the total with your own take-home pay, not the household's.

If the numbers are tight, decide now which costs to cut, and count on support payments only after they're ordered and arriving. Start an emergency fund in your new savings account, since you no longer have a second income to fall back on.

Retirement accounts, the house and taxes

Workplace retirement plans like a 401(k) or pension are split with a qualified domestic relations order (QDRO), a court order that tells the plan how much to pay a former spouse. The plan has its own rules about what it can pay, so check with the plan before you agree to terms. Cashing out early can trigger taxes and penalties.

If you're thinking about keeping the house, run the full monthly cost on your income alone: mortgage, property tax, insurance and repairs. For taxes, alimony under agreements signed after 2018 isn't deductible or taxable, and child support never is. IRS Publication 504 covers the rest, including who claims the children.

After the divorce is final

Update the beneficiaries on your life insurance, retirement accounts and bank accounts. These forms usually override a will, so an ex can stay the beneficiary if you forget. Give your employer a new Form W-4 so your withholding matches your new filing status.

Check your health coverage. Losing coverage through a spouse's plan can open a special enrollment period or COBRA continuation coverage, both with deadlines. If you change your name, update it with Social Security first, then with your bank and employer.

Where to get help

Because so much depends on state law, get advice from someone who knows yours. A family law attorney can review any agreement before you sign. A mediator can help you both reach an agreement for less than going to court. If money is tight, a legal aid organization may help for free; the Legal Services Corporation funds them in every state.

If you're worried about your safety, put that first. Contact local domestic violence services before making financial moves your spouse might notice.