A step-by-step guide to protecting your finances during divorce, covering asset inventory, account separation, credit protection, and long-term budget adjustments.
Include checking, savings, money market, and CDs at every institution. Print statements from the last 12 months as documentation.
Document all retirement accounts (401k, IRA, pension)
Retirement accounts acquired during marriage are typically marital property. Get the most recent statements showing vesting schedules and current values.
Catalog real estate holdings and mortgage balances
Order a current appraisal for each property. The equity (market value minus mortgage balance) is what gets divided, not the full property value.
List all debts including credit cards, loans, and tax obligations
Joint debts remain the responsibility of both parties regardless of what a divorce decree says. Creditors can still pursue either spouse for joint accounts.
Document investment and brokerage account holdings
Record cost basis for each holding, not just current value. Capital gains taxes on liquidated assets can reduce the actual value by 15-20%.
Inventory personal property of significant value
Photograph and appraise items worth over $500 including vehicles, jewelry, art, and collectibles. Keep a spreadsheet with estimated values.
Account Separation and Credit Protection
Open individual bank accounts in your name only
Choose a different bank than your joint accounts to avoid any accidental linking. Deposit enough to cover 3 months of personal expenses.
Pull your credit report from all three bureaus
You can get free reports weekly at AnnualCreditReport.com. Look for accounts you did not open and any joint accounts you may have forgotten about.
Freeze or close joint credit card accounts
Contact each issuer to either freeze the account or remove yourself as an authorized user. New charges on joint cards before closure become shared debt.
Establish credit in your own name if needed
If you have no individual credit history, apply for a secured credit card with a $500-1,000 deposit. Building credit takes 6-12 months of on-time payments.
Change passwords on all financial accounts
Update banking, investment, email, and tax preparation account passwords immediately. Enable two-factor authentication on every financial account.
Legal and Professional Costs
Research and budget for attorney fees
The average contested divorce costs $15,000-30,000 per spouse in attorney fees. Mediation typically costs $5,000-10,000 total and resolves faster.
Hire a forensic accountant if complex assets are involved
A forensic accountant costs $3,000-10,000 but can uncover hidden assets or income. Worth the investment if your spouse owns a business or has complex finances.
Get a QDRO prepared for retirement account division
A Qualified Domestic Relations Order is required to split 401(k) and pension accounts without tax penalties. QDRO preparation typically costs $500-2,000.
Understand tax filing status implications
Your filing status on December 31 determines your status for the entire year. Filing as Head of Household instead of Single can save $2,000-4,000 in taxes.
Child Support and Alimony Planning
Calculate estimated child support using your state formula
Most states use an income-shares model based on both parents' gross income. Run your state's online calculator with accurate income figures for both parties.
Document all child-related expenses for the past year
Track education, medical, extracurricular, and childcare costs. Courts consider actual spending history when setting support amounts above the guideline minimum.
Understand alimony tax treatment
For divorces finalized after December 31, 2018, alimony is not deductible by the payer and not taxable to the recipient under federal tax law.
Set up a dedicated account for support payments
Use a separate checking account exclusively for support payments to maintain a clear paper trail. Many courts accept bank statements as proof of payment.
Post-Divorce Financial Reset
Create a new monthly budget based on single income
Housing costs should stay under 30% of your take-home pay. If your current home exceeds that threshold, plan to downsize within 6-12 months.
Update all beneficiary designations
Check life insurance, retirement accounts, bank accounts, and transfer-on-death designations. In many states, a divorce does not automatically remove an ex-spouse as beneficiary.
Revise your estate plan and power of attorney
Update your will, healthcare proxy, and financial power of attorney within 30 days of your divorce being finalized. Dying without updates can leave assets to your ex-spouse.
Review and update insurance coverage
You have 60 days after divorce to enroll in your own health insurance through a special enrollment period. COBRA coverage from a spouse's plan lasts up to 36 months but costs 100% of the premium.
Rebuild your emergency fund to cover 6 months of expenses
Single-income households need a larger safety net. Automate transfers of at least 10% of take-home pay until you reach 6 months of essential expenses.
Frequently Asked Questions
How are retirement accounts divided in a divorce?
Accounts accumulated during marriage are generally marital property. A Qualified Domestic Relations Order (QDRO) splits 401(k)s and pensions without taxes or penalties. IRAs use a transfer incident to divorce. Division method depends on state law (community property vs equitable distribution). QDRO specialists charge $500-$1,500; errors can be costly to fix.
How much does a divorce cost?
Contested divorces average $15,000-$30,000 per spouse in attorney fees; complex cases exceed $50,000-$100,000+. Mediated divorces cost $5,000-$15,000 total. Collaborative divorce runs $10,000-$25,000 total. Uncontested with online services: $500-$1,500. The level of conflict, not estate size, drives costs.
How does divorce affect my credit score?
Divorce itself does not appear on credit reports, but joint accounts remain both parties responsibility until closed or refinanced. Missed payments by an ex on joint debts directly damage your score. Immediately freeze or close joint cards, refinance joint debts individually, and monitor all three reports weekly during proceedings. Average divorced people see 50-100 point declines recovering in 1-2 years.
Should I keep the house in a divorce?
Keeping the house is emotionally appealing but often financially straining. You must qualify for the mortgage alone, cover all costs on single income, and equity tied in property cannot be invested. Selling and splitting gives both parties liquid capital. If the mortgage exceeds 28% of your single income, the house is likely too expensive to maintain comfortably.