If you have experienced a divorce, remember that the decree itself is a starting point and not the finish line for dividing assets gained during the marriage. Titles, retirement accounts, and tax filings remain at risk until the decree is executed. A signed judgment can still leave a multitude of assets in the wrong name. A divorce decree grants legal rights by awarding assets; however, it does not automatically move assets under the proper name. You must present the decree to various institutions to prove your divorce and claim what you’ve been awarded.
Titles, Retirement, Social Security, and Taxes
Assets awards to each partner are not automatically retitled once the divorce decree is awarded. For most tangible assets, such as real estate and vehicles, you must still complete the appropriate action, such as transferring a home deed, securing a new mortgage on a residence or piece of real estate, or transferring a vehicle title from one spouse to another.
Retirement accounts require a separate court order called a Qualified Domestic Relations Order (QDRO), which informs an employer retirement plan how to rightly divide the benefit between the employee and their former spouse. For IRAs, a trustee-to-trustee “transfer incident to divorce” is necessary, as a decree alone is not sufficient to withdraw funds or move the money to a new account. Common examples of retirement plan administrators include Fidelity, Vanguard, and Empower, which process these requests. If unclear, the employee spouse’s human resources center can provide specific instructions for requesting the distribution.
You can download your Social Security statement online, which breaks down your lifelong earnings record. Once you set up your account, you will see the calculation of what your Social Security benefits will be upon retirement. If you were married for at least ten years, are divorced for two years, remain unmarried, and are at least 62 years of age, you are entitled to up to half of your former spouse’s Social Security benefit amount. This is an alternative option if your own earnings statement results in a lower benefit amount. This is called the divorced spouse benefit. SSA pays the higher of the two earning records, not both benefits stacked. Your former spouse must also be at least 62 before you are eligible to file a benefit claim, and their benefit is not reduced because you filed for a benefit based on your former spouse’s earnings record. The maximum amount you can claim is half (50%) of your former spouse’s full retirement benefit when you reach full retirement age. To claim it, you’ll need your former spouse’s Social Security number.
Taxes can also be tricky, as filing status follows your marital status on December 31 of the previous year. Regardless of separation or when you filed for divorce, if your divorce was final on January 1, the IRS considers you married for the entire previous year. Only one parent can claim a child as a dependent on an income tax return. Make sure you have a written agreement with your former spouse about who will claim each dependent in future years. Alimony also depends upon the year the decree was filed. An ex-spouse can collect alimony once the divorce has become final.
Red Flags That Need an Attorney
Here are a few red flags to look for. If your decree awarded benefits from a retirement account but no QDRO has been drafted or signed, you need to contact your attorney. An attorney’s office can also help you file to retitle a residence, primary or additional location, and update account beneficiaries if assets remain in joint names months after the judgment.
If you or your former spouse are unclear who claims the dependents, you’ll also need to consult your attorney for help to sort it out. If there is any deadline language within your decree regarding refinance or buyout or account transfers, your attorney should also be notified.
How a Daily Money Manager Tracks the Post-Divorce Paperwork
After your divorce, your DMM will partner with you to ensure all the pertinent paperwork necessary to separate your married life from your single life is accounted for. We’ll work closely with your financial advisor, legal, and accounting teams to ensure a smooth transition from married life into single life.
If any pertinent information is missing, such as a former spouse’s Social Security number or any other identity details for an SSA claim for divorced spouse benefits, your DMM will inform you. We will keep a running list of tasks to complete after the divorce is final. We help track status and key deadlines, so assets awarded on paper become assets you own and are recorded properly.
At Organized Instincts, our certified Daily Money Managers help you turn a signed divorce decree into an executed action plan. Reach out today to discuss how a DMM can help you track titles, QDROs, and the post-divorce paperwork.
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