Women and Divorce – What You Need To Know – Part 3

A very complicated piece – and possibly a very contentious one as well – of a divorce is your and your spouse’s pensions and retirement benefits.

A pension and a 401k earned during your marriage are generally considered the same as any other type of marital property – that is, they’re treated the same way as your house or your bank accounts. According to very good information at the Pension Rights Center, typically a divorce court will decide how the pension assets are divided and whether a former spouse is permitted to receive your pension benefits (or for you to receive benefits under his or her pension).

Because this is an area where laws differ on a state-by-state basis, it is very important for your legal representation to research this so that your pension is handled properly. You will likely have to get your spouse to agree in writing that they are waiving their rights to your pension so please don’t ignore this important piece of financial housekeeping when you are divorcing. It’s not something you’d want to be facing years later when you are ready to collect your pension.

And since people can and do take withdrawals from 401k plans, you and your lawyer should make sure that what can be a sizeable asset is protected. As with pensions, any funds and interest earned in a 401k during a marriage is considered marital property so you need to use due diligence in making sure this is handled properly, both from a legal and a financial prospective.

Finally, at some point you’ll reach the age where you are able to collect Social Security retirement benefits. Not everyone realizes that – if you are divorced and your marriage had lasted more than 10 years – you can receive Social Security retirement benefits based on your ex-spouse’s earnings. That holds true even if your former spouse has remarried.

There are, of course, provisos to this, most notably that you must be unmarried and be over the age of 62. You also need to prove that the benefit you’d get based on your own work history would be less than the benefit you would be entitled to based on your former spouse’s work history. If you meet these requirements, you will be entitled to a Social Security payment that is 50% of the amount of the Social Security benefit your former spouse receives.

This can be beneficial to people who either have worked in lower-paying jobs than their former spouses or were stay-at-home parents with fewer working years. And it’s important to note that if you choose to collect benefits under your former spouse’s work history, it will not affect in any way the amount of Social Security benefits your former spouse (and his or her new partner, if they’ve remarried) is entitled to collect. A good analysis of this can be found on the Social Security Administration’s website.

While many things we’ve discussed in these articles can be managed through discussions with your spouse, it’s ultimately going to be to everyone’s benefit to have both legal and financial professionals work with you to ensure that your interests and your children’s interests are completely protected.

Women and Divorce – What You Need to Know – Part 2

One of the things we learn at an early age is that we need to protect our families. And for most of us that means taking out a life insurance policy. You may have purchased a life insurance policy on your own or you may have one through your company and the odds are that your spouse is the primary beneficiary of it. Once you’re divorced, you need to work with the life insurance company to change that so that you can designate who you want to be your primary beneficiary, whether that be your children or your siblings or your parents.

Another thing that is optional but if you have children something you may want to consider is taking a life insurance policy out on your spouse. If you will be getting alimony and/or child support and that will be an important component in supporting yourself and your family after the divorce, consider what would happen if your former spouse died suddenly and you were left without that income. Taking out a life insurance policy on your spouse can provide you with some financial peace of mind in that respect.

Whether or not you decide you need alimony is one thing but, if you have minor children, you must advocate for them by getting sufficient child support. In an ideal world, you and your spouse will be parenting partners that can negotiate a reasonable monthly amount to provide for each of your children. If that’s the position you’re in, you’re very lucky. But if you have an acrimonious divorce, common sense tells you that you need an attorney or arbitrator to ensure that your children are provided for financially.

Another important issue to consider is your health care coverage. Very often, if your company or your spouse’s employer provides health care, it’s less expensive for you, your spouse and your children to be covered under a family plan on one policy. That can’t happen once you’re divorced. In fact, health insurance laws prohibit ex-spouses from being covered under their former spouse’s health coverage.

As the divorce is proceeding, you need to work with your health care insurer (if the health insurance is in your name) to take your spouse off the health care policy. If your spouse has the health care policy, you need to do two things. The first is to make sure that your children are covered under your spouse’s policy. And the second is to shop around for your own health insurance coverage. If you’re employed, check with your Human Resources Department to find out if you need to wait until open enrollment period (usually the last month or so of the calendar year) or if you’re able to get coverage sooner. You cannot afford to go uninsured when it comes to your health (or to become sick and have no affordable access to health care) so this needs to be a very top priority for you.

You should already know that you need a will and a power of attorney, as well as a living will and health care proxy. It’s likely that you’ve designated your spouse as the person with authority to make decisions on your behalf if you’re unable to do so, so you need to decide who that person now should be and update your legal documents accordingly. And if your will provides that your spouse is your primary heir, you should update that to reflect who you want. If you have children who are minors, you also need to consider designating a guardian for them to protect their financial interests in the event of your death before they reach the age of majority.

In our final discussion, we’ll focus on how you deal with your pension and/or 401k, as well as your Social Security benefits.