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Protecting Your Financial Future in a Divorce

Oct 24, 2022 | Kathleen M. Newman

Divorce involves serious financial matters with long term consequences for the parties and their children.  Correctly addressing financial matters in the divorce decree is critical because later corrections can be extremely difficult, if not impossible, as well as expensive. Family Law attorney Kathleen M. Newman of the DeWitt Law Firm uses her 30 years of family law experience to help clients protect their financial interests.  

What are some key pointers?

1. Be Mindful of the Tax Consequences of Selling Marital Assets.

Generally, the sale and/or transfer of marital assets to someone other than your spouse in a divorce are subject to the usual taxes, with capital gains tax being the predominant one.  In valuing an asset in the context of a divorce settlement, you should consider whether it is subject to capital gains or other tax.  Further, to minimize such taxes, the sale of assets in a divorce must be properly documented and structured. 

2. Life Insurance Should Ideally Cover the Other Spouse’s Obligations.

Life insurance in a sufficient amount to cover any financial obligations is often key to a financially sound divorce settlement.  For example, spouses paying  child support or spousal maintenance (alimony) are often subject to an insurance policy to cover these obligations in the event of the death of the person paying support.   Also, if your spouse owes you money as part of a cash property settlement, it is often recommended that he/she maintain you as a beneficiary on sufficient life insurance to cover the obligation in case of death.  Make sure the death benefit is sufficient to fully cover the payor’s obligations rather than just agreeing to an arbitrary, flat amount of coverage.   

3. Consult an ERISA Specialist Before Making Decisions on Retirement Funds.

Retirement funds are often at the heart of your financial security.   If you are receiving an interest in retirement funds held in your spouse’s name, these funds will need to be transferred to you after the divorce.  Some funds, such as Roth or regular IRA can be transferred by using your financial advisor.  Other funds, such as funds held in a 401(k) account must be transferred through a Qualified Domestic Relations Order (QDRO).  Often the divorce decree will name a specialist in retirement fund transfers who will be a neutral working with both parties, to transfer the funds after the divorce is final.  Transfer of retirement funds from one party’s retirement account to the retirement account of the other spouse are usually tax free.

4. Don’t Accept an Unfair Share of Marital Debts.

All marital debt should be listed in your divorce decree; hidden debts are potential liabilities for both spouses.   If you can, review current copies of your spouse’s credit reports as well as your own report.  Accurately identifying liabilities allows you to account for them in the divorce settlement.  Make sure that any joint credit cards or accounts are ordered to be closed and make sure you have a provision that any debts not listed in the decree are the responsibility of the spouse that incurred the debt.

5. Be Flexible in Deciding What Makes Financial Sense Post-Divorce.

Divorce often brings changes making some assets no longer financially reasonable.  Be open to reassessing what makes financial sense once your divorce is final.  One common example is the marital home, the cost of which may have required two incomes.  Financial planners are often helpful in assessing the value of assets and the future cost of maintaining the asset, especially sentimental ones like a home.


 Take away:  Among other things, a divorce is a very serious financial transaction with long term consequences.  Kathleen M. Newman of the DeWitt LLP Law Firm and her colleagues are skilled at guiding clients through all aspects of a divorce, including the financial ones.   If you are or may be headed for a divorce, please contact us for an appointment.



“10 Important Financial Factors to Consider During A Divorce,” Forbes (February 8, 2021). 

“Top Financial Mistakes to Avoid in a Divorce Settlement,” Investopedia (September 7, 2021).