Why Post-Divorce Finances Are Trickier Than You Think

Most people need help to implement their divorce order properly.

After a long, emotionally charged divorce process, you’ve arrive at a final divorce settlement agreement. It seems fair, reasonable and satisfying. You expect to receive what the final judgment states you are due.

Brace yourself: Chances are that the steps required to meet the terms of a divorce agreement will leave you and your ex-spouse confused, frustrated, and still adversarial.

In my experience of over 25 years as a divorce financial planner, I have found most people need help to implement their divorce order properly. The necessary logistical details are rarely spelled out in a divorce agreement, and they always place the burden of follow-through on the divorced couple.

But most ex-spouses fail to create what they need: a mutually acceptable post-divorce action plan for moving forward. Such a plan lays out step-by-step actions in order of their priority, along with a timetable for achieving them. The goal is to avoid inaction, ambiguity, noncompliance, and—most importantly—inadvertent forfeiture of entitlements.

Here are only some of the problems you might face:

Enforcing obligations to pay child support, alimony

Ensuring compliance with custody and parenting agreements

Non-payment of debts

Failure to list the family home for sale or refinance its mortgage

Improper division of assets

Failure to divide assets at all

Attorneys benefit greatly from this post-divorce angst and may even perpetuate conflict through court motions and motions for contempt.

Problems can get particularly knotty when you’re dividing assets. Say, for example, you are dividing retirement accounts. You are ordered to divide these accounts equally and in-kind and with each ex-spouse retaining his or her own accounts as appropriate.

This sounds clear enough, but is it? What if you have a grab bag of different kinds of retirement accounts, some of them costing you money to divide and others nothing at all? Suppose you both have traditional IRAs, Roth IRAs, annuities, 401(k) plans, and pensions:

Do you divide equally all types of retirement accounts?

Do you each keep whatever accounts of same character you both own, split the ones you don’t, and perhaps transfer an equalization payment? (John and Susie, for example, each keep their traditional IRA, they divide Susie’s Roth and John’s 401(k), they divide John’s annuity, and John pays Susie an equalization payment.)

Do you each retain your own accounts, whatever they are, and have one spouse make an equalization payment to the other?

Unfortunately, disagreeing about how and when to do something is not as problematic as refusing to do it at all. Some ex-spouses simply feel settlement agreements are made to be broken and they defy your every request. The key nuance is if your ex-spouse is defying you willfully and intentionally.

If so, you have only two major options. One is to wait and hope that at some point your violating ex-spouse complies with his or her obligations. The other is to hire an attorney to enforce your former spouse’s obligations under a property settlement agreement or previously issued court order.

Enforcement of child support orders is a special case. It comes at no cost to the spouse owed the money because of the very strong national policy to support the health, safety, and welfare of children. All states have laws that specifically address the failure to pay child support, and judges don’t like it when parents fail to make court-ordered child support payments.

When all else fails to get a non-compliant ex-spouse to fulfill his or her obligations, filing for contempt remains your best option. It is a big deal to be held in contempt, and your ex could be held liable for both civil and criminal penalties: fines, payment of your attorney fees, or even a jail sentence. Your piece of paper, after all, is a legal order.