In today’s episode, I wanted to give you an overview or a refresher of an overview of the different phases of the divorce process. The phases that I’m going to cover are, first, working through the substantive issues of your divorce. I’ll talk about each of these in more detail, but that’s the first phase is basically talking and working through the issues, whether that be in mediation through your attorneys or some other process. The second phase is taking the agreements that you have reached in the first phase, working through the issues, and to reduce those to a written contract, to a legally binding agreement. The third phase is to file that agreement with a bunch of other documents with the court so that the court can issue your legal divorce, that it can legally dissolve your marriage. Then once that is complete, I do want to cover a couple of the main administrative tasks that fall to you to complete after your divorce has been approved by the court.
Let me take phase one first and talk about it in a little bit more detail. I usually refer to this phase as negotiating the terms of your agreement or working through the issues. Essentially, this is where you and your spouse are figuring out what you want to do vis-à-vis your kids and your finances going forward. You’re moving from one to two households. You are going to be separating your family and parenting lives. You’re going to be separating your financial lives. There are numerous issues that you need to think through and resolve to define and to clarify your parenting and financial lives going forward. I’ll cover just at a very high level what those topics are.
First, it’s figuring out, if you have kids, custody, which is essentially your parenting schedule with your kids, how you’ll make major decisions for your kids, and then a host of other ancillary topics related to, for instance, traveling with your kids or introducing a significant other to your kids. Also, if you have kids, you have to figure out child support. How are you going to financially support your kids to pay for the expenses related to your kids and to support each other financially in your ongoing parenting of your kids?
Then whether or not you have kids, there are two other financial topics to resolve in a divorce. The first is whether or not there would be any kind of spousal maintenance or alimony between you. That’s a payment from the higher-earning spouse to the lower-earning spouse in some amount for some period of time. It’s not relevant for every couple, but it may be relevant in your situation if there’s a real disparity in the income levels between you and your spouse.
Then separate from that is the discussion of how to divide your assets and your debts. What are you going to do about your retirement accounts or your brokerage account or your family car or the apartment that you own? Looking at all of your assets. I didn’t mention any debts, but for instance, what are you doing about credit card debt or taxes owed or student loans? Figuring out what to do about assets and debts as you separate your finances is a critical part of your divorce negotiation.
In addition to those four major topics (custody, child support, spousal maintenance, and the division of your assets and debts), there are some ancillary topics that we also need you to figure out as part of your divorce process. Those include health insurance for adults. Health insurance for children is covered in child support. Health insurance for adults, what’s happening there? If you’re insured both on one person’s plan, what’s your plan going forward? Life insurance. Do you have life insurance policies? If you don’t, are you going to get them? If you do, what agreements are you making about how much life insurance you’ll maintain, who the beneficiaries should be? Taxes. If you filed jointly, historically, what happens if you get audited and owe taxes for a prior tax year? Are you splitting that? Are you handling it in a different proportion? Are you assigning responsibility in some different way? Also cost of the process. The divorce process is expensive. How are you going to handle that? Is it being paid by the spouses equally out of their income? Is one person covering it 100%? Are you paying for it out of marital assets or something completely different? That’s just a quick list of substantively the topics that you need to think through, talk through, and reach resolution on in the first phase of your divorce process.
Once you have resolution on those topics, you shift to phase two, which is drafting a legal agreement that reflects the resolutions that you have reached in your discussions in your negotiation. The drafting of that agreement usually works as follows. You’ll start off with a bullet-pointed or a short summary, in lay man’s terms, of what are the agreements that you have made in this process? “This is your plan on parenting schedule. This is what you’re doing about spousal maintenance. These are the assets and debts that you have, and this is how you’re going to divide them.” That’s done by your professional, whether it be your mediator or your attorneys. “This is our understanding of what you would like your contract to say. Is this correct?” essentially. Then you’re going to review that. If you’re in mediation working with consulting attorneys outside the process, you definitely want to have them review that as well. Then you’ll make any revisions you need to the term sheet. Some people call it a term sheet. Some call it a memorandum of understanding, an MOU. Terminology doesn’t matter so much. Essentially, you’ll review and make any tweaks needed to that summary of your agreements.
Once that summary has been solidified and affirmed by both parties, your contract will be drafted. That’s going to drafted either by your mediator, if you’re in mediation, or by your attorneys, if you are negotiating through attorneys. Usually, that draft goes through a series of revisions once it’s drafted. A first draft is created, and then it will be shared with you and your attorneys, if relevant, to review and suggest revisions to. Then revisions are incorporated. That usually happens a couple of times. In certain cases, it may happen five or six or seven times. In other cases, there may be just a few teeny revisions, and then your final draft is ready. However many rounds of revisions are required, you will work toward finalizing a signature draft for you to sign. Then when that draft is ready, you will schedule a signing.
Once your agreement is signed, you are ready to have your uncontested divorce paperwork drafted. That’s the paperwork that, in addition to and apart from your contract, the court in your area requires you to submit to the court in order for the court to review your case and issue your legal divorce. The number of documents required are going to vary by jurisdiction. They’re at 15 to 20 to possibly 25 in New York, depending on your situation. The documents are numerous. That said, they do not require work from you in the same way that the first phase of this process requires a ton of work from you in thinking and talking through the issues to resolve.
Phase three of the process, which is really drafting the court-required paperwork to get divorced, is more the professionals’ job than does it have anything to do with you or require any work from you. When the court documents are drafted, you will have a chance to review them as will your attorneys. There may be some minor revisions to those documents, but generally, the revisions are less substantive. Once you have your separation agreement or your settlement agreement finalized and signed, and the terms of your agreement are finalized, the court papers should really only reflect the terms of your agreement. Thus, the drafting and the revision process is often less involved than it was for the drafting and revision process of your contract.
Then, when those papers are finalized and signed by you… and I should note that they can be signed at the same time with your separation or settlement agreement. That’s a detail you can talk with your own professional about coordinating, but some people prefer to just sign everything all in one fell swoop, which is fine.
Once everything is signed, it’s then submitted to the court, and it goes in queue behind all the other cases that were submitted before it to be reviewed by a judge. It may take two weeks, or it may take nine months, depending on where you are and on the queue of cases ahead of yours for the judge you’re assigned to. At some point, you will receive feedback from the court, and that feedback will either be that they have approved your documentation and signed off on your divorce or that there are documents missing or they want more information in order to complete their review and approval of your case. If the latter, if more documentation is required, you will work with your mediator or your attorneys to provide that to the court. In the vast majority of cases, your paperwork will be approved, and your divorce will be issued at that time.
When your divorce is signed is when you are legally divorced. However, often you will have to wait, and certainly this is the case in New York, for your divorce judgment to be sent to the county clerk’s office to be recorded as part of their record. You may not be able to get an immediate hard copy of your signed judgment of divorce. The moment that it’s signed by the court, you may have to wait a couple of weeks, or sometimes, not ideally, a couple of months for your divorce judgment to be entered into the county clerk’s record. Then it becomes available for you to go and pick up yourself or to have your attorney or mediator send their filing service to the court to pick up your documents.
At that point, usually there are some legal requirements about how the judgment of divorce needs to be served on one or both parties. Again, that’s something that your professionals should be taking care of for you. So, you will receive, you can expect to receive a formal hard copy as well as a digital copy of your divorce documents. With those and your signed separation agreement, I now want to talk to you about what could almost be called phase four of the divorce process. But technically, when your divorce is signed, your divorce process is over. However, there are some important administrative matters that can only happen once your divorce has been approved and signed. Let me talk about those now.
The primary area in which this is important is with regard to the division of retirement accounts. If your agreement contemplates the division of retirement assets between you and a spouse, and by that I mean not just that you’re keeping all your own retirement assets, and your spouse is keeping all his or her own retirement assets, but that from one person’s retirement account is being transferred some amount of money to the other person’s retirement account, you must take care of that once your divorce is signed. It does not happen automatically. So, you need to be in touch with the institution that holds the account from which money is going to be transferred, and they will always have their own protocols as to how this needs to happen. At a minimum, you will need to provide them with your signed judgment of divorce and your signed separation agreement specifying what is supposed to happen in that transfer.
Then depending on the type of account that you are transferring money from, certainly if it’s a 401(k) or a 403(b), you will need to have an additional document drafted called a qualified domestic relations order or a QDRO, which is a separate legal document that gets submitted to the court for signature. Then it gets submitted to the institution holding the account, holding the 401(k) or the 403(b). Those aren’t the only accounts that require a so-called QDRO, but they are the main ones, the most common ones. You would then submit the QDRO to that institution, and they will take the steps necessary to transfer the account, as is directed in the QDRO. Whereas with accounts like an IRA, for instance, you don’t need a QDRO. You don’t need an additional separate document, but they will require your judgment of divorce and the relevant language of your separation agreement to direct them as to how to transfer the account.
That’s something that you really need to stay on top of and be proactive about literally until the money is transferred and received into the account of the recipient spouse because something like that can fall through the cracks and then it may not happen. God forbid, if a spouse were to pass away, for instance, their retirement account will go to their named beneficiary. If the recipient spouse’s portion has not been transferred yet, that portion is going to go to the named beneficiary, which may not be the recipient spouse. So, you just want to be really diligent about making sure that any retirement transfer that is called for in your agreement and thus in your divorce takes place and is completed after your divorce judgment is issued.
The other kinds of administrative considerations that you want to tend to post-divorce would be updating your beneficiaries on your life insurance, getting new health insurance. If you are coming off of your spouse’s plan and you need to enroll in COBRA, or you need to go on the health insurance exchange and figure out your own plan, you need to be working on that as soon as the legal divorce comes through and make sure that that transition happens. You also want to consider whether or not your estate planning documents need to be updated, like your will, a power of attorney, a living will, a healthcare proxy. All of those documents, if they exist, they may have been generated at a time when you were legally married and wanted your spouse to serve in different roles than you would like your ex-spouse to serve in going forward potentially, so you want to think about updating those documents as well.
Then also any non-retirement assets that you have agreed to transfer pursuant to your agreement in your divorce papers. Maybe you’re transferring funds in a brokerage account. Maybe you’re transferring title to your car. Or maybe you’re agreeing to divide a certain account 50/50 to split the proceeds of the account and then close the account. All of those administrative tasks fall to you after your divorce is issued. They are not automatically taken care of as a result of the divorce being completed. So you do have a fair amount of administrative work often that will fall on your shoulders after the divorce. The good news is that it is not particularly challenging or complex work in the way that phase one or working through your parenting and financial agreements often is and was for both people. This is more administrative homework that you just need to make sure happens and is completed as soon as possible after your divorce is issued.
In summary, the three, and arguably four, phases of the divorce process are: Number one, working through the substantive parenting and financial issues that you need to resolve in order to move forward with your divorce. Number two, based on the resolution of those issues, drafting a legal agreement that obligates both of you, binds both of you to the agreements you have made in principle in your negotiation process. Three, drafting the additional court-specific documents that are required in your jurisdiction to be legally divorced. Those, along with your agreement will be submitted to the court. Then there’s a waiting period while the court reviews your documentation. After that period is complete, it will issue, whether it’s called a divorce decree or a judgment of divorce. Different names in different jurisdictions. Basically, it will issue your legal divorce and legally dissolve your marriage. That’s phase three, and that is the completion of the legal divorce process. In reality, there is an additional phase of work for you after that happens, which is the post-divorce administrative matters that you need to take care of in order to effectuate the agreements that you’ve made in the divorce process. That involves the division of things like retirement accounts, updating life insurance and other account beneficiaries, changing your health insurance, updating your estate planning documents, and the like.
This mini-episode covered our overview of the divorce process. I hope it was helpful for you.