Getting divorced is a major life event that affects not just both spouses but the whole family. The primary concerns for people making this difficult decision are the emotional toll, the life disruptions, and the effect it can have on young children. Financial considerations are often a close second. A divorce can create drastic changes to finances and the risk that you may be left in a bad financial situation. In this article we’ll discuss some of things you can do to minimize the financial hit of a divorce.
Creating the right team
Among the most important things to consider when getting divorced are coming to a fair and equitable division of property, a fair amount for alimony, and child support if applicable. This may seem daunting, especially if either you or your spouse are a business owner or own real estate.
It’s critical to have the right professionals helping you through the process. An attorney who specializes in divorce is the first professional to consider. Don’t assume a tough and aggressive approach will be preferable. Contentious divorces often cause more financial and emotional pain for both spouses than an amicable one.
If both spouses agree they don’t want to go to court, a collaborative divorce is preferred. The collaborative process involves a series of meetings between the interested individuals to reach agreements that are in the best interest of all the involved parties, including the children. During a collaborative dissolution, the parties have more control over the process, as they are involved in the decision making each step of the way. Instead of litigating the matter, the parties make the decisions that will determine their life after divorce. The attorneys pledge to not litigate the matter or threaten to litigate the matter.
One of the professionals often used in a collaborative divorce is a Certified Divorce Financial Analyst (CDFA). A CDFA professional can answer critical financial questions and offer guidance on money matters during a divorce. A CDFA profession will work to:
- Determine what you own, as well as the advantages and disadvantages of dividing assets and debts in different ways
- Analyze various options to divide a 401(K) or pension
- Decide what investment and support options will best provide financial security
- Analyze income tax returns and financial statements to find hidden assets, if any
- Ensure the settlement drives to the heart of what matters most to you
- Consider the financial pros and cons of lump sum alimony
“Get our full checklist of financial considerations when getting a divorce here.”
Financial planning during a divorce
In addition to getting help from legal professionals, having a financial planner involved can also be very important. There can be many financial decisions that must be made in a divorce, and those decisions can affect one or both spouses for a long time.
A financial planner can assist with negotiating agreements, as well as decisions related to taxes, life insurance, pensions, executive benefits, and health insurance.
Post-divorce money management
You may need to make changes to existing documents and accounts. If your name changed with the divorce, name changes will need to be made with your employer, the Social Security Administration, DMV, on bank and investment accounts, insurance agencies and with creditors.
Other things that should be updated after a divorce are your estate planning documents, beneficiaries on accounts and life insurance, property titles, credit reports and tax-filing choices.
A financial advisor can help guide you as you go through these changes. At Blankinship & Foster, we specialize in personal financial planning for women, physicians, and retirees. We help you keep your financial plan in focus year-round.