Financial planning during divorce: Protecting your future

Allworth advisor Laurie Ingwersen, CFP^®, CRPC^®, CDFA^®, CBC^®, CEPA^®, offers essential financial planning steps to help individuals protect their future and regain financial confidence during and after a divorce.

 

Divorce is one of life’s most challenging transitions, both emotionally and financially. While no one plans for this situation, taking thoughtful steps to protect your financial future can make all the difference as you navigate this difficult time.

As someone who’s seen the financial and emotional toll divorce can take, I understand how overwhelming it can feel. My goal is to help clients like you regain confidence and control by focusing on practical financial strategies that provide clarity and peace of mind. Let’s explore some essential steps to take when financial planning during a divorce.

1. Take Stock of Your Financial Picture

The first step is understanding where you stand financially. Gather information about all of your assets, liabilities, income, and expenses. This includes:

• Bank accounts (checking and savings)
• Investment accounts (brokerage accounts, retirement accounts, pensions)
• Property and real estate (homes, vacation properties, rental properties)
• Debt (mortgages, car loans, credit cards)
• Insurance policies (life, health, and disability)

Be thorough—it’s important to have a complete picture of your financial situation before you begin negotiating a settlement.

2. Know Your State’s Property Division Rules

Divorce laws vary by state, and understanding how property is divided in your state is essential. In general, there are two main approaches:

• Community Property States: In states like California and Texas, marital assets are typically divided 50/50.
• Equitable Distribution States: Most states follow this approach, where assets are divided in a way that’s considered fair, but not necessarily equal.

Work closely with your attorney or financial advisor to understand how these laws apply to your situation.

3. Understand the Tax Implications

Divorce often comes with complex tax considerations, and failing to plan for them can result in costly mistakes. Here are a few key areas to watch:

• Alimony (Spousal Support): Under current 2025 tax laws, alimony payments are no longer tax-deductible for the payer, and the recipient does not count them as taxable income.
• Retirement Account Transfers: If retirement assets are divided, a Qualified Domestic Relations Order (QDRO) is typically required. This allows retirement accounts to be divided without triggering early withdrawal penalties.
• Property Transfers: While transferring property during a divorce is generally tax-free, future capital gains taxes could be a factor if the asset is sold later.
• Child Tax Credits: If children are involved, clarify which parent will claim the child tax credit on future tax returns.

A financial advisor or CPA can help you navigate these details and minimize your tax burden.

4. Protect Your Credit

Divorce can take a toll on your credit score if shared debts aren’t managed properly. Take steps to protect yourself by:

• Separating joint accounts and opening individual accounts.
• Paying off joint credit card balances or refinancing loans into one person’s name.
• Monitoring your credit report regularly for errors or suspicious activity.

Clear communication with your ex-spouse and creditors can help avoid missed payments or misunderstandings.

5. Revisit Your Financial Plan

Once your divorce is finalized, it’s time to adjust your financial plan to reflect your new reality. Some areas to revisit include:

• Budgeting: Create a budget based on your new income and expenses. Make sure it accounts for any alimony or child support payments you’re receiving or paying.
• Retirement Goals: Divorce often impacts retirement savings, so review your goals and adjust your contributions to get back on track.
• Insurance Needs: Update your life insurance beneficiaries and evaluate whether additional coverage is needed to protect your family.

6. Build Your Support Team

You don’t have to navigate this process alone. A strong support team can make all the difference. Consider working with:

• A Divorce Attorney: To protect your legal rights and ensure a fair settlement.
• A Financial Advisor: To guide you through the financial complexities and help you plan for the future.
• A Therapist or Counselor: To support your emotional well-being during this transition.

Your team can provide the expertise and guidance you need to feel confident and secure as you move forward.

7. Plan for Your Future with Confidence

Divorce is a difficult chapter, but it’s also an opportunity to build a new financial foundation. By taking proactive steps, staying informed, and leaning on trusted professionals, you can create a plan that supports your goals and protects your future.

If you’re navigating divorce and need guidance with your financial planning, I’m here to help. Let’s work together to create a plan that gives you clarity, confidence, and peace of mind for the next chapter of your life.

Laurie Ingwersen, CFP®, CRPC^®, CDFA^®, CBC^®, CEPA^®

Partner Advisor

My father was a financial advisor who introduced me to the impact proactive planning can have on people’s lives at a very early age. At the same time, I also watched my mother struggle to make the right, forward-focused decisions after divorce—which ultimately led her to a life of financial insecurity. Forever moved by the sacrifices she made for us, I want to honor her by helping others avoid some of the mistakes she made. Now as a passionate financial professional myself, I strive to help others make sound financial decisions that expertly balance their priorities today and their future needs.

LEARN HOW I CAN HELP >>