Divorce: 5 Key Financial Considerations

1. Assess your priorities

Sometimes it’s as simple as knowing precisely what the things are that you won’t compromise on, and being comfortable with the things you will.

For example: Do you want to keep the house? Fund your children's college education? Or invest in your own education to enhance your earning potential?

And what about retirement?

Don't forget to work to ensure that your part of the shared assets will be enough to help secure a stable financial future.

2. Know your future responsibilities

You need to understand the scope and duration of potential financial responsibilities, such as alimony and child support.

Consider the financial implications of any support payments and how they might influence your future.

We recommend that you talk to your advisor and your attorney to fully understand and plan for these responsibilities.

3. Conduct thorough research

Obtain all relevant financial documents, including income statements, tax returns, investment portfolios, real estate deeds, and any other key records.

Take the time to carefully review these documents to gain insight into your current financial standing. Learn which areas may need attention or further clarification during the divorce process. And be meticulous in gathering this information, as it will protect your moving forward.

4. Create a budget

Establishing a true, accurate budget (your advisor can help with this) post-divorce is paramount to understanding your financial obligations and ensuring financial stability.

This includes accounting for all expenses, including housing, utilities, groceries, insurance, and any potential legal or financial fees associated with the divorce. You’ll need to allocate a portion of your budget towards savings and emergency funds to prepare for any unforeseen circumstances.

5. Work with your advisor to develop a financial plan

Developing a comprehensive financial plan for your post-divorce life is critical. A well-crafted financial plan considers your current financial situation, including income, expenses, assets, and liabilities, and outlines strategic steps to optimize your resources and help you achieve long-term financial security.

What are 6 key estate planning documents you may need?

1. Revocable Living Trust: This trust enables you to maintain control of your assets, not only during your lifetime, but also after your passing. It helps your heirs to potentially save money on probate and taxes, and it makes certain that your assets are distributed according to your wishes.
2. Wills and Will Substitutes: These ensure that wills and beneficiary forms are updated post-divorce to accurately distribute assets and prevent unintended beneficiaries from receiving your assets.

3. Durable Power of Attorney: This designates a trusted individual to manage specific health, legal, and financial responsibilities, particularly in case of incapacitation.

4. Giving Plan: This will incorporate charitable gifts into your estate and financial plans, and that allows flexibility in response to changing life circumstances.

5. Health Care Proxy: This appoints someone to make medical decisions in the event of your incapacitation, and it ensures that your preferences for medical treatment are respected.

6. Written Instructions: Provides essential, non-legal, instructions to your survivors, including things such as the locations of your important records, investment accounts, safe deposit box details, and logins and passwords for digital assets. (Do not forget that you need to account for your digital life after you are gone.)

By adopting these financial considerations and estate-planning tools into your divorce proceedings, you can proactively manage your financial well-being and establish a more safe and organized foundation going forward.

Taking a proactive approach to financial planning and estate planning empowers you to make informed decisions and safeguard your financial interests, ensuring a secure and stable future for yourself and your loved ones.