For anyone considering divorce, my first piece of advice is this: Batten down the hatches. Divorce is challenging not just emotionally, but also financially. I recently guided my mother through a very tough divorce, so this topic hits close to home. Although the American Psychological Association predicts 40-50 percent of current marriages will end in divorce, many fail to prepare for this potential outcome. In this article, I’ll focus on considerations women should make prior to filing for divorce.
Make The Finances Your Finances
My wife and I intend to raise our two young daughters to be successful, financially independent women. I’m sure that all parents, not just those with daughters, want this for their children. However, a 2018 study by UBS showed that 56 percent of married women are still uninvolved in financial planning decisions. They defer these decisions to their spouses. This puts women at a significant disadvantage heading into a divorce. My mother was part of this 56 percent. One of the issues she struggled with most was understanding the marriage finances, as she had always deferred this to her husband. If you have not always been involved in the financial planning decisions in your marriage, now is the time to get involved. If you have been involved, then continue that dynamic, and make sure you can answer some important questions. Here are some essential questions you need to answer:
• What are all the assets of the marriage? What are their values? Where are they located?
• What are all the liabilities of the marriage? What are their values? Where are they located?
• What are all the income sources? Are these variable or guaranteed? What are their values?
• What are all of our ongoing expenses? Which are essential, and which are discretionary?
• Where and how are we insured? Health? Home? Auto? Life? And others?
• Who are my current beneficiaries — for assets that pass by operation of law, contract, and trust?
These are just some of the matters you’ll need to be familiar with for a proper understanding of your finances before filing for divorce. By answering these questions, you’ll be more prepared to get the best possible outcome for yourself.
Create Your Own Support System
My mother — like most others — needed a combination of family, friends, and professional advisors to guide her through the divorce process. It goes without saying that a family law (divorce) attorney is essential. Also essential is working with a qualified financial planner with training in investment, retirement, and estate planning. Such a financial planner can help give you a better understanding of the following, once you’re on your own:
• What will I require in income when I’m on my own?
• What will be my ongoing expenses?
• Will my investment allocation change now that I’m investing for my own goals, risk tolerance, and time horizon?
• How will I change my retirement plan to reflect my own goals?
• What are the tax ramifications common with divorce?
• What insurance will I still require?
• How should I update my estate plan now that I’m on my own?
These and other questions unique to your own experience can best be answered by meeting with an experienced financial planner. No statistic more shows the importance of sitting down with a financial planner than one released in a study by the US Government Accountability Office. The USGAO found that women make out far worse financially in divorce than men do. In fact, a woman’s income falls over 40 percent after divorce, almost twice as much as that of a man. It’s essential to work with a financial planner to understand how your cash inflows and outflows will be affected when you file, and after completion of your divorce.
Batten Down the Hatches
No matter how much one prepares for an intense event like divorce, there are always surprises. However, by following the tips in this article, you will find yourself better prepared and hopefully better able to improve your eventual outcome. By evaluating and increasing (as needed) your involvement and knowledge of the finances, creating and solidifying a support system, and seeking guidance from professional advisors, you can ease some of the emotional and financial pain that comes from divorce.
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