Before, During and after Divorce
If you’ve been reading my financial columns for the last couple of years, I’m sure you’ve picked up on a consistent theme: if you plan ahead, you can plan stronger. Divorce is no exception. With the high rate of failed marriages in the United States (even amongst older spouses), no one should remain in the dark about their marital finances. When the decision to end a marriage has been made, there are three critical phases: before, during and after divorce. Let’s take a moment to look at all three. [Please note, I’m not an attorney; I don’t play one on TV, and this isn’t legal advice.]
“Before” Planning: 1. Know where and what all the assets are; 2. Monitor and get copies of investment, banking, and retirement account statements; 3. Know and understand debts; 4. Familiarize yourself with all insurances, especially life insurance policies; and 5. Have a good sense for what it costs to run your household – what comes in, what goes out, and where the leftover money goes.
“During” Planning: 1. Get copies of everything your attorney says you’ll need (all the statements mentioned above plus tax returns); 2. Understand your financial assets from a tax and liquidity standpoint (monies in a 401(k) are very different from cash in a checking account); 3. Know what it will cost each month, after taxes, to run a household on your own; 4. Be clear on how much of the marital assets and/or alimony you’ll need to pay monthly bills and plan your own retirement; and 5. Understand any benefits you may be entitled to due to the marriage – like a pension or Social Security, and the requirements to receive them (e.g., if your spouse’s Social Security earnings record is higher than your own, you’ll be required to have 10 years invested in the marriage to draw the benefit).
“After” Planning: 1. Effectively follow through on the tasks needed to implement the Settlement Agreement and the court’s final order; 2. Transfer and liquidate assets; 3. Pay off debts and close joint accounts; 4. Re-title and change the beneficiary designations on accounts; 4. Update your estate plans (wills, trusts, powers of attorney, healthcare surrogate, and advanced directives); and 5. Build your own financial and investment plan for your needs now and in the future.
These are just fifteen of the many tasks to consider if you divorce. There will likely be more depending on your marital situation. Are there children? Business or real estate holdings? Other sources of income and/or assets? While the idea of corralling all the divorce-related tasks may be overwhelming, I can tell you that the guidance of a competent attorney and an experienced financial planner can definitely help you plan your divorce and your financial future – and plan them stronger!
David D. Holland, a CERTIFIED FINANCIAL PLANNER™ practitioner, hosts a weekday radio show at 9AM on AM1380 Ormond Beach, AM1230 New Smyrna Beach and AM1490 Deland. He has also authored two books in his Confessions of a Financial Planner series. Holland offers investment advice through Holland Advisory Services, Inc., a registered investment adviser in Ormond Beach. He can be contacted at (386) 671-7526. Email your financial questions to info@DavidHolland.com.