The financial impact of a divorce may be greater than most of us expect. If you have been the “stay at home” parent, you may find yourself without income and may need a support order to sustain life. You may be coming to the realization that one-half of your worth with be gone; overnight. However, with some planning, you can minimize the impact if you think about your finances prior to moving towards a divorce.
1. Do some planning. It is important to know how a divorce will impact your financial goals. Establish which items may be lost and need to be replaced, therefore having an effect on your immediate cash flow. Have an understanding of where your new financial obligations may be, with regard to potential support orders. Understand future expenses, if your children are young, including school tuition, car insurance, or other large purchases, so as not to be caught off guard as time moves forward.
2. Realize that not all assets are created equal. During the course of a divorce, it is important to realize that assets have financial value and emotional value. Although sentimental value items are important, they will not pay the bills. If your wealth is sufficient that the division of property does not demand your concerns over real value, then this may not be a problem. It may be tempting to fight for the residence, but the fact that the asset requires a mortgage payment that is considerably more than you can maintain would be detrimental in the long run. Assets, such as retirement plans which are tax-deferred, are an asset worth seeking; they appreciate over time.
3. Bank and financial accounts should be updated when the time is right. Revise the beneficiaries on your checking and savings accounts, investments, retirement plans and life insurance policies and update your will. After a divorce, the names on titles of real property and vehicles need to be changed. You should also confirm that your name has been removed from any accounts or property held by your former spouse, so you are not liable if they fail to follow through with obligations in regard to those accounts.
4. Check your insurance needs. Once you become single again, your insurance needs will change. Make an appointment with your insurance agent to discuss your new needs as they relate to health, auto, life, property, etc. and confirm that your policies are set up to cover you and your children adequately. Do not forget to ask the court to require your former spouse to maintain established policies to protect support orders, in the event they are injured or prematurely die.
5. Talk to a professional about your finances. Attorneys will help get the ball rolling, but we aren’t financial experts. Get the advice you need with regard to your financial life after divorce. This includes information about income, liabilities, budgeting, and taxes.