Preparing for a Divorce: Personal Finance Tips from the Pros



It's hard to think in a practical, financial frame of mind when you're in the midst of the emotional storm of a divorce. All the things that have to be taken care of during a split add what feels like another full-time job to your schedule, and the stress can really take a personal toll. But regardless of the reasons for the divorce or the immediate fallout, each party must consider personal finance decisions several times in the divorce process. Here is what financial professionals say about personal finance health during the divorce process.

You Can Safely Forget Financial Advice from Friends and Coworkers

Once people discover you're going through a divorce, they will inundate you with advice. Divorce is such a common, overwhelming life event that people tend to overshare about what they went through, and mostly what this does is make the speaker feel better about his or her situation.

However, you should only take legal and financial advice from your lawyer and a financial professional, because no one has been through your exact situation. Your friends and coworkers may have good intentions, but following their advice can be disastrous, according to Certified Financial Planner (CFP) Jeff Landers. If you don't know where to start with your personal finances, ask your lawyer if he or she can recommend a financial planner, particularly one with experience in financial planning surrounding divorce.

Tackle the Administrative Work

Here is a basic list of the things to do to secure your personal finance picture when you're divorcing. Some of these things can be done right away, while others have to wait until the divorce is final. Do what you can now rather than trying to do it all once the dust settles:

• Close joint credit accounts.
• Remove your spouse's name from bank accounts, credit cards, and employer records.
• Change your status and relevant information (like marital status and address) on tax records, post office records, professional licenses, property titles, utility bills, and health insurance.
• Open a new bank account and credit card account in your name.
• Disinherit your spouse from your will, trust, medical directive, living will, and power of attorney.
• Change beneficiaries on your pension, 401K, IRA, and life insurance policies.
• Use a personal finance app to track child support, alimony, medical expenses, and other expenses related to the divorce.
• Establish sound credit in your name if you have not done so.

Going forward, Landers tells Huffington Post, "You'll need to address both short-term (day-to-day expenses, monthly utilities, mortgage, car payments, etc.) and long-term (college tuition, retirement, travel) financial needs."

Understand Your Role in Your Marriage's Finances

Robert Pagliarini, CFP, President of Pacifica Wealth Advisors, differentiates between the "out spouse" and the "in spouse" in an article for CBS News. The "out spouse" is the one who has not been involved in managing bills, investments, insurance, or budgeting. This spouse is the one who doesn't have a relationship with the family CPA, financial advisor or attorney. The "in spouse" is the one who has the experience and relationships to make the post-divorce financial transition without starting from scratch. Naturally, whether you are the "out spouse" or the "in spouse" determines how you secure your personal finance future. Pagliarini also recommends working with a Certified Financial Planner: "Work with a financial advisor before the divorce is finalized so you can make sure you are not only getting your fair share, but that you don't get stuck with illiquid assets while your ex gets the cash."

For Those Over Age 50

If you are divorcing in middle age or later, you may not have worries about child custody, but your financial situation is almost always more complex than it was in your twenties and thirties. Howard Hook, CPA, CFP, of EKS Associates tells Financial Advisor, "Although each divorce has its own unique set of circumstances, the single most universal issue affecting couples is time, or specifically, a lack of it." Older divorcing spouses may have to return to the workforce or work more hours than expected for personal finance stability.

Additionally, divorcing people over age 50 have fewer years to get back on track after the typical financial setbacks of divorce before hitting retirement age. Financial advisors with experience helping older adults going through divorce can help these people create a plan to minimize disruption to personal finance and life goals.

Personal finance is never simple, and divorce makes it significantly more complicated. While anyone going through a divorce will be bombarded with advice from well-meaning friends, the true source of help for getting through a divorce with the best possible financial situation is a financial planner, preferably one with experience helping people who are dealing with divorce. It's easy to let emotions take over and neglect personal finances during a divorce, but keeping a clear head and relying on the advice of professionals will help ensure your best possible financial future.

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