by Kristen Miller
After having intertwined finances during a marriage, splitting things up again can be a lengthy and complicated process. Few people think of all of the details that need to be addressed after a divorce, but it’s critical to handle these right away to ensure that money and other assets are managed correctly. There are several major categories of financial concerns to attend to after a divorce.
Wills and Beneficiaries
Many people will their assets to their spouse, but a divorce changes the plan. It’s critical to write a new will as soon as possible after a divorce to ensure that your assets don’t go to your ex if you pass away. In addition to removing your ex-spouse from your will, you should also consider removing children your ex brought into the marriage if you no longer have relationships with them. Beyond the assets that pass through your will, you should also have your family law attorney change the beneficiary of other accounts, like your life insurance policy and your retirement accounts or pension.
You and your ex likely planned on using each other’s assets in retirement, but when you get divorced, those assets are split between you. Now is the time to evaluate what assets you got for retirement and consider whether they will be enough for you. For example, if you haven’t worked much during your lifetime and weren’t married long enough to qualify for spouse benefits, you won’t be able to depend on Social Security for any substantial income. Therefore, you’ll need to save more in private retirement accounts than your ex-spouse will. In many cases, you’ll want to put much of the money you got from your divorce settlement into a retirement account so you have more to draw on when it’s time to retire.
Household Cash Flow
The last part of financial planning to address after a divorce is how your household cash flow will work on just one income. In many cases, you’ll either be paying or receiving child support or alimony, which you’ll have to factor into your cash flow plans. Sit down with a CERTIFIED FINANCIAL PLANNER™ practitioner to look at what money comes in and out and how you can allocate funds to continue meeting your financial goals after the divorce. You may need to consider adjusting your career plans so you can earn more money to support your expenses. Otherwise, downsizing and cutting back is the other way to manage your household cash flow on a balanced budget.
There’s a lot to consider when sorting out your finances after a divorce, and it’s not wise to tackle the project on your own. Professional assistance can help you consider every angle and understand the intricacies of your financial situation. Mistakes in financial planning can have serious repercussions when you’re financially independent, so you want to learn all you can after a divorce and ensure that you have a solid plan to take you into your retirement.
Kristen Miller is not endorsed by or affiliated with LPL Financial or Mike Bonacorsi LLC