Facing Divorce? Address These Financial Priorities First
By Guli Fager, Financial Advisor
The COVID-19 pandemic has caused unprecedented strain on families and relationships. While the emotional toll of dissolving a marriage may be top of mind, there are important financial considerations as well.
Zero in on expenses: Make a list of all recurring costs, both “nondiscretionary” items (rent/mortgage, utilities, taxes, student loan payments, insurance, childcare, tuition) and discretionary (food, meals out, clothing, pets, shopping, travel, entertainment). If you haven’t paid much attention to the outflow of money in your household, get access to bank and credit cart statements so you can review a few months’ worth of transactions.
If your financial accounts have all been joint, open a separate account for yourself. If you anticipate major expenses like security deposit, down payment, or a new car, start setting aside money in a separate bank account.
Update Retirement Funds & Life Insurance: If you are allocated some of your spouse’s retirement funds through a QDRO (Qualified Domestic Relations Order), you will need to open an IRA for yourself in which you can deposit those funds. Toler Financial Group can help with this. If you have your own retirement plan, you’ll need to update the beneficiaries – the default is usually your spouse and must be updated post-divorce.
If you are close to retirement age and worked part time or not at all for much of your marriage, you might be eligible for a higher social security benefit based on your ex-spouses’ work history. Read more here from the Social Security Administration: Ex-Spouse Benefits And How They Affect You
Life insurance policy beneficiaries should also be reviewed and updated. Insurance policies can be transferred in a divorce so, for example, you can be the owner and beneficiary of a policy covering your ex-spouse’s life. You can pay the premium yourself or the premiums can be required by the divorce decree to provide protection for child/spousal support in the event of your ex-spouse’s death. This can be an important safety net after divorce, especially if there are children who will need to go to college.
If you didn’t have life insurance before and will be receiving child/spousal support, consider taking a life insurance policy that covers your ex-spouse so that if they pass away before the children reach adulthood, there will be financial resources available to replace that support. Toler Financial Group can advise on insurance strategy.
Estate Planning: if you had a will, powers of attorney and other estate plans together with your ex-spouse, those documents need to be updated. If you didn’t have them, establish them now. Our firm works extensively with LGBTQ inclusive estate and family law attorneys and can recommend an attorney if you need one.
This is an emotionally heightened time so please reach out to Guli if you would like a free consultation on the financial aspects of divorce.