You may not realize it, but a divorce will be the biggest transaction of your life. It can set your financial trajectory for decades to come. If you’re age 50 or older, the stakes are even higher because you are closer to retirement.
It’s really important to get all the details squared away the first time, because mistakes made during divorce proceedings can cost you for many years. So, how can you get through this process without putting yourself in a financial bind?
One way is to insure support payments. If you are receiving child support or spousal support from your ex, this crucial source of income can vanish in an instant if your ex-spouse suddenly passes away. Therefore, it is wise to back up those payments in the form of a life insurance policy. Additionally, by owning the policy, you will guarantee that your ex-partner will not be able to end payments or alter the beneficiary.
When it comes to the division of your marital assets, you should focus on liquidity. A typical scenario has a woman ending up with the marital residece, but she may end up being unable to support herself. It could be that taking the same amount of your home’s value in financial assets would be better than taking the house itself. This focus on liquidity applies to taxes as well. A house can come with a larger tax bill, so one possibility that could work for both parties is co-ownership of the house. Additionally, taxes can reduce the value of a 401(k) or 403(b) plan vs. a taxable account.
With all these financial fluctuations, you need to ready yourself for a major lifestyle change. Both you and your partner will have to adjust to a new normal. If you haven’t been earning your own income, this new normal will introduce an even more frugal life for you. Budgeting can help ease you into this new life.
Going through a divorce can be an emotional ordeal, especially around the topic of money. You may be feeling overwhelmed with all the changes. Ultimately, what can help you through this difficult time is to seek professional help. A professional financial advisor can provide guidance through your lifestyle adjustment and set you up for a brighter future.
Even after seeking professional financial advice, you will still need some legal help. Reaching out to an experienced family law attorney can help provide some needed support and assistance.