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Going through a Divorce: What Now, Financially?


Divorce can have a huge emotional toll, but it can also have a major impact on your financial picture. Here are some things to keep in mind if you are going through the process.

With rare exceptions, divorces are difficult emotionally. There may be children involved, there may be acrimony on both sides, and there may be a great deal of uncertainty about what your post-divorce life will look like. While financial concerns may not be top of mind, the reality is that many different issues must be dealt with. Some of them will likely involve an attorney, but some may also involve a financial advisor as well. Here’s a quick look at some of the matters you’ll want to keep in mind.

The Financial Terms of Your Divorce Settlement

Whether you may be receiving alimony and/or child support or paying for it, recognize that the amount of money you have set aside for investments and retirement savings may necessarily change. You may be responsible for rent or another mortgage payment in addition to what you were paying before. Other expenses may be on the rise as well, including attorney fees, separate utilities you’re now responsible for, and many others.

While some divorcing couples will pursue an amicable split and may even do so without an attorney, that won’t work for everyone. Many people going through a divorce benefit not just from the legal expertise of an attorney, but also simply from having the objective view of a third party. Before you sit down with your attorney, come prepared with the full financial picture of where you are, where you want to go, your current income and debt load, and a general sense of what you might want to keep the same. For example, if you and your spouse are both putting money into a 529 College Savings plan for a school-age child, you may not wish for that to change. You’ll need lists of your earnings and possessions, the earnings and possessions of your spouse, and a third category: marital possessions. Your debts will have to be similarly categorized.

There are too many variables to list them all here, but the key point is to think through all the different financial aspects of your life that may change before you meet with your representative. This time can be overwhelming. Maximize the time with your attorney by being as prepared as you can. In particular, if there will be support for either spouse and some divvying up of current investments, consider how you’d want those to change. Although the exact scenario that works best for you may not come to pass ultimately, it will be helpful to have a baseline expectation and work from there.

Consider Some Tax Consequences, and an Advisor

If you and your spouse jointly practiced medicine together, there may be significant assets that need to be split. And in many cases, there will be split equity of a home, concerns about how to claim interest deductions on tax filings, and other questions. In any divorce scenario, there can be a dispute about saved retirement funds, and if some sort of distribution is required, there are specific legal documents that will have to be filled out and some tax implications for large lump-sum distributions from one party to another. Not all attorneys are fully informed about qualified domestic relations orders and other documents that will be needed.

This is complicated stuff; consider including a financial or tax advisor in your divorce planning.

Updating Beneficiaries and Making Insurance Decisions

Are you on your spouse’s benefit plan? Chances are you’ll have to find an alternative sooner rather than later. It’s also essential that you take time to review your beneficiary designations on both life insurance policies and potentially on some savings and investment vehicles, such as any annuities you may have.

There is a lot involved in a divorce proceeding, and while you may have moments of clarity, there will likely be times of confusion and uncertainty as well. Confide in a trusted friend, think carefully about whether or not you need legal representation, and think also about working with a financial advisor. Decisions you make now with a foggy head could be legally binding for a very long time.

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Victor J. Dzau, MD, gives expert advice
Victor J. Dzau, MD, gives expert advice