Financial Checklist For Women After Divorce
WRITTEN BY: Autumn Lax, CFP® AIF®
Many of our clients are single women, either going through divorce or recently divorced and contrary to the way things used to be in the past, many of these women are also the breadwinner.
Going through a divorce is a very emotional process and on top of the personal side, you have some serious logistical matters to sort through. It’s no surprise that your finances are going to be a big focal point of divorce and while your lawyer may help you navigate the technicalities for the decree itself, what happens next? How do you move forward post-divorce and who is there to help with this new phase of independent life?
The concerns I hear most from my female divorced clients are, “I want to find a way to protect myself going forward, I want a plan that shows achieving my goals independently, and if I want to bring in another partner I can, but I don’t want to be dependent on someone else. How do I ensure my kids are taken care of and what estate planning should I do now to protect myself moving forward?”
Unfortunately, the divorce process isn’t an all-inclusive package. It doesn’t automatically rewrite your estate plan or re-title your accounts. For many, divorce prompts an urgent desire to get estate planning done for the first time. So, certain things, like changing your beneficiaries or retitling accounts (to remove your ex), are an important first step. But if you have children or plan to re-marry, you may want to explore further ways to protect your assets and kiddos moving forward. Keep in mind, some states have laws on when you can change beneficiaries on joint accounts and life insurance during the process so be sure to consult with your attorney before making these changes or wait until your divorce is finalized.
Finances take a bit hit in the divorce process. You may be in a situation where a significant portion of your retirement or liquid assets got split with your ex, leaving you needing to make up for that loss. When I work with divorced clients, we focus on helping you figure out how to fill in those gaps and build up your nest egg once again…then make sure you protect it moving forward!
Here are a few things to consider as it relates to getting on solid financial ground again:
- You may need to reassess cash flow and work up a budget now that you will be managing certain expenses on your own. Paying alimony or split childcare costs can make this seemingly simple process even more complex.
- If you haven’t already, build your own relationship with a financial planner so you can develop your own investment strategy. Men and women approach investing with a different mindset, and the approach you take now, could be different than the one you had with your ex-spouse. For some, the whole investment topic is a completely foreign world…but we’ve built a planning process around educating, with easy digestible steps, to make this a whole lot less intimidating.
- Taxes are a common after thought when it comes to divorce. Consulting with a CPA or tax professional after a divorce can help. Your filing status will now change, and this could affect your tax liability and deductions so the sooner you can address these issues the better. Also, if you have children, you may be splitting who gets the dependent deduction. Many of my clients ask about retirement accounts, and if you need to split these with your ex, be aware of potential tax implications. Working together with a financial planner and tax specialist can help ensure it’s done properly
- Review your insurance needs as they have likely changed. Do you still have the appropriate amount of life insurance, disability or Long-Term Care? Did you lose any coverage in the process and need to make up for this on your own?
Now more than ever its important for you to take charge of your life and your finances. We want to be your partner in this journey and help you develop a plan forward! Below is a checklist that may help as you work through some of these post-divorce items.
Here is a summary of important financial to-do's to review after your divorce:
- Retitling or closing accounts post-divorce
- Updating beneficiaries
- Redoing your will and estate planning
- Change passwords to financial accounts you may have shared with an ex-pre-divorce
- Consult with a tax professional as your deductions and filing status have now changed, the sooner the better]
- Review your insurance needs and any coverage you may be losing as a result of the divorce
- Develop a Financial Life Plan®!