How to use this tool
How to use this tool
Divorce and Your Finances
by Dave Horan (Write for us!)
(Click on the links within the article to get definition of that word)
(Click on the links within the article to get definition of that word)
Q: I will soon be divorced, and I am concerned about how my spouse and I are going to handle financial matters. What
steps can I take to ensure that I won't be jeopardizing my future?
A: For starters, make sure both of you know where you stand, as far as your finances. If one person in a marriage has pretty much handled all the money and investment decisions, the other one needs to take a "crash course" to catch up. You need to know as much as possible about your situation.
Q: How do I begin?
A: List all your investments - stocks, bonds, mutual funds, etc. - and determine who is listed as the owner. Also, go over all your debts, such as your mortgage, car payment and credit cards; here, too, you will need to know if one or both of you are listed as the responsible party. Keep in mind that, at this point, you are not trying to "split up" assets or debts; you just need to know what's out there as a basis for later actions.
Q: Will I have to change the way I invest?
A: Possibly. You and your spouse may have had different investment styles. For example, your spouse may be an aggressive investor, willing to take greater risks in the hope of higher returns. On the other hand, you might be more conservative, accepting lower returns in favor of preserving principal. You might have reached some middle ground while you were married, but now, you'll have to chart your own course. And you may have to step outside your comfort zone, too. Even if you are a conservative investor by nature, you may need to invest for growth if you're going to achieve your long-term goals - and that means, you'll need some stocks in your portfolio. To make the right decisions, you may want to work with a financial professional.
Q: What should I do about some of the goals we had in common, like sending our kids to college?
A: If at all possible, try to work with your spouse to keep making progress toward your joint objectives. By combining your resources and coordinating your strategies, you can get the maximum benefits from college-savings strategies and vehicles, such as tax-advantaged Section 529 plans.
Q: What else should I keep in mind as I go through the divorce process?
A: Don't forget about insurance. Once you are divorced, you may lose some of the forms of protection you had while you were married. Consequently, you may need to consider adding, or expanding, your life and disability insurance. Also, once you reach your 50s, you might want to take a close look at long-term care insurance. You may never need to spend time in a nursing home, but, if you did, the costs would be enormous - and, if you're on your own, the expenses will loom even larger. A long-term care policy can help protect your financial independence - and the younger you are when you buy a policy, the less expensive the premiums will be.
Q: What about my will? Do I need to revise it?
A: Almost certainly. See your tax and legal advisors right away about revising your will or any trust arrangements you may have established.
Q: Is there anything else I need to keep in mind?
A: Yes. Review the beneficiary designations on all of your financial papers, including insurance policies, retirement plans and annuities. Many people forget to change their beneficiaries when they divorce; if they eventually remarry, they will leave earlier spouses in a position to receive assets, at the expense of new spouses.
Piper Jaffray & Co., Member SIPC and NYSE.
A: For starters, make sure both of you know where you stand, as far as your finances. If one person in a marriage has pretty much handled all the money and investment decisions, the other one needs to take a "crash course" to catch up. You need to know as much as possible about your situation.
Q: How do I begin?
A: List all your investments - stocks, bonds, mutual funds, etc. - and determine who is listed as the owner. Also, go over all your debts, such as your mortgage, car payment and credit cards; here, too, you will need to know if one or both of you are listed as the responsible party. Keep in mind that, at this point, you are not trying to "split up" assets or debts; you just need to know what's out there as a basis for later actions.
Q: Will I have to change the way I invest?
A: Possibly. You and your spouse may have had different investment styles. For example, your spouse may be an aggressive investor, willing to take greater risks in the hope of higher returns. On the other hand, you might be more conservative, accepting lower returns in favor of preserving principal. You might have reached some middle ground while you were married, but now, you'll have to chart your own course. And you may have to step outside your comfort zone, too. Even if you are a conservative investor by nature, you may need to invest for growth if you're going to achieve your long-term goals - and that means, you'll need some stocks in your portfolio. To make the right decisions, you may want to work with a financial professional.
Q: What should I do about some of the goals we had in common, like sending our kids to college?
A: If at all possible, try to work with your spouse to keep making progress toward your joint objectives. By combining your resources and coordinating your strategies, you can get the maximum benefits from college-savings strategies and vehicles, such as tax-advantaged Section 529 plans.
Q: What else should I keep in mind as I go through the divorce process?
A: Don't forget about insurance. Once you are divorced, you may lose some of the forms of protection you had while you were married. Consequently, you may need to consider adding, or expanding, your life and disability insurance. Also, once you reach your 50s, you might want to take a close look at long-term care insurance. You may never need to spend time in a nursing home, but, if you did, the costs would be enormous - and, if you're on your own, the expenses will loom even larger. A long-term care policy can help protect your financial independence - and the younger you are when you buy a policy, the less expensive the premiums will be.
Q: What about my will? Do I need to revise it?
A: Almost certainly. See your tax and legal advisors right away about revising your will or any trust arrangements you may have established.
Q: Is there anything else I need to keep in mind?
A: Yes. Review the beneficiary designations on all of your financial papers, including insurance policies, retirement plans and annuities. Many people forget to change their beneficiaries when they divorce; if they eventually remarry, they will leave earlier spouses in a position to receive assets, at the expense of new spouses.
Piper Jaffray & Co., Member SIPC and NYSE.
Email this Article
Print this Article
Cite this Article
Other Suggested Articles
Cohabitating Couples Need to Establish Rights Now >
Divorce Decrees Often Left Lacking >
For Richer Or Poorer >
When Facing Separation or Divorce, Be Prepared to Negotiate >
Pre-Nuptual Agreements: Sign and be Mine >
Sign and be Mine >
Money and Marriage >
Suddenly Single: Steps to Financial Fitness >
Other Articles By This Author
Don't Let the "Pink Slip" Ruin Your Financial Plans >
Determining the Optimal Rebalancing Frequency >
Don't Overload Your 401(k) with Company Stock >
Don't Let Divorce Lead to Financial Turmoil >
Before Picking a Financial Advisor, Ask the Right Questions >
Article reprinted with permission. Unauthorized reproduction of this content is prohibited.
Click here to license InvestorGuide University content.
Click here to license InvestorGuide University content.
