Divorce: First Steps to a New Beginning
After a marriage breaks down, the last thing most people want to do is sit down with one more attorney. But no matter how old you are or if you have children, it is important to consult financial and legal experts to ensure you have an up-to-date financial and estate plan for your new life once the divorce decree is final.
It’s also best to combine estate planning with post-divorce financial planning. If you weren’t working with a financial or estate planner during the divorce process, it’s time to do it now. The immediate months after a divorce can be disorienting and even if you don’t move, you are literally starting a new home that you will have to run yourself, and that means new money problems to face.
That’s why the weeks immediately following your divorce are a good time to review your short-term and long-term spending and planning goals. Here’s a general roadmap to guide that process:
Start with a financial planner: Whether you plan to stay single, remarry, or move in with a new partner, it is good to have a basic overview of your finances as soon as possible after the divorce is final. Newly single expenses can add up quickly and unexpectedly, and a financial planning professional can help you review your new expenses and current savings needs, compare strategies to achieve long-term goals like college and retirement, and provide critical tools to protect. your assets. and loved ones if you die suddenly. Even if you have a good relationship with a former spouse and have addressed key issues for your children as part of the divorce process, you should re-examine all of these issues as one person before moving on to the next stage.
Talk to a trained estate planning attorney about wills and other critical documents: It is true that there are software programs and other kit solutions available for writing basic wills, powers of attorney, and certain simple trust agreements. But it makes sense to coordinate the activities of a financial planner with an estate planning attorney who can tailor a specific general estate plan to your needs, no matter how basic they may be at the moment. Even if you are very young and low on assets, it makes sense to get some solid advice in this area so that you can manage such planning as you get older and your finances become more complex.
Particularly if you have children, such planning is important if you plan to remarry and if you want to ensure that specific assets are guaranteed to them when you die. In some cases where a spouse dies unmarried and has minor children, a former spouse can automatically gain control of assets that were supposed to be destined for the children. If you don’t want that to happen, you have to legally plan for it.
Make a Guardianship Game Plan for Your Children: It is not enough to plan how money and assets will go to your children if you or your ex-spouse die suddenly or become disabled. If your children are minors, it is particularly important to make sure that you and your ex-spouse have a guardianship plan for their upbringing, as well as the assets they may inherit. You can completely rely on your ex-spouse’s new husband, wife, or partner to raise your children if your ex-spouse dies before you, but there may be others better equipped to handle this. So spell that out now. Additionally, if there are any trust or estate issues that become effective for your children once they reach adulthood, it is also important to establish an efficient legal structure to distribute those assets, as well as to appoint a trustee in a will to train and guide your children through that financial transition.
Plan for children with special needs: If one of your children is disabled and is expected to need some assistance for life, you should consult a qualified attorney to help you create a special needs trust. It will help protect your child from having to give up any public or social financial assistance, as well as access to special doctors, medical help, special prescriptions, or treatments that could be withdrawn if they personally inherit assets that would disqualify them. programs. When such assets are held in trust, they are not counted as the child’s assets. The advantage is that those inherited assets can still be used to maintain your home or other personal living needs without negatively impacting your qualification for government assistance programs.
Get solid protection instead: Most people focus on what can happen to their health insurance if they get divorced, but insurance-related issues like life, property / casualty, and disability insurance sometimes take a backseat. If you are recently single, you definitely need the best health coverage you can afford for yourself and your children, but life, property, liability and disability insurance becomes doubly important, particularly if you were unable to address those needs during the divorce. Even if your ex-spouse cooperates with financial support, it is wise to insure yourself as if they weren’t. A financial planner should be able to analyze those options in detail.
Review all your investments for primary property and beneficiary information: Even if you were correctly advised to change the names of the assets that you and your spouse were dividing between you, it still makes sense after the divorce to check that the names are actually correct on those assets and, most importantly, to make sure that all the Beneficiary information is correct.
Manage your “windfall”: People may mistakenly believe that just because they are smart in other areas of life they can make investment decisions after going through an emotionally difficult event like divorce. It is important not to be blinded by the windfall profits that one could receive. There are long-term issues to consider. And as tempting as it may be to blow off some steam with a vacation, a new car or truck, or even a closet, people have to think about the day after tomorrow. Now is not the time to bet the ranch on the number 3 on the Roullette table or the next high-flying action you heard someone mention while at the gym.
That is why it is important not to overdo it with a little R&R needed, but to save most of what can be received in cash to help supplement the emergency fund, cover debt service, and any future moves in career or in the future. home. By meeting with a professional financial planner shortly after the divorce, one can outline short-term and long-term goals to prepare for. Save any drastic changes in investment allocations or decisions for when things stabilize (maybe 3 or 6 months after the divorce is final).