Financial planning on divorce, Pt. 1
There are no guarantees in life except death and taxes. But there are some high-probability things in life — such as divorce. In fact, roughly 50% of marriages in the U.S. end in divorce (U.S. Census Bureau).
Of course, no one goes into their wedding day expecting to end up a statistic. But when a marriage ends in divorce, it’s best to be prepared financially.
Financial planning is half goals and half being prepared for the unthinkable. At NEST, we help with both: preparing for your desired future while mitigating the potential damage of unexpected life events — including divorce. It can be extremely emotionally taxing. Because of that, money isn’t always the first thing people think about.
That is, until it’s time to negotiate terms. And by then, preventable mistakes could have already been made. That’s why today we’re talking about financial planning through a divorce.
On Divorce — It's Not as Easy as 50/50
While filing for divorce can be drawn out and contentious, some people just want to split things evenly and move on. However, that’s not always as simple as it seems.
Even in the division of properties, you must consider many factors to make a fair appraisal — property value, cost of maintenance, projected value of the area, remaining loan balance, and the number of mortgages. It isn’t as simple as, “you take the house, I’ll take the vacation home.”
If you bring your financial advisor in early, they can work with both parties’ attorneys to ensure the information supports equitable distribution.
Some important considerations include:
The types of accounts and assets you have, and how they are accurately valued.
The needs of each spouse, especially if one will be the primary caretaker of children.
The liquidity of the assets. (What is liquidity?)
The actual value of accounts after factoring in fees, penalties, or taxes.
The real estate’s cost to maintain. The spouse who gets the house may struggle with upkeep.
Your financial advisor can provide an accurate appraisal and insight into the long-term implications of asset division (More on bespoke financial planning).
Pay Close Attention to Dollar Amounts and Percentages
It’s important when dividing assets that you carefully consider the dollar value, projected growth, and interest rates. To bring a swift resolution or to get cash quickly, people sometimes accept lower value assets. That can backfire long-term.
Your financial advisor can help you go over these figures thoroughly to ensure you understand the implications.
Talk to Your Financial Advisor First
While it may not be the first thing on people’s minds, talking to your financial advisor should be one of the first things you do. They can:
Monitor for unusual or retaliatory withdrawals.
Help assess the full scope of your assets (including stocks, bonds, retirement accounts).
Work alongside legal professionals to bring clarity to complex financial scenarios.
Retaliatory behavior is, unfortunately, not uncommon. If your advisor doesn’t know what’s transpiring, they can’t protect your assets effectively.
Divorce is emotionally difficult. But it doesn’t have to become a financial disaster. By involving a trusted financial planner from the beginning, you’ll have an advocate who can help you navigate the numbers with confidence and clarity.
If you have any further questions about financial planning through divorce, or if you’d like to schedule a financial planning session with Gloria, reach out at info@nestfinancial.net.
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DISCLAIMER: We are legally obligated to remind you that the information and opinions shared in this article are for educational purposes only and are not financial planning or investment advice. For guidance about your unique goals, drop us a line at info@nestfinancial.net.
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