Our Monthly Tip, as featured in Family Lawyer Magazine:
Leverage July’s independence theme to seize your financial independence after divorce! Aside from being a huge life change, divorce can be an overwhelming and difficult undertaking from a planning and financial standpoint. Fortunately, there are several steps you can take to make the process less daunting.
1. Get organized
You should have a clear picture of your marital balance sheet and your cash flow needs before starting the divorce process, especially if you were not very involved in handling the finances during the marriage. Assembling and reviewing financial documents (bank statements, investment accounts, retirement accounts, tax returns, etc.) with a financial advisor will often be key in understanding current income, expenses, assets, and debts.
2. Examine current and future expenses – including for children – for accurate projections
An important step in the divorce process is projecting how a proposed settlement will – or will not – sustain your lifestyle. An accurate lifestyle analysis includes accounting for additional expenses for children, such as summer camp, college tuition and future education funding, hobbies, etc. Financial advisors can help successfully position you and your attorney at the negotiating table and beyond with comprehensive financial planning and cash flow analysis.
3. Review existing marital agreements
If you have an existing prenuptial or postnuptial agreement, review the agreement with your attorney to see what rights and obligations are incorporated.
4. Update planning and other important documents
During times of transition – especially divorce – it’s key for you to review all your estate planning documents and beneficiary designations to make sure the documents reflect your current wishes and heirs. While some planning might have to wait until the divorce decree is final, documents such as wills, powers of attorney, and health care directives, can and should generally be updated while divorce is pending so your soon-to-be ex-spouse inherits the minimum possible and is not able to make important financial and health care decisions for you.
5. Establish individual bank accounts and build credit history
Consider opening accounts in your own name so you have cash readily available. You should also examine your credit report to review your credit history – or lack thereof. You may have been an additional cardholder on your spouse’s credit cards and may not have your own credit history. If so, consider applying for a credit card in your individual name to build your credit score.
6. Create a sustainable financial plan
You should implement a thoughtful long-term financial plan so that a lump-sum settlement and/or alimony proceeds can sustain your desired lifestyle. Consult with a financial advisor for guidance on organizing your finances, running cash flow projections, stress testing a portfolio, and modeling projected rates of returns, inflation assumptions, and upcoming outlays to give you peace of mind for the future.
7. Engage a trusted team
A trusted team of professionals – which typically includes a matrimonial attorney, a trusts & estates attorney, a financial advisor, and an accountant – can help make the divorce process less daunting for you. Including cross-disciplinary experts from the outset can help you navigate the divorce process, provide holistic guidance and support, and position you for a successful future.
Surrounding yourself with the right professional support team can help you secure your financial freedom after divorce. July is an ideal month to declare your financial independence and start a new chapter.
This article is for general information only and is not intended as an offer or solicitation for the sale of any financial product, service or other professional advice. Wilmington Trust does not provide tax, legal or accounting advice. Professional advice always requires consideration of individual circumstances.
Investing involves risks and you may incur a profit or a loss. There is no assurance that any investment strategy will be successful.