Step 1 Establish Goals
Step 2 Gather Data
Step 3 Analyze & Evaluate Your Financial Status
Step 4 Develop a Plan
Step 5 Implement the Plan
Step 6 Monitor the Plan & Make Necessary Adjustments
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Divorce Financial Planning Strategies
In my role in divorce planning I have heard more than once, clients articulate that they would prefer death over another divorce. The stress takes years off one's life. The scars take a lifetime to heal. Typically it takes the average divorced couple seven years to recover financially from a divorce. Divorce is never a good thing, no matter what the psychologists say. Everyone in the family unit suffers. The most distressing part of divorce planning from an advisor point of view is the inability of the client to think clearly. Their brains do not function at an optimal level. The stress clouds their thinking. They just want the divorce process to end so they can get on with their lives. Oftentimes this means settling for less in order to expedite the process. For those seriously considering divorce or in the very beginning phases of a divorce the time to lay out the financial planning strategies is now, not later. You need to determine your course of action at the very beginning, because during the divorce process you will be unable to think as clearly as you do at the beginning.
Financial Planning Strategies:
1. Start a bank account, brokerage account and open a credit card account in your own name. This should be done while still married. The fact is, while you are married, your joint assets offer greater leverage than those assets remaining after the divorce. Your credit score will be higher, your financial balance sheet more robust and your shared liabilities watered down when there are two individuals rather than just one. This is particularly true for spouses who never established such accounts in their own name during the marriage. Don't wait until the divorce process begins to get these accounts opened.
2. Change beneficiaries on life insurance, retirement plans, in your IRAs and trusts.
3. Draft a new will changing beneficiaries.
4. Change title to assets that are owned jointly. This may include your car, an existing joint bank account or a jointly owned brokerage account.
5. Close joint bank and credit card accounts. An angry spouse can cause havoc by withdrawing money or running up the balance on a jointly owned credit card.
6. Sell your home. The clock starts ticking on the residential gain exclusion once the divorce is finalized. Better to sell the home right away and maximize the gain exclusion, which is $500,000 for married individuals.
Tom is a Certified Public Accountant, a Certified Financial Planner, CLTC (Certified Long-Term Care) and President of Cerefice & Company, the largest CPA firm in Rahway, New Jersey. Tom works with clients helping them manage their money, retirement planning, college savings, life insurance needs, IRAs and qualified plan rollovers with an eye towards maximizing tax benefits and minimizing taxes. Tom is founder of the Rich Habits Institute and author of "Rich Habits".
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