A good attorney is an absolute necessity in the divorce process. But, what about the financial considerations beyond legal advice? Working with a financial planner gives you another advocate in your corner—one who is also focused on your well-being after the final papers are signed. As a part of our financial planning services, we walk with clients during, and perhaps more importantly, after the divorce process. Approaching your divorce from a “what’s next” perspective can help with decisions now. Below are 5 things to consider:
Social Security benefits
Especially for spouses divorcing later in life, understanding Social Security options is a must. You may be able to pull a benefit from your divorced spouse’s record that will be higher than what your benefit statement says you’ll receive.
Lump Sum vs. Income Stream
A clean cut may seem appealing, but ongoing ownership in an entity may be preferred over the long haul. Comparing those options is tough. Say your spouse has ownership in a small business that produces income. An income stream over time may be better than a lump sum now. Even still, the emotions involved may supersede the math. Why not understand your options and discuss all angles with a trusted advisor prior to the drafting of legal documents?
Division of Assets
It may not be in your favor to cut each asset equally down the middle. For example, if there are work place retirement plan assets, understanding the pros and cons of a Qualified Domestic Relations Order (QDRO) is important. QDROs are often used in divorce to split a retirement account. QDROs can be very helpful or can cause a headache (or both). Taking a larger piece of another asset may or may not be more ideal.
Understand the tax impact of your divorce settlement--child support and alimony are treated differently for tax purposes. Investable assets carry differing tax ramifications as well. After a long divorce process, the last thing you want is a tax surprise.
Your Financial Future
Say the assets are divided evenly and it seems like a decent chunk of money. But where does that leave you as a single person? What do you need to do to ensure your stability going forward?
From participating in discussions with attorneys to helping with the division of assets, to gaining direction and financial stability after the final documents are signed, we walk with our clients each step of the way. We serve as an advocate who is focused on your financial health and happiness after the separation is complete.
Click here to learn more about our Financial Planning Process.