5 Financial Divorce Tips

Your share of the assets could be substantially whittled away by taxes and penalties. Be sure you choose an attorney who understands tax consequences and involve your CPA in the process early on. “There are financial planning firms and CPA firms that specialize in divorce planning and/or litigation support, but the time to start that planning is as soon as the decision is made to divorce,” says Dylan Ross, CFP and owner of Swan Financial Planning in New Jersey.  

“Give your financial advisor your attorney's business card and vice-versa,” advises Michael Reid, CPA and owner of Reid Financial Group. “Encourage your attorney to call you before calling your advisor, in case you can answer questions quickly. Only have your advisor contact your attorney to ‘briefly clarify matters that you don't understand’ to save on legal and advisor bills. These two professionals will provide checks and balances on each other.” 

4. Guarantee Future Support.
Even if  child support is addressed in the settlement, future events can bring the support to an abrupt halt if you don’t take precautions now. “One tip before finalizing a divorce is to mandate continuing or new life insurance while support payments are being made,” says Tony Blasting, a CLU, ChFC, CFP, AEP, financial advisor at Northwestern Mutual Financial Network. “I have seen cases where this is overlooked. If your ex dies, that will be the end of support checks. Even when the mandate is in place, he or she may change beneficiaries or lapse coverage. The only sure protection is for the receiving spouse to own the policy.”  Follow the same advice on ensuring the mortgage or other debts get paid, including future college costs, in the event your ex dies or becomes disabled.  

5. Change Beneficiaries Immediately.
Unless you want “to death do us part” to turn into “to death doth us remarry,” change the beneficiaries on all your insurance policies. “Review beneficiary designations. Many people don't do this and inadvertently leave their accounts to their ex-spouse at death,” warns Richard Krasney, CFP, President/ Personal Chief Financial, RJK Wealth Management, LLC. “Make sure to review the designations. Most commonly, this would apply to pension accounts, annuities, IRA, 401k's, and other retirement type accounts, and life insurance policies.” There is one more money  issue to consider: the cost of your attorney. In every  bitter divorce, it’s the legal beagles that get the biggest bone. “Look at mediation rather than traditional divorce. Divorce mediators can save you both a lot of time and money,” says Krasney. “A mediator is knowledgeable about the law and will be able to help you to determine if your request to saw the pet dog in half will just wind up wasting your time and money. They know the state laws and may be useful in situations where there isn't bloodthirsty animosity toward one another.”