Divorce means separation and starting over. It means substantial life changes. It is also time to reassess everything. Whether you already had a financial plan in place or not, it is time to evaluate or reevaluate your financial situation and create a financial plan to secure your new future. Financial planning after a divorce is necessary, as the future goals you had will change when you get divorced.
Review your finances and expenses
The best advice is to be proactive. Most people get divorced and then realize they have to deal with the consequences. To be successful following a divorce, you should think about your finances before you actually sign the divorce decree. Already have a plan in place. Although every divorce may be different, one common truth is that maintaining two separate households will be more expensive than one. Take into consideration what you were spending before the divorce and how those expenses will change. You need to have a realistic idea of what you can afford going forward. If you have children, be sure to consider their potential future expenses, while taking into consideration child support payments.
Consider downsizing your home
Most people decide to stay in the family home for the sake of the minor children, in an effort to disrupt their lives as little as possible. However, that can be a very difficult situation financially, because it costs a lot to maintain a home on one income, if the mortgage had been maintained by two. While moving out of the family home may be an emotional decision, moving to a less expensive home, or even renting, may be a better option depending on your budget.
Make sure you have sufficient health insurance
Health insurance is often a very substantial expense, especially if you were covered under your spouse’s policy before the divorce. Though you have the option of using COBRA, it is often very expensive as well, and it only lasts for 36 months. Before the divorce is finalized, you should start shopping for a new health insurance policy.
Considerations involving alimony
Alimony, often referred to as spousal support, may be a part of your divorce settlement. Whether you are the spouse who is paying or receiving, there are certain financial issues that need to be given some thought. There are various factors that go into alimony, including the length of the marriage and whether one spouse did not work during the marriage. Permanent maintenance agreements, as part of a divorce, do not always remain permanent. Alimony can end if the receiving spouse retires, is unable to continue working, or remarries. In the end, though, alimony will have an effect on both spouse’s budgets, as well as their taxes.
Don't forget the estate plan
In most states, a divorce will nullify the portion of wills that name a spouse as a personal representative or beneficiary. The same is often true as to trusts. Consider, however, what would happen if a death occurs during the process, but before the divorce is final. Increased emotional and mental strain can lead to illnesses and accidents, so be certain to meet with your estate planning attorney even before the divorce is final.
If you have questions regarding divorce, or any other financial planning issues, please contact the experienced attorneys at Anderson, Dorn & Rader, Ltd., either online or by calling us at (775) 823-9455.
