There’s no getting around it: Divorces are difficult. Of course, they take a significant emotional toll, but they can also complicate other areas of your life — including your personal finances. The good news is, there are steps you can take early on to make the process smoother. If you’re wondering how to prepare financially for divorce, here are some of our top tips.
Assemble Your Own Financial Team
In amicable splits, people sometimes plan on sharing a financial advisor with their former partner during divorce proceedings. After all, divorces are expensive enough when it comes to legal fees alone. But splitting a financial advisor with your ex is almost always a mistake. Financial advisors are tasked with doing everything in their clients’ best interest — and that’s difficult, if not impossible, when dealing with two people that have two different interests.
When thinking about how to financially prepare for divorce, hiring your own personal financial advisor is one of the best first steps you can take. They can help you evaluate your current situation, come up with a strategy, and help you carry it out. This can be especially helpful when you’re unfamiliar with the divorce process or feeling overwhelmed by it. The knowledge and experience they have, combined with the fact that they aren’t compromised due to personal involvement, typically results in better financial outcomes for those involved.
Beyond expenses associated directly with the divorce, financial advisors can also help you factor the longer-term financial implications of your divorce — changes in income or asset value, child support, alimony payments, etc. — into your long-term financial plan. That way, you’ll be able to not just emerge on the other side of the divorce financially sound but to also set yourself up to thrive in the future.
Read More: Five Things You Should Know When Planning for Divorce
Take Stock of Your Assets
With a financial team in your corner, the next step of how to prepare financially for divorce is to take inventory of your financial assets: savings accounts, investments, retirement or pension plans, property, valuables like vehicles or jewelry… everything you can think of that may have a significant value.
And again, make sure to take an individual approach here — don’t just rely on your former partner to provide an accurate list of your mutual assets and their value. In many couples, one person will handle the finances for the two of them, but that system won’t continue to work during a divorce. An inaccurate estimate from an ex, whether intentional or not, can be an expensive mistake.
Don’t be afraid to pull in experts for appraisals when necessary, such as real estate professionals to appraise the value of your home. CPAs can also be helpful in accounting for the value of certain complex assets, like businesses in the name of one partner or company equity that hasn’t been fully vested.
Read More: CPA vs. Financial Advisor: Which Do You Need?
Be Open to Compromise
When thinking about how to prepare financially for divorce, concessions probably aren’t the first thing that comes to mind. But divorce is a two-way street, and there’s a good chance you won’t get everything you want. While it can be tempting to go for exactly what you had in mind, reaching a compromise can be a better option in the long run. It’s not just about avoiding disputes or rancor — it can often be more affordable to agree to concessions than drag a process out.
Fees for attorneys and other hourly advisors can add up quickly and may even cancel out any possible gains from further negotiation. Getting an additional $10,000 from a joint account, for example, isn’t really a win if it took an additional three months and $12,000 in legal fees. But if you’re ever unsure of whether or not it’s worth conceding a particular term of your settlement, consult with your financial advisor.
Suppose you’re on good terms with your ex; in that case, you may even want to consider a collaborative approach in which you and your legal team work with your former partner and their legal team to reach an equitable settlement without litigation or hostile tactics. Because you’re working together toward an end goal rather than nitpicking over who gets what, a collaborative settlement can be a lot quicker and, consequently, more cost-effective, than a traditional one.1
Make Divorce Settlement as Stress-Free as Possible
Divorces are hard enough — they shouldn’t be made even harder by financial stress. If you’ve been wondering how to prepare financially for divorce, you may be interested in the specialized financial services Team Hewins offers for individuals going through a divorce.
With Team Hewins in your corner, you can rest assured that your financial advisor will do everything they can to understand your situation and help you achieve an outcome tailored to your needs–now and in the long term. Reach out today to speak with a professional and learn more about our services.
1 “What Is Collaborative Practice?” International Academy of Collaborative Professionals, www.collaborativepractice.com/what-collaborative-practice.
Team Hewins, LLC (“Team Hewins”) is an SEC-registered investment adviser; however, such registration does not imply a certain level of skill or training, and no inference to the contrary should be made. We provide this information with the understanding that we are not engaged in rendering legal, accounting, or tax services. We recommend that all investors seek out the services of competent professionals in any of the aforementioned areas. Certain information provided herein is based on third-party sources, which information, although believed to be accurate, has not been independently verified by Team Hewins. Team Hewins assumes no liability for errors and omissions in the information contained herein.