Going through a divorce can be one of the most stressful and emotional events a person can experience in their lifetime.
No one envisions getting a divorce when they say the words “I do," but the reality is that divorce can happen.
While this change in a person’s life can be emotionally draining, it does not necessarily have to be financially draining.
Here are five tips to help make the divorce process less stressful.
Start gathering important information
If you are getting a divorce, many — if not all — of your assets may be part of the negotiation.
To help prepare your attorney, gather:
Personal information including birthdays, social security numbers
Marriage and separation information
Employment and income for each spouse
Assets and liabilities for each spouse, including retirement assets
Insurance policies (life, health, disability, etc.)
Review your beneficiary designations
Perhaps the single-most important task is to review your beneficiary designations before, during, and after the divorce.
For example, your attorney may advise you to change your beneficiary designations before initiating proceedings to protect your assets should you pass away before the divorce is final. Once the divorce is finalized, the divorce decree may require updates to existing beneficiary ownership designations.
Set a new budget
During a divorce, you may find yourself financially overwhelmed, facing new expenses and less income. Work with your financial professional to set a new budget geared toward accomplishing your current financial goals or setting new goals.
Talk to a tax professional
Many people underestimate how important tax planning can be during a divorce. Something as simple as the date of a divorce decree can have a huge impact on your tax filing status for the entire tax year. Understanding the different tax treatment for items such as alimony versus child support can put you in a better bargaining position during negotiations.
Your financial professional may be able to connect you with a tax professional who understands the tax rules applicable to divorce planning, which could save you money and give you peace of mind.
Review insurance needs
Throughout a divorce, the need for life insurance and disability income protection may change particularly when one spouse will provide income and the other may have primary custodianship of minor children. Insurance ownership and premium payments may be negotiated as part of the divorce settlement.
Before the divorce is finalized, work with your financial professional to determine the amount of life and disability income insurance you will need that best covers your post-divorce financial situation.
The divorce planning checklist may be helpful with “to-do” items before filing for divorce, during divorce and after it is finalized.
In addition, your financial professional can be an essential resource to you during a divorce and may be able to connect you with a network of professionals – including experienced divorce attorneys, counselors and tax advisors – who can provide professional assistance throughout the divorce process.
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