Wednesday, September 30, 2020

This Too Shall Pass

ASK THE CFP® PRACTITIONER


 

 

Question: My husband and I will be divorcing. What suggestions do you have to make this easier?

Answer: It’s likely that you already have an emotional support team in place. It’s as important to have a financial team to help you navigate through the divorce process. Many people don’t seek professional financial advice until after a settlement is reached, and then it’s too late.

My Mom and Grandma are two reasons I became a CERTIFIED FINANCIAL PLANNER™ professional. Each of them, through divorce or widowhood, was not in a position to manage their financial affairs when the time came and I witnessed the disastrous, and unnecessary results. One of my goals is to help people gain confidence and competence during these transitions.

All marriages eventually will end, due to either divorce, or death. Both outcomes have the potential to cause financial confusion and uncertainty. Being well organized and asking for assistance can make facing any major changes smoother and aids in making sound decisions during what can often be a painful time. Here are a few things to consider:

1. Don’t go it alone. Enlist professional help on all fronts, both legal and financial. Find team members you are comfortable with who provide expertise, compassion, and levelheaded advice. Decisions made now have long-term consequences that need to be understood. Tax implications and future liabilities should not be overlooked.

2. Find out how your state handles divorce and child custody matters if there are minor children involved. Community property states (i.e., California, Texas and eight others) require marital assets to be split equally. Other states like Florida divide assets equitably and fairly rather than equally.

3. Identify cash flow needs. Be aware of credit scores while keeping an eye on emotional spending, which can increase at this time. According to the U.S Census Bureau, the average divorce costs between $18,000 and $30,000, with expenses often going much higher.

4. Take inventory of all marital assets. It’s said that when a spouse leaves the house documents tend to disappear. Create some distance by establishing an individual credit card and checking account. You’re responsible for debt acquired during the marriage, even if you didn’t run up the debt yourself. Make sure that the divorce settlement states who will be responsible for paying off all debts, and close joint accounts.

5. Income and expenses must be disclosed by both parties during the divorce process. Claims for support will be based on needs and ability to pay and are derived from this information. Before agreeing to a settlement, a realistic future budget should be in place to successfully manage a new life and plan for a secure future. Good record keeping is essential.

6. During the divorce process, both spouses must determine and disclose their monthly income and expense needs. Claims for support (based on need and an evaluation of the other party’s ability to pay) are based on this financial affidavit.

7. It’s not uncommon in a marriage for one spouse to assume primary responsibility for the family budget. For some couples, bills are paid when due but neither party tries to stick to a budget. When two households are created incident It’s common for one spouse to carry the coverage for the family through a group plan at work. Don’t overlook this essential piece of a financial plan.

10. Retirement accounts are often one of the largest assets to be divided in a divorce. It is critical to understand their before and after tax values. When possible, divide retirement assets in a way that keeps the money in a tax-deferred status.

11. If your marriage lasted 10 years or longer, you may be eligible to receive benefits on your ex-spouses earnings record even if they remarry. If not yet receiving Social Security, a reduced benefit may be applied for at age 62, or wait until full retirement age to receive an unreduced spousal retirement if married a minimum of ten years. Visit www.ssa.gov for full details.

12. Relationships and responsibilities have changed. It’s time to update your estate planning documents and beneficiary designations for retirement assets and life insurance policies. If minor children are involved, estate planning becomes even more important for single parents. Select a guardian for your children and set money aside to secure your children’s future needs. Divorce is a time of emotional and financial upheaval. Enlisting the help of a financial professional who is knowledgeable and empathetic can help. Understanding and anticipating financial changes may make them less devastating. Over my career I’ve worked with many clients who’ve come through this process more confident and competent then when they started out. If you’d like access to any of our resources or have questions, please feel free to contact me. We can provide a detailed and customized checklist if you’d like. Stay focused and plan accordingly.

The opinions expressed are those of the writer, but not necessarily those of Raymond James and Associates, and subject to change at any time. Information contained in this report was received from sources believed to be reliable, but accuracy is not guaranteed. Information provided is general in nature, and is not a complete statement of all information necessary for making an investment decision. Always consult with financial, legal, estate and tax planning professionals before taking any action regarding this planning.

“Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER™, CFP® (with plaque design) and CFP® (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board’s initial and ongoing certification requirements.”

This article provided by Darcie Guerin, CFP®, Vice President, Investments & Branch Manager of Raymond James & Associates, Inc. Member New York Stock Exchange/ SIPC 606 Bald Eagle Drive, Suite 401, Marco Island, FL 34145. She may be reached at 239-389-1041, email darcie. guerin@raymondjames.com. Website: www.raymondjames.com/Darcie.

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