After a marriage breaks up, the last thing most people want to do is sit down with yet another attorney. But no matter how old you are or if you have children, it’s important to consult financial and legal experts to ensure you have an up-to-date estate and financial plan for your new life once the divorce decree is final.
It’s also best to combine estate planning with post-divorce financial planning. If you weren’t working with a financial or estate planner during the divorce process, now is the time to do so. The months immediately following a divorce can be disorienting, and even if you don’t move, you’re literally starting a new home that you’ll have to run yourself, and that means new money problems to deal with.
That’s why the weeks immediately following a divorce are a great time to review short- and long-term planning and spending goals. Here is a general roadmap to guide that process:
Start with a financial planner: Whether you plan to stay single, remarry, or move in with a new partner, it’s good to get a basic look at your finances as soon as possible after the divorce is final. Expenses for newly singles can add up quickly and unexpectedly, and a financial planning professional can help you review your current new spending and savings needs, compare strategies for achieving long-term goals like college and retirement, and provide you with critical tools to protect your assets. and loved ones if he dies suddenly. Even if you have a good relationship with a former spouse and you addressed key issues for your children as part of the divorce process, you should review all of these issues as one person before moving on to the next stage.
Talk to a trained estate planning attorney about wills and other important documents: It’s true that there are software programs and other kit solutions available for drafting basic wills, powers of attorney, and certain simple trust agreements. But it makes sense to coordinate the activities of a financial planner with an estate planning attorney who can tailor an overall estate plan specifically to his needs, no matter how basic they may be right now. Even if he’s very young and has few assets, it makes sense to get some solid advice in this area so he can manage that planning as he gets older and his finances become more complex.
Particularly if you have children, such planning is important if you plan to remarry and if you want to ensure that specific assets are guaranteed to them when you die. In some cases, when a spouse dies unmarried with minor children, a former spouse may automatically gain control of assets that were intended for the children. If she doesn’t want that to happen, she has to plan it legally.
Make a guardianship game plan for your children: It’s not enough to plan how money and assets will go to your children if you or your ex-spouse die suddenly or become disabled. If your children are minors, it is particularly important to make sure that you and your ex-spouse have a guardianship plan for their upbringing, as well as any assets they may inherit. You can completely trust your ex-spouse’s new husband, wife, or partner to raise your children if your ex-spouse predeceases you, but there may be others better equipped to handle this. So spell it now. Additionally, if there are trust or estate issues that will become effective for your children once they reach adulthood, it is also important to establish an efficient legal structure to distribute those assets, as well as appoint a trustee in a will to empower and guide. to his children. through that financial transition.
Plan for children with special needs: If one of your children is disabled and is expected to need some form of assistance for life, then you should consult a qualified attorney to help you set up a special needs trust. It will help protect your child from having to give up any public or social financial assistance, as well as access to special doctors, medical assistance, special prescriptions or treatments that could be taken away if they were to personally inherit assets that would disqualify them. programs When such property is held in trust, it is not counted as the child’s property. The upside is that those inherited assets can still be used to maintain your home or other personal living needs without negatively affecting qualification for government aid programs.
Get strong protection instead: Most people focus on what might happen to their health insurance if they get divorced, but insurance issues like life, property/accident, and disability insurance are sometimes pushed to the background. If you’re just single, you definitely need the best health coverage you can afford for yourself and your children, but life, property, liability, and disability insurance become doubly important, especially if you didn’t address those needs during the divorce. Even if your ex-spouse cooperates with financial support, it’s wise to make sure you don’t. A financial planner should be able to analyze those options in detail.
Review all of your investments for primary ownership and beneficiary information: Even if you were correctly advised to change the names of the assets you and your spouse were dividing between you, it still makes sense after the divorce to check the names on those assets for correctness and, more importantly, to make sure that all the beneficiary information is correct.
Manage your “Windfall”: People may mistakenly believe that just because they are smart in other areas of life, they can make investment decisions after going through an emotionally difficult event like divorce. It is important not to be blinded by the sudden windfall one might receive. There are long-term issues to consider. And as tempting as it may be to blow off some steam with a vacation, a new car or truck, or even a wardrobe, people have to think about the day after tomorrow. Now is not the time to bet the ranch on number 3 at the roulette table or the next high-flying action you heard someone mention while you were in the gym.
That’s why it’s important not to go overboard with some necessary R&R, but to stash away most of what can be received in cash to help supplement the emergency fund, cover debt service, and any future career or job moves. home. By meeting with a professional financial planner soon after the divorce, one can outline short-term and long-term goals to prepare. Save any drastic changes in allocations or investment decisions for when things settle down (perhaps 3-6 months after the divorce is final).