After a marriage breaks up, the last thing most people want to do is sit down with yet another lawyer. 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 is also best to combine estate planning with post-divorce financial planning. If you were not working with a financial or estate planner during the divorce proceedings, now is the time to do so. The months immediately after 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 good 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 remain 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. Newly single expenses 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 for protect your assets. and loved ones if he dies suddenly. Even if you have a good relationship with a former spouse and you addressed the 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 an attorney trained in estate planning 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 a specific master estate plan to his or her 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 without being married with minor children, an ex-spouse can automatically gain control of the property that was intended for the children. If she doesn’t want that to happen, she must legally plan for it.
Make a guardianship game plan for your children: It is 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’s particularly important to make sure that you and your ex-spouse have a guardianship plan for their upbringing, as well as any assets you may inherit. You can completely rely on 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 set up an efficient legal structure to distribute those assets, as well as designate a trustee in a will to train and guide them. 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 type of assistance for life, then you should consult a qualified attorney to help you create 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 help, special prescriptions or treatments that could be taken away if she personally inherited assets that would disqualify him from them. programs When such assets are held in trust, they are not counted as assets of the child. The advantage is that those inherited assets can still be used to support your home or other personal living needs without negatively affecting your qualification for government assistance programs.
Get strong protection in place: Most people focus on what can happen to their health insurance if they get divorced, but insurance issues like life, property/casualty, and disability insurance are sometimes put on the back burner. 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 still a good idea to make sure they don’t. A financial planner should be able to discuss those options in detail.
Review all of your investments for principal ownership and beneficiary information: Even if you were correctly advised to change the names on the assets that you and your spouse were dividing between you, it still makes sense after the divorce to check that the names are correct on those assets and, more importantly, make sure that all the payee 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 is to blow off 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 at the gym.
That’s why it’s important not to go overboard with a bit of necessary R&R, but to stash away as much of what may come in as cash to help supplement the emergency fund, cover debt service, and any future career or career moves. home. By meeting with a professional financial planner soon after the divorce, one can outline short-term and long-term goals to prepare for. Save any drastic changes in allocations or investment decisions for when things calm down (perhaps 3-6 months after the divorce is final).