General
Divorce and Your Finances
By Dave Horan
Financial Advisor, UBS Financial Services
Q: I will soon be divorced, and I am concerned about how my spouse and I are going to handle financial matters. What steps can I take to ensure that I won’t be jeopardizing my future?
A: For starters, make sure both of you know where you stand, as far as your finances. If one person in a marriage has pretty much handled all the money and investment decisions, the other one needs to take a “crash course” to catch up. You need to know as much as possible about your situation.
Q: How do I begin?
A: List all your investments — stocks, bonds, mutual funds, etc. — and determine who is listed as the owner. Also, go over all your debts, such as your mortgage, car payment and credit cards; here, too, you will need to know if one or both of you are listed as the responsible party. Keep in mind that, at this point, you are not trying to “split up” assets or debts; you just need to know what’s out there as a basis for later actions.
Q: Will I have to change the way I invest?
A: Possibly. You and your spouse may have had different investment styles. For example, your spouse may be an aggressive investor, willing to take greater risks in the hope of higher returns. On the other hand, you might be more conservative, accepting lower returns in favor of preserving principal. You might have reached some middle ground while you were married, but now, you’ll have to chart your own course. And you may have to step outside your comfort zone, too. Even if you are a conservative investor by nature, you may need to invest for growth if you’re going to achieve your long-term goals — and that means, you’ll need some stocks in your portfolio. To make the right decisions, you may want to work with a financial professional.
Q: What should I do about some of the goals we had in common, like sending our kids to college?
A: If at all possible, try to work with your spouse to keep making progress toward your joint objectives. By combining your resources and coordinating your strategies, you can get the maximum benefits from college-savings strategies and vehicles, such as tax-advantaged Section 529 plans.
Q: What else should I keep in mind as I go through the divorce process?
A: Don’t forget about insurance. Once you are divorced, you may lose some of the forms of protection you had while you were married. Consequently, you may need to consider adding, or expanding, your life and disability insurance. Also, once you reach your 50s, you might want to take a close look at long-term care insurance. You may never need to spend time in a nursing home, but, if you did, the costs would be enormous — and, if you’re on your own, the expenses will loom even larger. A long-term care policy can help protect your financial independence — and the younger you are when you buy a policy, the less expensive the premiums will be.
Q: What about my will? Do I need to revise it?
A: Almost certainly. See your tax and legal advisors right away about revising your will or any trust arrangements you may have established.
Q: Is there anything else I need to keep in mind?
A: Yes. Review the beneficiary designations on all of your financial papers, including insurance policies, retirement plans and annuities. Many people forget to change their beneficiaries when they divorce; if they eventually remarry, they will leave earlier spouses in a position to receive assets, at the expense of new spouses.
Piper Jaffray & Co., Member SIPC and NYSE.
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