Divorce Financial Planning

A comedian once joked that he had been married and divorced so many times that next time, he was going to find a woman he didn't like and just give her a house.

Divorce is no laughing matter for families coping with the emotional and financial issues it can create.

The U.S. divorce rate is significant and, in general, men recover financially from divorce much more rapidly than do women. It goes without saying that better pre-divorce financial planning improves the financial fortunes of more individuals post-divorce.

Divorce planning involves negotiating an equitable division of assets, income, and debt – and also sources of future cash flow. A common mistake in many divorces is demanding ownership of the family home in the settlement, mainly for emotional reasons. Home ownership costs can overwhelm a divorcee’s sole income and lead to financial stress post-divorce.  

Alimony is another tricky financial matter in a divorce negotiation, especially in marriage with lopsided earned incomes. Working up a pro forma post-divorce financial plan for the lower income divorcee is key to solving for the proper amount and duration of spousal support.

When minor children are ensnared in a divorce event, negotiating a fair support arrangement, including higher education costs, can be life changing for them, too.   

Divorce law varies by state and your most important advisor is a competent divorce attorney.  An experienced financial planner can also be a valuable team member, helping the recently divorced generate new income, saving and investment strategies, and avoiding common divorce-related tax traps.