A House Divided

Navigating Divorce and Finances

Going through a divorce is often a painful, emotional process for both the couple as well as the entire family. Along with the end of the marriage comes a split of the finances, which poses some unique challenges as well.

An understanding of the laws of your state and what that means for your finances is an important place to start. Take time to carefully consider all of your options and seek guidance from a financial advisor before you reach a financial settlement. Poor decisions can have life-long consequences.

If you are in the process of a divorce, or divorce is a possibility, here are a few financial ideas that may help you prepare.

Organize Your Finances

The most important need is to organize your finances. Make a list of the family assets. You should make copies of account statements or records that show details of each asset. Also make copies of other important financial papers, such as:

• Retirement plans
• Savings accounts
• Deeds
• Tax returns

Make a record of the components of the family income and keep copies of any documentation. Hopefully things can be settled amicably, but some divorces become challenging to the point where it becomes difficult to obtain important records.

Consider Mediation Over Litigation

When it comes to dividing up your assets, consider mediation as a low-cost alternative to litigation. Most states have equitable-distribution laws that require shared assets to be divided 50/50 anyway. When a divorce becomes contentious, attorney’s fees can escalate quickly.

Understand the Financial Impacts of Divorce

From a financial perspective, divorce means taking all the income previously used to run one household and stretching it out over two households with all the associated costs. There are other costs as well, such as:

• Attorney fees
• Security deposit on a rental property
• Moving costs
• Increased child-care expenses

Be Aware of Tax and Asset Considerations

Dividing assets may sound simple, but it can be quite complex. The forced sale of a home or investment portfolio may have tax consequences. Potential tax liability can make two seemingly equal assets have very different net values.

Additionally, when pulling apart a portfolio, consider how each asset will suit the recipient in terms of risk tolerance and liquidity. A financial advisor can provide guidance during this difficult time.

Avoid Costly Financial Mistakes

During a divorce, many factors compete for attention. By understanding the key concepts, you may be able to avoid making costly financial mistakes.

Looking for more resources? Explore our Financial Academy for expert insights, or connect with an advisor for personalized support.

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Investment advice offered through OneDigital Investment Advisors LLC.

Information is provided for educational and information purposes only.

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