While not a topic most people may wish to discuss, divorce is a reality for an increasing number of Americans. Obviously an emotionally charged time for you and your family, most divorce attorneys suggest thinking about how to divide your financial responsibilities as early as possible. Here are some helpful tips:
- Get help as soon as you consider a separation. Meet with your financial advisor at the first hint of impending separation. A good financial advisor will be compassionate and willing to remain neutral if he or she serves both you and your soon-to-be-ex. Your advisor can revisit your investment portfolio and do a cash-flow analysis to illustrate what you might draw as future income. Your advisor can also offer advice about which shared debts might be best for you to take on (or avoid), given the amount of risk with which you are comfortable.
- Look at shared debt. With the help of a mediator and your financial advisor, you may be able to decide which of you will take which debts. You may consider paying off or closing any credit accounts before you divorce. Most states allow you to settle debt issues between you. If you can't come to an agreement and the court has to decide for you, the divorce can get very complex and expensive.
Another reason to be proactive about your shared debt: It can help you both maintain good credit ratings after your split and, perhaps most important, prevent uncomfortable conversations about unresolved debts with your ex-spouse in the future.
- What about the house? Research confirms most divorcing women want to keep the matrimonial home whenever possible, especially when children are still living at home. The spouse who keeps each home should also take responsibility for its loan, refinancing it in their name if at all possible.
- Information is important to handling debt well during a divorce. One situation where you might have to continue working together with your ex-spouse on a shared debt is if you have an unresolved tax obligation. You should talk to the IRS about setting up separate payments on that joint debt.
Overall, information is the most important key to handling debt well during a divorce. Collect tax returns, credit reports, and bank and brokerage statements as early as possible. The more you know about your marital finances, the easier it will be for you to negotiate over outstanding debts at the settlement table.
As the last word, work with your trusted financial advisor throughout the entire process. They should help prepare you and help strategize on how to map out how your financial future will look after divorce.
Caroline Hill, Financial Advisor
(This article contains the current opinions of the author but not necessarily those of Brighton Securities Corp. The author's opinions are subject to change without notice. This blog post is for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. References to specific securities and their issuers are for illustrative purposes only and are not intended and should not be interpreted as recommendations to purchase or sell such securities).