Tips for Financial Security After Divorce Settlement
Meet with an Lawyer
Even if you’re hoping for a simple divorce, you can still benefit significantly from consulting an attorney who specializes in divorce law. A lawyer can be objective, advising you of your rights, obligations and options and walking you through issues surrounding alimony, child custody and a divorce settlement. During this emotional period, an attorney will be able to help you focus on critical details regarding your divorce finances.
Estimate what you and your spouse are worth
The court may require a list of all marital assets and liabilities you and your spouse have jointly and separately. You should:
Once you’ve accounted for all assets, list each of them under one of three categories:
1. Your pre-marital assets (things you brought into the marriage).
2. Your spouse’s belongings.
3. Marital property, or property acquired during the marriage.
The court will decide how to “equitably” divide marital property. Pennsylvania laws does not automatically define “equitably” as “equally.” The court and applicable law will also determine the ownership and division of all property and the responsibility for debt incurred during the marriage.
As an aside, if your marriage is in trouble, from this point on, it might be a good idea to postpone new and large purchases as well as the assumption of any new debt.
Review your Income and cash flow
After divorce, you’ll be a single person and maybe even a single parent. Financially, things will be much different from the way they’ve been, so it’s important to estimate your cash flow after the divorce, so you can plan for your new financial reality. You should also try to forecast future income to enable the court to determine child custody and alimony payments.
Give serious thought to creating a post-divorce budget as a tool for managing your money going forward. A budget can help you determine how you will need to scale back your lifestyle.
A budget can also help you focus on the income side of your cash flow. For example, you might realize that after the divorce, you will need to find a higher-paying job, or go to work if you’re not currently employed. You may even decide to go back to school as a way of enhancing your future income potential.
Review your insurance
Make sure you will have adequate health, disability, and life insurance coverage after a divorce. If you’re currently covered by your spouse’s employer-provided health plan, you can usually keep existing coverage for at least 36 months after a divorce under the Consolidated Omnibus Reconciliation Act (COBRA). You will have to pay premiums for COBRA coverage, and the premiums will probably be much more expensive, so you need to account for them in your post-divorce budget.
If you’re employed but don’t currently use your own employer-sponsored health plan, consider signing up for it. A group policy at work is typically much cheaper than an individual policy purchased on your own. Employers typically do not permit you to sign up for health insurance mid-year, but if you’ve experienced a major life event like a divorce, it may be possible.
After a divorce settlement, remember to review and, if necessary, change beneficiary designations on your life insurance policies and retirement/investment accounts, as permitted by court order. Definitely discuss your situation with a financial advisor
Your attorney may be able to provide limited guidance on financial issues. However, for broader assistance with the financial aspects of a divorce settlement, consider consulting with a financial advisor. He or she will also be able to guide you through longer-term financial planning, which might address issues like debt reduction, education funding, retirement planning and estate planning.