9 hours Ago
Marriage formally recognizes the union between two people, creating a legal and cultural connection. People marry for many reasons: love, companionship, financial stability and the desire to build a family.A couple usually marries thinking they’ll be together for a lifetime.
But sometimes, the bond of marriage breaks, and the relationship ends with a divorce.Planning and implementing a prenuptial agreement could make sense for a variety of reasons. You or your future spouse may bring substantial wealth to the marriage, own a business, plan on placing your career on hold to raise children, or have a high debt level.
A prenuptial agreement, often called a prenup, is a written contract a couple enters into prior to marriage. It enables them to control and manage the legal rights and obligations that are acquired upon marriage. Implementing a prenup will allow both parties the opportunity to address and discuss their expectations, fears, or concerns before committing to a lifelong relationship.
Additionally, a prenup can help ease the strain if a divorce occurs, because the division of assets is typically negotiated and agreed upon by both parties in advance of the marriage.Less common than a prenup is a postnuptial agreement created after marriage. It allows a couple to protect themselves and their assets in the case of a future divorce.
Financial circumstances may change during the marriage, such as a spouse winning a lottery or having an extramarital affair. The postnuptial agreement could help to define the division of assets if a divorce were to occur, providing peace of mind within the marriage.Planning for a divorce is not often top of mind when one agrees to commit to a person for life.
Sadly, however, we should not dismiss the idea that it could become a reality. And if it does occur, there will be many issues to deal with, such as dividing marital assets and debt, custody issues, and spousal support. Not surprisingly, when a divorce does happen, it can have a shattering effect on your life, both emotionally and financially.
During a divorce, expect to experience a full array of emotions such denial, fear, and anger. While these emotions may be consuming, they’re normal. For your benefit, try to set them aside while you prepare to negotiate the details of your divorce with your soon-to-be former spouse.
Before you agree to split any assets, seek the counsel of professionals who understand your unique situation. Should you take a brokerage account versus a retirement account? Does your spouse have a pension, and if so, what is your share? Who will pay for your health insurance? Is your spouse paying for your children’s future college expenses? Should you keep or sell the house? Who is responsible for paying the mortgage, insurance, and property tax prior to selling the home? Will you receive alimony? How long will it last?During this period:—Seek out attorneys who specialize in mediation and divorce with people in a similar position. Then interview a few of them before engaging with one.
What is their experience? Who is their target client? What are their fees? After you engage, will you work with the attorney or a staff member?—Organize your financial data so it’s readily available as you transition through this phase.—Document all conversations related to your divorce.—Gather and review your tax returns.
If you’re not familiar with your tax returns, ask a certified public accountant (CPA) to review and explain the tax returns to you.—Identify your income and all your monthly expenses. This information will be key in settling your temporary and permanent spousal support.
Start tracking this information, so you are prepared to implement a new monthly household budget following the divorce.—Continue paying your debts in a timely manner.—Gather all your statements reporting assets or liabilities, such as your bank, mortgage, credit card, retirement, and investment accounts.
—Change the passwords on your email, social media, and financial accounts. Select a password that is independent of your life with your soon-to-be-ex spouse.—Write a letter to the credit bureaus, informing them of the divorce.
Have a fraud alert placed on your credit reports if you are concerned that your spouse may try to open new accounts under your identity.—Don’t be a passive observer in the negotiating phase of your divorce. Feeling an overwhelming amount of sadness is common due to how emotionally draining a divorce is, sometimes leading to depression.
Nevertheless, make a concerted effort to ask questions and engage in this process. If you don’t understand an explanation, ask for clarification.Following your divorce, give yourself permission to rebuild your life.
Rebuilding isn’t a quick process but is an opportunity for you to set goals and objectives specific to your future.As you rebuild, take time to review and reset the details of your finances.—Implement and follow a budget based on your new circumstances.
—Confirm that all joint accounts are closed.—Put your home and auto loan into your name.—Remove your former spouse as the beneficiary on your retirement accounts, annuities, and life insurance policies.
—Reassess and update your personal insurance coverage, as necessary.—If you change your name, contact the Social Security Administration to update your information with them and discuss your benefits.—Create an emergency reserve.
Keep six months to a year of expenses in a cash reserve account.—Meet with your CPA to understand the tax implications of filing as single or head of household.—Meet with your financial adviser to review your investment holdings and to run new retirement plan projections.
—Meet with your estate planning attorney to update your trust, will, power of attorney, and healthcare directives.—Check your credit score.Divorce is an end, but it’s also an opportunity for self-discovery and renewal.
Give yourself permission to grieve, heal, and redefine your future. Over time, financial stability and emotional resilience will pave the way for a fulfilling new phase of life.By taking control of your finances and embracing the process of rebuilding, you empower yourself to move forward with confidence and optimism.
Teri Parker is a certified financial planner and vice president for the Riverside office of CAPTRUST Financial Advisors. She has practiced financial planning and investment management since 2000. Contact her via email at Teri.
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