Weddings are happy times, and few people want to think about the possibility of divorce in the early years of their marriage. But as many as half of marriages end in divorce, and these painful events are full of difficult decisions at a time when emotions are running high. Basic issues such as the financials in the heart of divorce can become clouded with other distractions. Unfortunately, the time to protect your financial health is often overrun with a thousand other considerations, but it shouldn’t be.
Recently, a panel of Forbes Finance Council members gathered to brainstorm about financial considerations that are often overlooked when dealing with a divorce. Some of their most important points included:
Looking at your joint accounts. Many people spend injudiciously when a divorce is happening, and one partner may be harmed by the financial decisions of the other spouse when it comes to joint accounts, credit cards, and loans. It’s important to seek financial advice at this time so you can protect yourself from suffering the repercussions of bad financial decisions on the part of your soon-to-be-ex-spouse.
Ensuring the bills are paid. It may be a hum-drum thing, but the bills are due regardless of what’s going on in your personal life. During a divorce, some couples tend to ignore run-of-the-mill financial housekeeping duties like ensuring the mortgage is paid. It’s important to make a timely decision about who will be responsible for payments on bills and get that in writing. You may wish to quickly refinance the mortgage to whoever will remain living in the house, so the other spouse isn’t on the hook for the credit hit that will occur if payments are late or non-existent. Experts recommend that divorcing spouses keep a close eye on their personal credit scores so they can receive early warning of any anomalies.
Life insurance policies. Often, it’s the main breadwinner who secures life insurance to cover future alimony and/or child support in the event the breadwinner has a premature death. Many people tend to choose these amounts at random. It’s important to seek professional help to calculate the present value of future payments in order to make sure the future payments are covered.
Tax considerations. Couples often split their assets without considering the tax ramifications of their choices. A couple might, for example, determine that one partner will get the retirement accounts and the other will keep the house if the values are similar on paper. There are strong tax considerations that may make these decisions not as equitable as they appear.
Consult with a Professional Financial Services Partner
One of the first things individuals undergoing a separation or divorce should do is ensure they are getting good advice from a financial services expert. In Connecticut, we are an equitable distribution state, which makes all marital assets fair game for equal, or in some cases, unequal division. It is imperative that both parties understand the long term pros and cons of each decision made that may potentially impact the rest of their respective financial lives.
At Toomey Investment Management, Inc. (TIMI), our business model is designed to treat all of our clients equally and fairly. We realized long ago that the financial industry dedicated many resources to capturing money from prospective clients but much less to service and accountability for existing clients. At Wallingford, Connecticut-based TIMI, we listen carefully, keep in touch, and return your calls and communications quickly, so you can count on us. We will work effectively to optimize your financial situation and solve your problems. Call us at 203-949-1710 or visit our website for more information.