My spouse and I are separated and considering divorce. What do I need to know from a financial standpoint?
August 27, 2014
First, know that "divorce" is a word that does not have to destroy your financial future. There are four things you'll need to financially survive a divorce: a place to live, little or no debt, retirement assets and liquid money. You should strive for balance in each of these, you need a mix of them all, not an abundance in one category and none in the other. Next, remember that divorce itself is not a taxable event; it is what you do with the assets after the divorce that could affect you for the rest of your life.
You will also want to figure out if you can afford to get divorced. Make a list of all of your assets and liabilities and meet with a Certified Divorce Financial Analyst (CDFA) to help you make a decision. As a CDFA, I have even helped couples decide if it makes more sense to go through the divorce or do a legal separation. If you are considering divorce, from a financial standpoint the first thing you need to do is figure out your total marital net worth. This is the total of all of your assets and liabilities as a married couple. Then take all of these assets and debts to develop a balance sheet so you can pick the assets and liabilities that make the most sense for you now and in the future. A CDFA then can help you assess your situation. We look at which assets and liabilities you should take from the divorce and how they will affect you in the next year, in three years, five year, ten years and so on. Then we can walk you through your options, including how to pay for the divorce.