Assessing the Assets: Dealing with the Finances of Divorce
Divorce is typically not an easy decision, and while your finances may not be top of mind, dividing assets is an important part of the process. Divorce is also an opportunity to reimagine the way you currently manage your money and the way you plan for your future. It isn’t uncommon to feel lost or confused during a divorce. They are disorienting. It can help to start with just a few key aspects of your finances to avoid feeling overwhelmed.
1. Budget and Living Arrangements
If you don’t have a prenup, then you first need to consider two things: your budget and your living arrangements. It is important to figure out who is going to live in the primary residence. There is some financial benefit to selling your primary residence, mainly that you can then divide the assets from the sale. If you choose to sell the primary residence, it may be advisable that you sell it before the divorce is final. Tax implications can complicate a sale post-divorce and dividing assets could prove to be much trickier.
As for the budget, creating one can be challenging, especially if you’ve never done it before, but it’s a crucial step in getting your finances back on track during and after a divorce. Your Rockefeller Private Advisor can help you create a budget that takes into account your unique circumstances and goals. It is crucial to make sure you know how much you can spend and in the chaos of separating assets, it can be easy to lose track. If there is a lot of tension in the divorce you may even need to hire an attorney to investigate assets. While you may think a prenup would prevent all of this, it merely streamlines a divorce and may not protect you from disagreements over assets.
2. Asset Division
Asset division is a critical part of the divorce process, and it can be a contentious one. The first step is to identify all your assets and liabilities, including bank accounts, investments, retirement accounts, and real estate. Once you have a clear understanding of what you own and what you owe, you can start to think about how you want to divide those assets.
3. Tax and Retirement Planning
Tax planning is necessary during a divorce to make sure there aren’t any surprises during tax season. Mistakes while filing could lead to some pricey penalties or interest. Divorce can also have a significant impact on your retirement plans. Things can get tricky when splitting a retirement account, which is something to consider. Some have found it less complicated to compensate an ex-spouse with other property in lieu of navigating the division of a retirement plan. If your future income is dependent on your spouse’s retirement savings, it may be wise to consider adding a life insurance policy to your divorce settlement. If you’ve been relying on your spouse’s income or assets to fund your retirement, it’s important to take steps to protect your own retirement savings. This might involve setting up a separate retirement account, adjusting your investment strategy, or exploring other options like annuities.
4. Children and College Planning
If you have children, college planning is an important consideration during and after divorce. It’s important to discuss college funding with your ex-spouse and create a plan for how you will pay for your children’s education. This might involve setting up a college savings plan or exploring financial aid options early. It is easy to push this process to the side, but if the plans are not written out, there is a possibility that this will cause complications regarding college funding when your child reaches that age. Your Rockefeller Private Advisor can help you navigate the complex world of college planning and create a plan that works for your family’s unique circumstances.
Financial divorce proceedings are not a simple process. This can be a challenging time in anyone’s life, but it can be made simpler by remembering a few core things. First, consider your budget and living accommodations as soon as the decision to split has been made. Second, connect with your Private Advisor as a resource throughout the process. Lastly, think about the future and consider taxes, retirement, and any college planning necessary. By breaking down the list of considerations and receiving the proper guidance, this can all become more manageable.
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