Financial Things to Think About Before Ending a Long-Term Marriage
Navigating the end of a long-term marriage is a complex and emotionally challenging process. When a marriage spans decades, untangling lives—both emotionally and financially—becomes more complicated.
If you’re contemplating this significant life transition, it’s essential to take into account several financial aspects to ensure you’re prepared for the road ahead.
Assets and Liabilities
First, establish a clear picture of your financial situation. Long-term marriages often involve complicated financial webs, including joint assets like homes, cars, investments, and savings accounts, as well as liabilities like mortgages and loans. Make an exhaustive list of these items, ideally with supporting documentation.
Division of Retirement Funds
Retirement accounts can represent substantial financial assets, especially when accumulated over a lifetime. In many states, these accounts are considered marital property and are divided between spouses in the event of a divorce.
Depending on the type of retirement accounts you have, you may need a qualified domestic relations order (QDRO) to divide the assets without incurring penalties.
Alimony and Child Support
While your children may be grown, alimony could still be a significant concern. The laws and formulas for determining alimony vary from state to state. They can depend on factors like the length of the marriage, the standard of living during the marriage, and each partner’s financial and non-financial contributions.
Estate Planning Revisions
Your current estate plan probably designates your spouse as the primary beneficiary and decision-maker. Upon divorce, you’ll need to update your will, trusts, beneficiary designations, and other estate planning tools to reflect your new circumstances. This is crucial to help ensure that your estate is handled according to your wishes after your lifetime.
Tax Consequences
Divorce could alter your tax status and have a range of implications. The divorce might affect your income tax bracket, deductions, and credits. Additionally, transferring or selling assets like real estate and investments may trigger capital gains tax.
Health Insurance
If you’re covered under your spouse’s health insurance plan, you will need to consider new coverage options. This is especially significant for those later in life, as healthcare needs are generally greater. Options may include COBRA continuation coverage or a new private health insurance plan.
Social Security Benefits
If married for at least 10 years, you may be eligible for Social Security benefits based on your ex-spouse’s work record. These rules are complex but can be crucial for those who were primarily homemakers during the marriage.
Consult a Financial Advisor
While attorneys can handle the legal aspects of a divorce, a financial advisor can offer invaluable insights into managing your finances before, during, and after this transition. They can assist with retirement planning, investment strategies, and budgeting in a new financial landscape. They may review your proposed settlement to help you determine if it is equitable.
Consider working with a fiduciary, fee-only financial advisor to help ensure advice that is in your best interest. A CERTIFIED FINANCIAL PLANNER™ professional has comprehensive education, experience, and ethics requirements to help guide you.
Final Thoughts
Divorce, especially after a long-term marriage, is rarely straightforward. But by taking the time to understand the intricate financial elements involved, you can better prepare for a stable, more confident future.
Schedule a complimentary, 15-minute chat with a fee-only, fiduciary financial advisor today to discuss your personal situation.
This material was prepared by Kaleido Inc. from information derived from sources believed to be accurate. This information should not be construed as investment, tax or legal advice.
Parkshore Wealth Management is a family-owned, independent, fee-only Registered Investment Advisor with offices in Granite Bay and Folsom, CA, and Lehi and Logan, UT. We partner with financially responsible individuals and families who are eager to take positive steps that will allow them to use their money to build the life they desire. The firm is led by Harold Anderson, CFP®, and Daniel Andersen, CFP®, both members of NAPFA, the country’s leading professional association of fee-only financial advisors.