Divorce is never easy.
While the goal is to separate lives with the least impact, this does not always happen. Divorce not only affects us emotionally, but also disrupts our financial situation.
I receive many calls from women inquiring about the best way to secure their financial future through separation and divorce.
The following basic steps will get you started and help you team up with the right professionals to get the job done properly.
Your divorce must not only address your current separation of assets, but your financial well being and take into consideration things such as retirement planning, tax implications, the long lasting impact of the division of assets including:
- Pension benefits
- RRSP account balances
- Canada Pension benefits
- TFSA accounts
- Cash flow
- Housing options
- Insurance requirements
- Company benefit plans
- Support options
What do you need to do during a divorce settlement to make sure you keep on track to retire comfortably?
- Compile a summary of all income, assets and benefits in both yours and your spouse’s name.
- Determine the net values and the tax implications of any sales or transfers of assets,
- Review past tax returns and use them to forecast your post divorce scenario.
- Revise your Financial Plan to reflect the division of assets, potential loss of benefits and its overall impact.
- Negotiate accordingly, from a position of understanding.
These simple steps provide a basic outline of some things to consider, but it is important to consult not only a lawyer, but also partner with a qualified financial professional specializing in divorce and separation of assets to ensure you get the best professional advice throughout the process.
In my conversations with the divorcees I work with, areas that have often been overlooked are:
- The understanding of how Pensions, RRSP’s and CPP benefits can be split in divorce.
- Ensuring the continuation of your ex-spouses company benefits and health plans or compensation to offset the loss of this coverage.
- Ensuring there is insurance in place, with an irrevocable beneficiary designation, for continuation of child support and spousal support payments on the death of the ex-spouse.
- Urgently establishing your own credit.
- Closing joint bank accounts and other joint debt obligations and structuring your new individual accounts efficiently.
- Partnering with a financial professional specializing in divorce before, during and after divorce to outline the real cost of your divorce agreement and to help protect your interests.
If you are considering divorce or in the process, consult a CDFA. We are financial professionals who specialize in assessing the long-term financial impacts of divorce settlements and work with your lawyer or mediator to help analyze your settlement before it’s too late.
Following these steps and having a plan of action will ensure your retirement plans stay on track after your divorce.
If you have any questions, please contact me at email@example.com.
Written by Heather Holjevac, CFP, CDFA, EPC, Senior Wealth Advisor, TriDelta Financial.