Divorce is a complex and emotionally challenging process that can impact many areas of your life, including your finances. A financial advisor can provide valuable assistance during a divorce by helping you understand the financial implications of your decisions, developing a plan that reflects your new financial situation, and providing emotional support throughout the process.
What is a financial advisor? A financial advisor is a professional who looks at a client’s entire financial picture – cash flow, estate planning, taxes, investments, and insurance – and advises them on how to achieve their short- and long-term financial goals. If you are already engaged with an advisor and you are contemplating a divorce, the advisor already has access to all your financial data and can help provide this information to your attorney or mediator.
Outline All Possible Financial Scenarios
The advisor can also estimate the impact the divorce will have on your finances so you can make an informed decision on your next steps. Some recommendations may include a reduction in spending, returning to work, selling, or downsizing your home, or even solutions to minimize your taxes. All of these are life-changing events that you want to fully understand before you take the first step in a divorce.
Clear, Objective Advice for Moving Forward
However, if you are not working with a financial advisor, it would be prudent to engage one who can help you organize your finances, outline any potential legal fees, give you an understanding of your investments, and be there as a resource should you go through a divorce. Many times, I work with new clients who have no idea of their family spending, where their income is derived, and where their assets are located. The client’s focus may have been on the children or their career, and their spouse was the one who managed the family finances.
The advisor’s role is to help you get a clear picture of your spending, assets, liabilities, and income. Risk management is another area of importance to ensure there is enough insurance in place that could cover the death or disability of one of the spouses. Should you go through a divorce, you may need to retain these policies on both spouses to ensure continuity of income, especially if alimony or child support is involved. While one would think a policy on the main breadwinner is the most important, having a policy on the spouse who is at home with the children is equally imperative. Should that spouse pass away or become unable to care for the children, you would have to hire a caregiver for those kids.