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Divorce and Money

on November 21 | in Money | by | with No Comments

Unfortunately, divorce is something more than 50 percent of us will experience in our lifetimes.*  Not only does it affect us emotionally, but it can be devastating financially.  Clients coming into the office to discuss their pending divorces tend to have a very unrealistic view of how much this is going to change their lives.  They live under the assumption that very little will change and that they are going to re-enter their single social lives totally unaffected.

There are four points of reality that I share with clients: It is going to cost you more than you think.  It is going to take you longer than you think.  You are going to be Mr. Mom a couple days per week.  You are likely to experience some emotional turmoil and dating is not going to be as simple as you think.

Child support, alimony, and college costs can create huge financial obligations, paid over a number of years.  These obligations can be shared by both husband and wife.  This is why in our discussion of divorce, the subject of life insurance is very important.  Life insurance in a divorce guarantees that the financial obligation is insured in the case of an untimely death.  Think about you being stuck without fifteen years of child support and half the price of a college education.  The life insurance solution is easy and not included in a lot of divorce settlements.  Term insurance is an inexpensive solution to this problem.  You can buy it in the amount that you need and for the term you need it for.  The key is to have it on each other for the amount of the final obligation through college.

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The ownership of the policy is key.  There are three parties to a life insurance contract: the insured, the owner, and the beneficiary.  The insured is the life that the contract is based on, the owner is the person who controls the contract, and the beneficiary is the party receiving the proceeds at death of the insured.  In some cases, it may be a good idea to own the contract on each other this way. If something unfortunate happens to your ex, you will not find out the policy lapsed two months ago because the premium was not paid.

One more point to consider is that multiple divorces and second families can compound some of these emotional and financial problems.

You should try to keep it simple and amicable.  Most important, consult legal advisors and tax accountants for guidance.


* – 2012


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