Advice for women on calculating your financial needs after divorce

Usually one the first steps in finalizing a divorce involves calculating a woman's financial needs after the divorce is finished. When you manage and organize your debt, finances, assets and liabilities, and negotiate, you can find financial peace of mind, and ensure that you are covered fiscally.


Do

Do identify your financial needs after divorce

Clients need to identify their financial needs five years post-divorce, 10 years post-divorce and at retirement. Each of these time periods may include different goals and needs of the client. Most often, five years after divorce, a client will need cash flow to assist her in transitioning back into the workforce. On the other hand, 10 years post-divorce, a client may need to think of college education expenses. Finally, retirement will have different financial challenges, including a reduction in income.

Do identify current assets and liabilities

Before an attorney can discuss settlement with a client, the attorney must aid the client in identifying their marital assets and liabilities. This task will help direct the client realistically as to what she can afford post divorce. Additionally, the client will then know which type of assets they own; a house, retirement, or cash on hand. Liabilities are also part of the equation and cannot be overlooked. Attorneys should direct the client towards a debt free settlement or a settlement which reduces the client’s debt post-divorce.

Do discuss settlement, review assets, and identify goals with your attorney and financial expert

Most often, a mother who is caring for children will want to retain the marital house. In order to determine if this is feasible, a calculation of income, assets and liabilities will be necessary. It is important for the attorney to direct the client to a financial expert who is capable of running income analysis programs. The client provides a list of expenses, income from all sources and a table of assets and liabilities. The attorney and client then discuss the client’s goals with the financial planner. The financial planner then can direct which assets will be most favorable for the client to retain, and which assets the client should not hold onto. Finally, the financial planner helps the client understand how they can financially achieve their goals post divorce.

Do make a proposal with room to negotiate

After you have successfully identified your financial needs post divorce, a proposal should be made with room for negotiation. The client should identify assets which she must retain, and identify assets which are negotiable and can be given up in the divorce. The proposal should be reviewed by the client and approved before being presented to the opposing party. The settlement should reflect all the discussions and concerns the client had post divorce and should be comprehensive.


Don't

Do not settle your divorce without identifying your goals

It is impossible to negotiate a divorce settlement without identifying your goals. A client should also be aware that their goals will change over the years. A client who has minor children will need more cash flow than a client who is closer to retirement age. Identification of goals is a necessary step in resolving your divorce.

Do not settle your divorce without meeting with a qualified financial advisor

An attorney is great at guiding the client through the legal maze of divorce. But a financial advisor is necessary in providing tax advice, valuing assets and directing a financial plan which meets the client’s goals.

Do not underestimate your financial needs after divorce

In reaching a financial resolution the client should always overestimate their goals and needs. A client isn’t going to get everything they want in the divorce. The client also isn’t going to be able to predict all of their financial needs over a ten year period. But underestimating your financial future can have a devastating impact on your future lifestyle.

Do not settle your divorce without educating yourself on your financial needs

Many women do not know their monthly expenses or how much they can earn. Prepare a detailed budget. The budget should include itemized monthly expenses and estimate one time expenses for vacations and maintenance to the home. Next it is important if you have been out of work for a significant period of time, to try and get employment before settling the divorce. Most clients have unrealistic ideas of how much they can earn. It is better to be employed and then negotiate a settlement because the client will then have a better understanding as to whether she can meet all the monthly financial responsibilities of retaining the house, caring for the children, and enjoying life.


Summary
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A well-thought-out financial plan will help a client not only identify their goals but successfully achieve them. A client must be able to communicate to their attorney their monthly financial needs, short and long term financial goals, and be directed toward a resolution with the assistance of a financial planner. Failure to properly plan can lead to a settlement which is ill-suited to help a client post divorce.


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Carolyn R. Mirabile, EsquirePartner at Weber Gallagher