Financial Planning During a Divorce

Working through the financial aspects of a divorce is always a difficult and time-consuming process. We recently sat down with our friend Rebecca Gill to discuss the financial aspects of a divorce. Rebecca is COO at DunlapGill Wealth Management Group and is a Certified Public Accountant and Personal Financial Specialist. Rebecca and the team at DunlapGill provide excellent services to residents of Indianapolis, Fishers, Carmel, Noblesville, and other central Indiana communities. 

Below are a few concepts that we discuss in the video above. It is important to note that the tips below and the content of the video is for generalized information only. Each person's situation is different and it is important to meet with an attorney and financial advisor to develop a specific plan for your needs.

Start the process early. It can be very difficult to unwind anything after a divorce is final. You’ll want to make sure you have the complete picture, so it is important to gather information on income, physical assets, liabilities, retirement accounts, savings, life insurance, and other accounts. This will prepare you and your advisor to develop a customized post-divorce financial plan. Each spouse needs to have a plan that addresses short-term needs (like liquid assets) and long-term needs (like retirement savings).

 It’s important to have good credit established. We frequently see situations where one spouse has shouldered the financial burden for the household. All assets, deeds, credit cards, retirement accounts, loans, and mortgages are in one spouse’s name. This isn’t a big deal when dividing assets because Indiana’s divorce laws dictate the allocation. It is a big problem after the divorce is final. In this situation, the other spouse will have little or no credit history. It can be hard to get a mortgage, car loan or other credit extended when the bank doesn’t have a credit history to rely on—even though there may be significant liquid assets after the divorce. Make sure both spouses are building good credit to ensure stability after the divorce.

 You have flexibility with retirement accounts. In certain circumstances, you may be able to take early distributions from retirement accounts during a divorce. Remember, you’ll always be taxed on distributions, but you may be able to avoid penalties. It is important to consult with a financial advisor to balance your short and long-term needs via a master financial plan and to make sure your decisions won’t result in penalties or unnecessary taxes.

 Don’t forget to update your beneficiaries. It is common to get so caught up in the more detailed aspects of a divorce that beneficiaries aren’t updated. Don’t forget to update the beneficiaries of any life insurance, retirement or investment accounts during the process. It is also a good idea to review these with your attorney and a financial planner on an ongoing basis. Beneficiaries cannot be argued in an Indiana courtroom!