Money and divorce
At some point in your relationship, you and your partner decided to combine your finances either partially or completely.
But now you’ve decided to divorce, and you need to separate your finances again. While the emotional aspects of divorce can be difficult, the financial aspects don’t have to be. Here are some ways to prepare your money for a separation or divorce.
Tips to financially prepare for divorce or separation
Gather your financial information
- Statements for bank and investment accounts, pension plans and credit cards
- Insurance policies
- Loan and mortgage statements
- Tax returns from the last 3 years
- Property tax bills
- Credit reports
- A list of assets including real estate and vehicles
Close joint accounts
Close any joint accounts, open separate accounts and decide how to separate the funds. While splitting the funds may make sense, know that the funds could be subject to other claims through the process for yourself. Stop using any joint credit cards and joint lines-of-credit.
Take charge of your finances
With many couples, 1 partner’s role is to manage finances. If this wasn’t typically your role in your relationship, this may be a challenge.
Either partner in an opposite-sex or marriage or same-sex marriage can take the lead on a couple’s finances, but Canada Life surveyed a panel of women who have experienced a divorce or separation and asked what advice would they give to their former selves. The most common answers were things like saving, budgeting, being more involved in the household finances and working with an advisor.
An advisor can provide advice and help you make financial decisions. If you had an advisor as a couple, one of you should likely find your own advisor that can help build a plan for your specific situation.
65% of those who responded to the Canada Life survey and worked with an advisor felt their settlement was fair and equitable, compared to 35% who didn’t work with an advisor.
Review your spending plan
You’ll likely need adjust your current expenses and income to account for post-divorce reality. Create a new budget that includes changes to your income, new housing expenses, child support, alimony etc.
Review your estate plan
Chances are, you’ll need to revise your will and powers of attorney. You may also choose to change beneficiaries on life insurance policies and investment accounts.
Understand your divorce options
There are lots of ways your divorce can proceed. While lawyers may need to be involved to protect your rights and interests, they can also be expensive.
If you and your spouse can find common ground, you may be able to use a mediator to reach agreements faster without lawyers. You may also be able to agree on many things yourselves without anyone’s help, which may narrow the need for a mediator or a lawyer. Either of these options can save you both money, but it is important to understand your rights and obligations.
Unique challenges for women
If you’re a woman in a divorce, your situation may be different than a man. For instance:
- Based on 2020 life expectancy statsOpens a new website in a new window, you could live almost 4 years longer than a man, so you’ll need to save for retirement accordingly
- Generally, women earn less than men and this pay equity gap means women may save less and may need to work longer to prepare financially for retirement
- Taking on a caregiver role for aging or ill parents may mean they need to leave their jobs for a time and miss pay raises and retirement contributions