Separation and divorce
Separation and divorce is a challenging process, mentally, emotionally and financially. In navigating this life change, it’s crucial to consider several financial decisions once you begin separation.
Assessing your financial situation should be a priority. While we all hope for an amicable split, this isn’t always the case, so planning out your finances is a good idea. In financially preparing for a divorce, here are several factors to consider.
Tips to assess your finances before a divorce
Organize your finances
Now is a fitting time to check on your finances and review some key concepts that will help you plan throughout the divorce process. To begin, make a list of your assets and their values. This may include your investments, savings, pension and real estate. You’ll also have to distinguish between marital assets — property you gained during the marriage — and nonmarital assets.
Next, determine what your liquid and illiquid assets are. You may need access to your liquid assets to pay for divorce proceedings, so it's helpful to know how much you’re able to use.
Reevaluate your financial goals
No matter which life stage you’re in, you should return to your goals, especially given the uncertainty of divorce. Whether you’re saving for retirement, working toward a downpayment for a new home or supporting children through school, understanding your goals will help you prioritize assets during the process.
You may also want to create a tighter budget or shift your post-divorce lifestyle expectations. Although much of this discussion might be uncertain for now, it's never too early to start planning. Working with your advisor can help you adjust your goals, as they can guide you through your new financial circumstances.
Work with professionals to avoid emotion-based decisions
You should not make these decisions on your own as it can be tricky, and you might feel overwhelmed by the sentiments that come along with divorce. It’s a wise choice to work with professionals such as lawyers and advisors. They can provide you with an objective, expert opinion of what is best for you.
Working with a lawyer and an advisor can help you reduce the time the divorce will take. Dragging out the divorce can cost more, not only financially, but also emotionally. While you shouldn’t make any decisions carelessly, dwelling in this process can be taxing as well.
Ultimately, try to leave your emotions out of your decisions and instead focus on creating a solution that will align with your needs.
Update your insurance and financial documents
Since you’re undergoing a major life change, it’s the right time to adjust your insurance and other financial information. Keeping these up to date is always a good idea, so revise this once you’ve gained a bit more clarity on your financial goals.
Specifically, this may mean changing your insurance coverage, beneficiaries, estate plan, will and other relevant documents. Divorce doesn’t automatically revoke beneficiary designations depending on the province where you live.
Find support
It’s no stretch to say divorce is an emotional, stressful time. So, amidst all the planning, focus on your mental health.
Connecting with family and friends can be a great way to provide you with the support you need. On top of that, take advantage of any employee assistance programs (EAP) your workplace has in place, benefits you haven’t yet used, or mental health resources they’ve provided.