The vast majority of married couples know that differences in financial decision-making have the potential to be a source of conflict. Even when financial differences are not the main source of conflict in a relationship, divorce is well known for the devastating impact it can have on both spouses’ finances as they transition to life beyond marriage.
For all couples, and perhaps especially high-net-worth couples, managing finances responsibly during divorce is of utmost importance. Although assets will need to be divided, they can still be managed in a way that allows couples to maximize their portfolio’s potential before, during, and after asset division. For couples who are divorcing in their later years, when retirement is approaching or is already a reality, careful financial management is even more important. Here are five tips for staying in control of your investments during a divorce.
Ensure You Are Aware of Your Entire Financial Picture
Spouses often divide household responsibilities, with one spouse being primarily in charge of finances. If this is the case in your family, while you may have a general picture of your assets, it is essential to get to know your portfolio in great detail. Make sure you have access to your accounts, including user names and passwords, so you can keep track of balances and performance. If you do not know whether your accounts are held jointly or separately, find out.
Understand the Tax Consequences of Various Divorce Settlements
Spouses often negotiate a divorce settlement that allows them to retain most or all of a particular asset. Perhaps a wife wants to keep the marital home while the husband prefers to retain the value of his retirement account. While any arrangement that is mutually acceptable to both spouses is likely to be approved by a judge, it is important to understand that different financial settlements can have different tax consequences. Certain retirement accounts have steep penalties for withdrawing funds that you may need if you find yourself the sole owner of a home with expensive mortgage payments or maintenance needs.
Make Sure Your Beneficiaries Are Listed Accurately
Spouses generally list each other as their primary beneficiaries, but a divorce will mean that needs to change. Once it is no longer appropriate to have your spouse listed as your beneficiary, take the time to work with your portfolio manager or estate planning advisor to have your beneficiary list updated.
Learn About QDROs
Many spouses divide their investment holdings down the middle using a QDRO, or Qualified Domestic Relations Order. QDROs allow spouses to divide their pension plans or 401(k)s by giving the account administrator a court order that dictates how assets are divided. Different accounts at different institutions have varying rules, so make sure you know whether you need to open your own account with the same institution, roll your funds over into a different 401(k), etc.
Have Professional Guidance
The high cost of divorce may have you looking for ways to save money wherever you can. But the long-term implications of financial mismanagement or ill-considered negotiations during divorce can make an enormous difference in terms of life quality for many years to come. Spend the money necessary to ensure you have professional financial guidance throughout your divorce.
Meet with a Wheaton, IL Divorce Attorney
At The Stogsdill Law Firm, P.C., our experienced DuPage County divorce attorneys understand the importance of maintaining a carefully managed financial portfolio even as your divorce is ongoing. For help managing these important but complex areas of divorce, call our offices today at 630-462-9500 to schedule your confidential consultation. We are well-established in the DuPage County community and can offer to make connections with well-regarded wealth management professionals if necessary.