In this article, we’re explaining the importance of crafting a financial plan during and after a divorce…
There are few things more stressful than a divorce and when money worries are added into the mix, things can become overwhelming. With divorce in Scotland on the rise, we’re exploring the importance of crafting a financial plan during and after a divorce.
Photo by Karolina Grabowska
Creating a Financial Plan During the Divorce
Once a divorce has been set in motion, there’ll be a lot to deal with and, although emotions may be running high, finances need to be made a priority. In this section, we’re looking at the financial plans to make during your divorce.
Marital assets are the term used for property and wealth which has been acquired during the marriage. A divorce solicitor will be able to help you figure out what these assets might be and your share in these assets once they have been divided.
Planning for Life after Divorce
During your divorce, both parties may still be living in the marital home however, this will likely change once the divorce is completed. It’s therefore important to think about where you are going to live and how you are going to pay for the mortgage or rent.
At this stage, it’s important to put together a financial plan, or prenup, which could include the following:
- Your share of marital assets including property, cash and investments.
- Your forecasted income following your divorce, i.e., salary.
- Your forecasted expenses include mortgage or rent, bills, transport, childcare and living expenses such as food and toiletries.
At this stage, you should also be negotiating with your former partner over spousal maintenance and childcare payments.
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Creating a Financial Plan After the Divorce
Once your divorce is complete and the dust has settled, it’s time to start thinking about your long-term financial future. In this section, we’re looking at some of the plans to put in place following your divorce.
Having a Will
During your divorce you’ll have had a lot on your plate and you’re bound to have missed a thing or two. One thing that you shouldn’t put off any longer is changing your will. If you made a will during your marriage, it will most likely include your former spouse.
This may mean that if you don’t amend your will to exclude your former spouse, they may still have a claim on your assets in the event of your death. For this reason, it’s important to either change your will or make a new one altogether as soon as possible.
Photo by Karolina Grabowska
If your divorce settlement included investments such as stocks or shares, you may wish to cash these in to boost your cash flow. Before doing this, you’ll need to check a couple of things including:
- Tax implications – Often cashing in your investments will have tax implications which you need to know about before going ahead. A good financial advisor will be able to help you figure out if this is a good idea or not.
- Reaching an agreement – If an investment is shared between yourself and your ex-spouse, you may both have to agree on cashing out. If you don’t feel that you can reach an agreement, a solicitor may be able to help with this. Sometimes, your former partner may choose to ‘buy you out’ of the investment which can often be a good mutual solution.
Closing Joint Bank Accounts
Following your divorce, you’ll want to make sure that any joint bank accounts have been divided and closed as well as changing any incoming and outgoing payments to your individual account to ensure that your finances are completely separated from your former spouse’s. This can help to protect you in the event that your ex-spouse encounters any financial difficulty in the future.
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Protecting Your Finances
The period during and after your divorce can be one of turmoil and it can be easy to let things slide. While this is understandable, it’s incredibly important that you take care of your financial planning to ensure that you get everything that you’re entitled to. Going from joint to single finances can be extremely difficult and many people struggle to cope with their new circumstances. By planning ahead and being realistic with your forecasted income and outgoings, you can help to make sure that you’re able to move forward with a degree of financial security following your divorce.
Please be advised that this article is for general informational purposes only, and should not be used as a substitute for advice from a trained legal professional. Be sure to consult a financial advisor or solicitor if you’re seeking advice on divorce. We are not liable for risks or issues associated with using or acting upon the information on this site.