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Your Guide to Divorce Financial Planning

January 28, 2022

If you are considering a divorce, in the middle of a divorce, or have recently completed a divorce, you should be particularly mindful of your financial situation. Your personal finances can potentially be decimated, stagnate, or significantly increase in value as a result of divorce. What matters is that you start planning your financial future now instead of hoping for the best outcome and assuming everything will work itself out.
Sit down with your divorce attorney and financial advisor to go over your pre-divorce checklist, and you’ll potentially reduce the stress involved with the financial elements of the divorce process. Here’s a quick look at how to plan your finances and divorce before cutting ties and also after the divorce is finalized.

Table of Contents

Pre-Divorce Financial Planning

Post-Divorce Financial Planning

Pre-Divorce Financial Planning

The steps you take in the context of money and divorce before officially cutting ties with your spouse are particularly important.

Above all, what matters in the context of pre-divorce financial planning is that you consult with a financial planner and divorce attorney. Your financial planner and attorney will provide guidance regarding the potential fate of your money and other assets, strategies to help protect your money, and also the legal strategies necessary to maximize the shared assets you receive after divorcing.

Pre-divorce financial planning should also include input from an experienced financial advisor. They will provide helpful guidance in terms of establishing a roadmap for financial success after divorcing your spouse. Tap into the expertise of both of these professionals to set the stage for a divorce primed for financial success in the short term and also across posterity.

How To Divide Your Money in a Divorce

The division of assets during divorce is determined by the nuances of your state’s divorce laws, the peculiarities of your financial situation, each spouse’s contributions to the marriage, and each side’s willingness to compromise on monetary matters.

In general, shared property is usually divided equally between spouses. Marital assets are divided “fairly,” yet that supposed fair division is not always equal, meaning there is no guarantee the cash, investments, and real property will be split down the middle, with each side getting 50%. Furthermore, attorney fees and other miscellaneous fees related to the divorce will be subtracted from the division of marital assets. If you can agree to a mutually beneficial matrimonial settlement agreement with your spouse in which the following assets are divided in what both sides consider to be a fair manner, the matter will become that much less complicated:

However, if you cannot reach a matrimonial settlement agreement with your spouse, the legal process will take its course and ultimately determine the fate of your personal assets as well as shared assets.

Financial Pros and Cons of Divorce

The financial pros and cons of divorce are distinct to each individual’s unique situation. For example, if you are a full-time stay-at-home parent who does not have a source of income, you will view the financial pros and cons in a different light. Such a homemaker will likely be provided with alimony and child support.

Additional benefits of divorce include:

  • More control over your personal finances
  • Easier budgeting
  • A golden opportunity to reestablish your financial priorities
  • The potential for more financial aid for your kids to attend college

The financial downside to divorce is that it removes the financial buffer one or both individuals rely upon in the event of a major setback such as a natural disaster, a lengthy illness, issues with the house, the loss of a job, and so on. If you are the breadwinner of the family, your finances might take a hit as a result of divorce. You’ll likely be required to pay alimony and/or child support to provide your former spouse and kids with the financial support necessary to maintain their quality of life.

How Women Are Financially Affected by Divorce

Women who work full-time and do not have kids tend to be disproportionately impacted by divorce as they do not receive child support. However, there is the potential for the judge to determine that the wife is deserving of alimony. Women who are homemakers, mothers, and those who work part-time might need alimony in addition to child support to maintain their customary quality of life.

The judge will consider your contributions to the relationship when determining eligibility for alimony and child support, including the work you perform in and around the house. Furthermore, the time you invested in childcare will also be considered when determining how to divide assets and whether you will be paid child support and/or alimony.

It must be noted that women tend to be negatively affected by financial divorce more than men. Statistics show women earn less money than men, meaning they may be financially dependent on their spouse for housing, food, transportation, retirement funds, and the cost of living.

According to Merrill Lynch, the United States Government Accountability Office reports female household income dropped by slightly more than 40% after divorce compared to a 23% drop for men. A woman who cuts ties with a breadwinner might struggle financially for years or indefinitely unless her attorney crafts the matrimonial settlement agreement with her financial interest in mind. How

Life Insurance Is Affected by Divorce

If you have life insurance, be proactive by considering how you would like to alter your beneficiaries moving forward. A life insurance account that names your husband as your primary beneficiary should be changed immediately after the divorce. Take some time to consider which of your relatives is most deserving of being named the new beneficiary of the life insurance policy and prepare to change that designation immediately after finalizing the divorce.

Do not change the beneficiary until the divorce is complete. If you were to make such a change before finalizing the divorce, the judge might decide to award the spouse rather than honoring your intention. When in doubt regarding the timing and details of changing the name of life insurance beneficiaries or other beneficiaries, consult with your divorce attorney or estate planning attorney.

Financial Mistakes To Avoid in Your Divorce

The vast majority of divorcees readily admit they made one or several mistakes in the context of personal finances and divorce. From withdrawing money from accounts immediately before divorcing to changing insurance policy beneficiaries prior to the completion of the divorce and attempting to hide money in cash form or newly-opened accounts, there are plenty of common mistakes.

The period leading up to a divorce is not a time to make drastic financial moves, run up your credit card debt to an egregiously high level, or open new lines of credit. Instead of making a rash decision with your available cash, lean on your divorce attorney and financial advisor for money and divorce guidance. Above all, don’t bury your head in the sand and assume the financial component of your divorce is meaningless. Be proactive, delve deep into the details of your financial situation, including shared accounts and assets, and you will have the information necessary to move forward with a divorce that proves mutually beneficial to you, your spouse, and your children.

Divorce and Credit Card Debt

Print your personal credit card statements and those from your jointly held credit cards during the past two years. Then, project your expenses moving forward. If you absolutely need to open a new line of credit in the middle of the divorce process, open it solely in your name rather than attempting to add your spouse’s name to the credit card or other account.

Obtain a copy of your credit report as soon as possible. This report will help prove your creditworthiness and serve as a legal tool that safeguards your credit rating amidst the divorce. If there is erroneous information on your credit report, address it before finalizing the divorce.

If you cannot reach an agreement pertaining to who is responsible for credit card debt on jointly held credit cards as detailed in a matrimonial settlement agreement, the judge will decide on your behalf. It must be noted that you will also be financially responsible for credit card debt that is strictly in your name. You will also be liable for credit card debt racked up in an account you previously cosigned for your husband or wife, even if that credit card account is not jointly owned.

Gray Divorce

Gray divorces are those involving individuals age 50 and older, a phenomenon that has doubled in the past 20 years. Gray divorces are unique in that they do not involve minor children yet usually involve a considerable number of assets. Moreover, dividing assets later in life can have a detrimental impact when it comes to supporting each individual’s housing, income, medical and retirement needs. Your ability — or lack thereof — to support yourself financially after divorcing at age 50 or later will shape your legal argument and perspective in the context of the matrimonial settlement agreement.

You need an experienced and talented financial advisor and divorce attorney to emerge from a gray divorce with your hard-earned financial nest egg fully intact. Use our Gray Divorce Checklist to help ensure all of your bases are covered. Control is central to gray divorces in that both parties desire control over the home, assets such as boats and cars, pets, and the family legacy.

Post-Divorce Financial Planning

Financial planning after your divorce is just as important as before your divorce. Even if your financial nest egg has significantly decreased in value after divorcing, you may be able to maintain your quality of life after cutting ties with your former spouse. Develop the right plan, budget for the years and decades ahead immediately after finalizing the divorce, and your finances will be in good shape moving forward.

Though divorce attorneys primarily assist in planning the divorce and executing that plan with optimal legal strategies, a legal practitioner can also provide invaluable advice in the context of managing your finances after divorce. Consult with your divorce attorney as well as with a financial advisor, and you will move forward with your new financial plan in full confidence.

Social Security for Divorced Spouses

Social Security in the aftermath of a divorce is a fairly complicated subject. Fret not, as your financial advisor can help you understand the nuances of Social Security after divorcing your spouse. Invest some time in organizing your financial records. Take a close look at your Social Security statements. Your financial advisor can walk you through the steps necessary to factor in the impact of the divorce in the context of Social Security payments and eventual retirement.

It’s a common misconception that you are ineligible for Social Security spousal benefits after a divorce. If you are divorcing after a long marriage and you earned significantly less income during the marriage, you may be entitled to Social Security spousal benefits based on the higher-earning spouse’s income. Social Security rules are complex, so it’s wise to work with a qualified financial advisor to help determine your eligibility. It might be necessary to shift your retirement timeline back a few years after your divorce. Adjustments might be necessary if your original retirement plan was structured with part of your spouse’s Social Security payments factored in. Consult with your financial advisor or investment advisor to reallocate your savings and investments accordingly, and you still might be able to retire at the age you initially targeted.

Health Insurance After Divorce: Your Options

If you were insured through your spouse’s health insurance plan, you could still retain health insurance for a brief period of time after the divorce. Take a close look at your health insurance paperwork and consult with your health insurance representative to find out exactly how long your coverage will be applicable after divorce.

However, you should start planning to transition to your own personal health insurance plan. If you cannot afford health insurance, research your eligibility for Medicare or Medicaid. If your income is above the threshold necessary to qualify for Medicaid, you will face the difficult decision of paying for a private health insurance policy or moving forward without health insurance of any sort.

Ideally, your divorce attorney will address the issue of health insurance before you finalize the divorce. If you have been a homemaker for most of your life, work at a job that does not provide health insurance, or do not have health insurance for another reason, consult with your divorce attorney prior to finalizing the divorce settlement agreement to address this glaring issue. Though few know it, it is possible to write health insurance coverage into a divorce settlement agreement.

How To Revise Your Estate Plan Post-Divorce

Now that you have divorced, the time is right to revise your estate plan. If you have already written a will, revisit its language and amend it. However, an altered will won’t be formally recognized by state law, meaning the failure to adhere to the legal requirements for will validation will trigger the probate process that frustrates your heirs and possibly causes family disunity.

As an example, the details of state laws often require that the creator of the will sign their name in front of a notary and two witnesses. Meet with your financial advisor and estate planning attorney to go over the details of your will and your estate plan. Fail to address the language of your will, and your assets will likely be bequeathed to your former spouse. This is the worst possible scenario as it would result in the proceeds of all of your hard work being transferred directly to the individual you no longer love.

Take the time necessary to identify new beneficiaries in your will and adjust other estate planning documents accordingly. Time is of the essence in the context of estate planning after divorce, yet it must be noted that you might not be able to officially remove your spouse from your will until after the divorce is complete.

Filing Taxes After Divorce

Your tax situation will change after divorce. However, you don’t have to navigate the taxation maze on your own. A tax advisor, accountant, and financial planner will help you determine your new tax bracket, plan for your year-end taxes as a single filer instead of a married filer, and set the stage for financial prosperity after divorce.

Schedule a Consultation With Creative Planning

At Creative Planning, we focus on providing you with confidence and security by helping to determine your financial needs, gain an understanding of your options and make decisions that are in the best interest of you and your family. For help navigating wealth management throughout and after your divorce, or for any other financial matter, please schedule a meeting with us today.

You can request a meeting with our team by clicking the link above or calling us at 1.866.273.2848.


  1. Who Is Responsible for Credit Card Debt in a Divorce?
  2. Divorce in mid-life: Fresh starts, new financial challenges for women
  3. Little-Known Financial Benefits of Divorce Divorce Statistics and Facts

This commentary is provided for general information purposes only, should not be construed as investment, tax or legal advice, and does not constitute an attorney/client relationship. Past performance of any market results is no assurance of future performance. The information contained herein has been obtained from sources deemed reliable but is not guaranteed.


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