Once a divorce settlement is finalized, the next step is to make that settlement last. But how? What are the next steps in financial planning? Should you keep the same financial advisors and investment professionals as your ex? What are the key areas to focus on?
Those are all good questions, and that’s where your financial plan comes in. After a divorce, you are independent again, and that places your former advisor in a potential conflict-of-interest situation if your ex-husband or wife continues to use that advisor’s services. Generally you’ll want to engage the services of a new planner, and your current financial advisor may even recommend this. However, that’s something to discuss with your legal counsel or other independent third parties.
After a divorce, you’ll want to get back on your feet financially as fast as possible. If you’ve found a new financial advisor, you’ll need to have a frank and open discussion about your life goals, your values, your investment goals, and financial objectives. And you’ll want to get to know your new advisor so you can you feel confident in developing an action plan. That will include the following key points:
What you’re worth.You’ll determine what you own and what you owe after the settlement. That will be your starting point to create your independent plan.
Your priorities.Short-term priorities include immediate cash flow for paying the bills (including mortgage and other debt) and everyday expenses for yourself and your dependants. Longer-term goals will include retirement planning, healthcare, and estate planning, including life insurance.
Investment planning.At this stage, you don’t need any more uncertainty in your life, and you have to stay well inside your comfort zone. Your financial planner will help with a statement of investment objectives, which will be used to set the best allocation of your investment assets. Your planner will then use this framework to guide investment professionals in the overall strategy for managing your assets.
Taxes, estate planning, and insurance.Because taxes can have a big impact on disposition of assets, you’ll really need expert help. Typically your lawyer will ensure taxes are minimized in any settlement and division of assets. Afterwards, your financial planner should be able to call on her network of professionals to make sure your taxes are minimized through careful tax planning and a focus on tax-efficient investing. They’ll also work with you to ensure your dependants are protected with the proper wills, an estate plan, and life insurance.
Courtesy Fundata Canada Inc.© 2018. Robyn Thompson, CFP, CIM, FCSI, is president of Castlemark Wealth Management. This article is not intended as personalized advice. Securities mentioned are not guaranteed and carry risk of loss. No promise of performance is made or implied.