Divorce can be challenging and emotionally draining regardless of how amicable a separation is. Taking the steps to divide your finances early in the process can help protect your individual credit scores and personal finances and hopefully reduce financial fallout. It does, however, require attention and planning.
Here are some tips for managing finances during divorce:
Close joint accounts
One of the first steps is to close any joint bank accounts and credit cards. Then open new individual accounts in your name only. Closing jointly-held accounts can help:
- Reduce future financial disputes
- Give each partner more control over their personal finances
- Lessen the chances both parties may be held liable for any new debts on the account
Review your estate plan and investments to update your beneficiaries. If your ex-spouse is being removed as a beneficiary of your estate, set up a time to meet with a lawyer or financial professional to appoint new beneficiaries. While reviewing your estate plan, consider also naming a health-care proxy — someone you trust to make medical decisions on your behalf, should you become unable to.
Update insurance policies
Updating your insurance policies during divorce is another important — and often forgotten — step. When the marriage dissolves, your insurance coverage needs to reflect the changes in your life and protect you from gaps in your coverage.
Tackle joint financial obligations
Couples often hold a significant number of financial products together. Determining how to manage joint debts such as loans, mortgages, and credit card balances is important. One option is using assets from the sale of the marital home to pay off jointly-held debts. Another option is to divide the joint debt fairly between the parties, opening new lending products for each and transferring the respective portions to the new ones.
Review and modify retirement savings
Understanding your divorce’s impact on your financial future and retirement savings is important. Going from two incomes to one may impact your ability to set money aside for retirement. Be sure to speak with a financial professional to create a plan that reflects and balances your priorities with your current financial realities.
Money plays a big part in marriage. Many financial elements of a married couple’s life are intertwined. While these steps can get you started, if you feel overwhelmed it might help to speak with a financial professional who can help guide you through separating your finances as a couple and regaining your financial independence.
This article is intended as general information only and is not to be relied upon as constituting legal, financial or other professional advice. A professional advisor should be consulted regarding your specific situation. Information presented is believed to be factual and up-to-date but we do not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the authors as of the date of publication and are subject to change. No endorsement of any third parties or their advice, opinions, information, products or services is expressly given or implied by Royal Bank of Canada or any of its affiliates.