Divorcing? 7 Tips for Financial Clarity During a Turbulent Time

Women need to be especially careful to make sure their long-term financial and health care needs are protected when going through a divorce.

(Image credit: Getty Images)

Divorce can be an emotionally and psychologically difficult undertaking. In the midst of such turmoil, it can be tough to focus on the financial impacts of divorce as well, especially for women, who, despite being breadwinners in many U.S. households, often play a less hands-on role when it comes to family finances. But it’s incredibly important that financial wellness be an important part of any divorce proceeding and settlement.

Here are seven financial tips for women going through divorce. Though not exclusive, they’re starting points that should not be ignored.

1. Be aware of all your assets.

How much in assets do you have? It’s a fairly straightforward question, but in a divorce, the picture can get murky. Some of those assets might be jointly held by you and your partner, while others might not even be known to a spouse. But knowing the value of your assets—as well as your spouse’s assets and those jointly owned—is essential for an ultimate, fair financial resolution in a divorce. It’s important to be sure, before proceedings begin, that you know what all assets are and where they are. Start by gathering all the documents you can. Paperwork like financial statements, tax returns, wills, trusts, retirement account statements, insurance documents and property deeds can help assess assets. If needed, attorneys and financial advisers can help.

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2. Don’t forget the debt.

Just as assets are shared in a marriage or civil union, so too are many types of debt. In many cases, spouses can be unaware of debts the other spouse might have, and they might not know until it’s discovered in a divorce. So, it’s important to fully understand any outstanding loans, credit card debts, student loans, property liens and other debts you and your spouse may be individually or jointly responsible for before settlement begins. Then you’ll want to be clear about establishing who is responsible for those debts post-divorce.

3. Have cash on hand.

Let’s face it, divorce isn’t cheap. First, there are the legal and court costs involved in the process itself — $12,900 on average, according to a survey conducted by legal resource Nolo. But there are also hidden costs of separation to take into account — changes in housing, transportation costs, child care, utilities and home upkeep. It’s important that those considering divorce make an honest appraisal of their current finances before beginning the process. Finding a trusted financial adviser is a good first step.

4. Strategize the split.

A divorce changes more than just spousal income. It can turn two-income households into one-income households, with all the related challenges of covering household expenses and providing for children or other dependents. It’s crucial that women planning for divorce have a plan for financial stability post-divorce — for both parties. That could mean looking closely at who should keep important assets like a house. Particularly in families with children, it may seem best to ensure the kids stay in the family home. But in some cases, it simply does not make financial sense.

In planning your separate financial future, make sure you know what kind of rent or mortgage you can afford, who will cover utilities and how expenses relating to dependents will be divided. Remember, things that were affordable with two wage earners in the home might not make as much financial sense once you’re on your own. Look at establishing future expenses as a business decision — be sure they’re affordable.

5. Plan for the future.

With changing marital status comes changes to your financial future, including plans for retirement. If your retirement income was based in part or whole on your spouse’s retirement savings, it’s crucial to sort out the division of existing retirement assets, like 401(k) plans or individual retirement accounts. Consider how any eventual distribution will be handled and potential tax consequences, especially if under age 59½. Additionally, the tenure of the relationship can impact retirement benefits. For example, if the marriage lasted for at least 10 years, one ex-spouse may be able to receive Social Security benefits from the other (even if he or she has remarried) if they meet specific qualifications, including the expectation of a lower benefit payout than their ex. Finally, look at additional assets you have geared toward providing for your ex-spouse or dependents, including life insurance or trusts. Make sure any settlement plan specifies how these assets are to be maintained or divided, and don’t forget to adjust your beneficiary information as needed.

6. In sickness and in health.

Many couples plan their approach to health care costs jointly. Often lost in divorce proceedings is the fact that, while spouses might seek equitable solutions when splitting, the cost of health care isn’t equitable for men and women. Women pay more for health care than men. Women also generally live longer than men, which means women will need to pay for health care longer. For many women who were covered by their spouse’s workplace health coverage, divorce means they’ll have to find their own coverage. So, women’s health care considerations should also be addressed in divorce settlements.

7. Who handles the taxes?

Divorce also means a change in filing status, and that means taking a new look at taxes and how they will affect a woman’s income. If alimony is part of a divorce settlement be aware that as of Jan. 1, 2019, alimony is no longer included as adjusted gross income, so the effective tax rate for recipients will be lower. But this change can be a double-edged sword, as ex-spouses paying alimony can no longer deduct payments from their taxes, meaning they may only be able to afford smaller amounts to start with. Be sure to talk to a financial adviser or tax professional who can guide you through the intricacies of the many tax questions that arise with divorce.

In these stressful times, when some predict divorce rates may increase in the wake of stay-at-home orders, it’s important to remember that financial health is just one part of our overall holistic wellness. There are resources you can tap into on the more personal side of the equation, too: local “meet-up” groups for in-person support, or places like Psych Central or Woman’sDivorce.com for support online.

And while important financial tips won’t necessarily make divorce any easier emotionally, ultimately, ensuring your financial house is in order can provide some peace of mind during a very difficult time. Getting a handle on finances now can help you prepare a financial plan for a future that is all your own!


Life insurance is issued by The Prudential Insurance Company of America, Newark, N.J., and its affiliates.


Prudential Financial and its financial professionals do not give legal or tax advice. Please consult your own advisers.




This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

Salene Hitchcock-Gear, President of Prudential Individual Life Insurance
President of Prudential Individual Life Insurance, Prudential Financial

Salene Hitchcock-Gear is president of Prudential Individual Life Insurance, a business unit of Prudential that offers competitive solutions to meet the needs of consumers through the manufacturing and distribution of a diverse portfolio of life insurance products. An insurance industry veteran with more than 30 years of experience, Hitchcock-Gear joined Prudential in 2017 as chief operating officer of Prudential Advisors, the Company’s national sales organization with more than 3,000 financial professionals, advisors and fee-based financial planners who offer clients a broad range of financial solutions. She became president of the Individual Life Insurance business in 2018.