Post Divorce Financial Planning

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Separation and divorce are never easy. Most people are born with the idea that they will get married one day, and then when they do, they tend to imagine that theirs is the marriage that will last. Nobody imagines that they will end up separated and divorced.

But then it happens, and it can be difficult to pick up the pieces as you re-start your life with often half of what you had prior to the separation. But pick up the pieces you must, and post-divorce financial planning with the assistance of a financial planner can help.

Key Steps to Take

Personal Financial Position

Starting with your net worth, you need to write down all your assets (bank accounts, RRSPs, TFSAs, property, etc.) and liabilities (credit card debt, lines of credit, mortgages, etc.). Understanding this will give you a foundational view of what you own versus what you owe.

From there, you need to consider your spending. Given your sources of income and cash flow have likely changed, you need to ensure that you are not spending more than you can afford. This means you must prioritize the essentials (i.e., housing, transportation, children’s costs, etc.) and hopefully continue to save for your future retirement. Having an active “budget” like this will allow you to get established with this change in your life, and you will be surprised at how quickly it will become your new normal.

Of note is when you begin this process, it also would not hurt to review your credit report. It is not a bad idea to do this from time to time regardless of whether you are divorced or not, just to be sure that there are no surprises lurking that you are unaware of with jointly held debts. You want to verify that the divorce will not negatively impact your credit in some way with a debt associated with your spouse.

Review Your Documentation

Once you have separated, you are still going to have financial ties to your ex-spouse/partner in ways that can sometimes fall below the surface. These ties should be addressed early in the separation process.

For example, if you have joint accounts with your ex-partner such as bank accounts or credit cards, these should be closed and reopened in your name only.

In addition, you should change beneficiaries on your financial accounts, including RRSPs, TFSAs, life insurance policies, pension plans, and any other accounts or assets where the beneficiary may have been your ex-spouse/partner.

Finally, be sure to update your will and powers of attorney (personal directives, mandates, etc. depending on your province of residence) so that they reflect your current wishes should something happen to you. Consider who you want to receive your assets should you pass away, or who you want to help oversee your finances and health should you become incapable of doing it yourself. This applies to everyone, not just those that have gone through a divorce, but a break-up is a prompt to update your estate planning.

You may have already done all this while going through the separation process. However, if you have not, it should be a priority if you do not want assets to go to your ex if you passed away suddenly.