Divorce is a challenging and emotional process that comes with unique financial complexities for women. Having a strategic approach can help ensure you retain financial stability and protect your money and independence. This involves dividing assets equitably as well as considering tax implications, estate planning, and future financial goals.
Careful and thoughtful planning is essential to success for women divorcing. Your lawyer’s job is to focus on the legal aspects of divorce, not necessarily all the financial impacts. Getting advice from an experienced team of finance, estate, and tax professionals can help with navigating complexities effectively. By taking a proactive stance, you can make informed decisions during this transitional period and help safeguard your financial future.
If you’re a woman who feels more comfortable with getting advice from female professionals, seek them out. You can find trusted financial partners who are familiar with women’s finances and have your best interests at heart. At Mercer Advisors we have Certified Divorce Financial Analysts® who specialize in the financial aspects of a divorce. And, with women comprising nearly half of our client-facing team and a third of our senior leadership team (in an industry where only 16% of advisors are women), we’re distinctively positioned to help more women achieve financial success.1
Key matters to consider
Here are key financial matters for you to consider when going through a divorce:
Asset division
One of the most critical aspects of divorce is the division of assets. You may jointly own real estate, investment accounts, or business interests. Retirement plans and bank accounts may also factor in equitable distribution.
Collaborate with financial specialists to accurately identify and value all marital assets. This includes tangible assets like properties and vehicles, plus intangible ones like stocks, bonds, and intellectual property. Investment advisors can help align your investment portfolio to reflect your new financial goals, risk tolerance, and time horizon.
Different assets have different tax implications. For example, selling a business or real estate can trigger significant capital gains taxes. Discussing these implications with a tax professional can help with making informed decisions about asset division. You can also get ideas about tax planning strategies after the divorce.
Prenuptial and postnuptial agreements
Do you have a prenuptial or postnuptial agreement? These agreements may already outline the division of assets. However, they might not be crafted in the interest of protecting your individual wealth.
Review and update these agreements regularly to reflect any changes in your financial situation. Also, check with legal counsel to ensure that the agreements are legally binding and enforceable in your state or jurisdiction.
Alimony and spousal support
Alimony, or spousal support, is another significant consideration. The amount and duration of alimony can vary based on several factors. These factors include the length of your marriage, standard of living during the marriage, and the earning capacity of both you and your spouse.
Rely on your divorce attorney to negotiate fair alimony terms. This may involve considering lump-sum payments versus ongoing support.
Be aware that there have been recent tax law changes that affect alimony. For example, alimony payments are not tax-deductible for either the recipient or payee for divorce decrees signed in 2019 or later.
Business interests
If you own a business, whether together or individually, it can complicate the divorce process. Protect your business interests by having your business professionally valued to determine its worth.
You’ll also need to consider the impact of divorce on the ownership structure. It may be necessary to buy out your spouse’s interest or restructure the business to maintain control.
Develop a plan for the future of the business post-divorce, including succession planning, if needed.
Estate planning
Amidst the many issues you may be facing, don’t overlook the need to review and update your estate plan during a divorce. This is also an opportunity to address guardianship of children who are minors or have disabilities.
Update your will and any trusts to reflect your new marital status as soon as possible. Otherwise, you can’t be sure distribution of your assets will happen according to your wishes.
You may need to change beneficiary designations on retirement accounts and other financial accounts. Remove your ex-spouse, if desired. Some types of accounts will be subject to laws that remove an ex-spouse automatically because of divorce, such as life insurance policies.
Lifestyle and cash flow
Post-divorce, your lifestyle and cash flow needs will likely change, as will your personal goals.
You should have an updated plan for cash flow that reflects your new financial situation and priorities. A comprehensive plan can address your income, expenses, and alimony or child support, to help identify areas of focus. This is an excellent opportunity to reconsider new goals and the next chapter of your life.
Charitable giving or gifting is a good option for supporting causes close to your heart while also getting tax benefits. You get to decide how to fuel your passion.
Strive to achieve financial independence as a single woman so you can feel confident that you will have long-term financial security.
Social Security
If you are the spouse of someone who has higher Social Security benefits than you, and they die first, you are entitled to survivor’s benefits based on their Social Security amount, provided you were married for at least 10 years. Obtain a copy of your spouse’s Social Security statement prior to the divorce, if possible. The information may be helpful for future planning.
Social Security can also be a factor in cash flow if you qualify for spousal benefits. In order to qualify for spousal security on your previous spouse’s work history, you have to have been married for at least 10 years, have not remarried, have less benefits than your spouse, and be at least 62-years old and eligible for early retirement.
Emotional and professional support
Since divorce can be emotionally draining, surround yourself with a support network and don’t be afraid to call on them for help.
Seek emotional support from professionals if you need help with weathering the emotional challenges you’re facing. Your well-being is the most important concern.
Get started
Navigating a divorce as a woman requires careful consideration of various financial matters for protecting your livelihood and future. This includes reassessing your estate plan, updating beneficiary designations, and understanding the tax implications of your new financial situation.
By collaborating with specialists in financial planning, estate planning, and tax planning, you can develop a comprehensive strategy. They can also help simplify your life so you can focus on taking care of yourself and any dependents rather than the financial impact of divorce.
Stay informed and proactive in your finances to help make well-informed decisions. Taking control of management of your assets is crucial. Ultimately, taking these steps can help provide reassurance and stability during a challenging time.
If you’re not a Mercer Advisors client and want a financial partner who can help you navigate a divorce, let’s talk.
1 “Why Are There So Few Women in the Financial Services Industry?” Financial Planning Association, November 2024.
Mercer Advisors Inc. is a parent company of Mercer Global Advisors Inc. and is not involved with investment services. Mercer Global Advisors Inc. (“Mercer Advisors”) is registered as an investment advisor with the SEC. The firm only transacts business in states where it is properly registered or is excluded or exempted from registration requirements.
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Certified Financial Planner Board of Standards, Inc. (CFP Board) owns the CFP® certification mark, the CERTIFIED FINANCIAL PLANNER™ certification mark, and the CFP® certification mark (with plaque design) logo in the United States, which it authorizes use of by individuals who successfully complete CFP Board’s initial and ongoing certification requirements.
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