The Financial Impact of Divorce: There is More to it Than Splitting Marital Assets

Submitted by: Big Little Wolf

Is your divorce still in process? Are you worrying about whether you dotted all your i’s and crossed all your t’s – especially where the future for your children is at stake?

Here are several subjects – serious matters – that I had to deal with during my divorce and since. These are hard topics for us to think about and process during the best of times, and when we are happy with our partners. But they become more critical as we are splitting into separate households, and make tough decisions that are both financial and logistical.

Estate planning and your will

You may think you don’t have enough assets to make a will, or plan your estate. But the fact is – if you have children, there are things you must put down in writing, for their well-being.

Even if you’re still married, what if something happens to you and your spouse? Who cares for your children? Don’t you want the option of clearly specifying who will raise them?  That is a critical part of what you do in your will. And when you divorce, it becomes even more important if you are concerned about the other parent’s ability to care for your children.

Furthermore, some of us do have assets. They may be straightforward and substantial – a home, cars, property, retirement money, or more. Or, your assets may include a smaller pool of items – but you still have family treasures, furnishings, and many personal belongings.

Is your relationship with your ex amicable or is there ongoing animosity? Should something happen to you, do you want him going through your things?

Appoint an executor you trust – truly trust – and include provisions for who can and cannot be part of the process of dealing with your assets, including your personal belongings.

Speak with your divorce attorney, gather recommendations for proper counsel to guide you in this matter, or execute a will on your own. Search the Internet for will-making options. There are many. Use them – or an attorney – if you haven’t already done so. If you do have an existing will, make sure you update it, considering where things stand with your new divorced status, change in locations, and so on.

Life insurance and other financial safety nets

I am neither a financial planner nor an estate planner. But if your soon-to-be-ex has life insurance on which you (and/or your children) are designated beneficiaries, make sure those policies stay in effect, or replacement policies are put into effect. Be certain you have the right to see (review) the policies on a regular basis. Negotiate additional policies – even if they are term life policies (quite inexpensive) to assure that your children would be taken care of until adulthood or through college. (20-year term life is quite common.)

Don’t want to think about this? I know. It’s painful – and difficult. We want to believe we will always be here for our children, that our ex-spouses will be responsible and reasonable, or that post-divorce we will embark upon a happy, new life, and in short order.

But it doesn’t always happen that way. People change. Circumstances change. Jobs are lost. Spousal or child support may be a critical part of how you survive financially, and you need to assure that you and your children are still taken care of if something happens to your ex. Assuring that life insurance remains intact, with you as the beneficiary, is part of being a responsible parent. And it is your legal right to request your ex carry a life-insurance policy with your children as the beneficiary.

Even if the ex is about to remarry – this is still his parental obligation. Insist on it.

As for other financial arrangements – medical insurance, dental insurance, vision insurance, and disability insurance are all essential. Trust me – trying to pay for health care, teeth cleanings and orthodontia, glasses when the kids are a little older – these expenses can run into the thousands per year. An eye exam and glasses alone can run $400 for a 15 year old. I’ve just been through this. And paying for your (medical) insurance? It costs a fortune, particularly over 45, even for minimal benefits.

What if you get sick? Some sort of disability plan – even if you are employed now – is vital. Find one you can afford. Purchase it when you’re young, and healthy – or discuss its inclusion in your settlement agreement.  Believe me, social security payments won’t cut it. And if you find yourself out of a job (where an employment relationship exists), you’ll be without benefits along with the lack of income.

Your attorney can help with these critical insurance issues, but only if you make sure you mention them! You have to take care of contingencies. Life has a way of throwing the unexpected at us – particularly at mothers – and it is more difficult to recover. We are (typically) caring for the children, and post-divorce, have the greater portion of the burden on us, as primary custodial parents.

This is not true in all circumstances, and I realize that. But it is true often enough – and forewarned is forearmed.

Plan ahead – car insurance, and more

One last sort of insurance expense you may not think of – car insurance when your children are teens. I’ve been going through this for the past three years (with two more to go). I assumed I’d be on my feet and possibly remarried within four or five years of divorce. That was not the case. My ex has been unwilling to chip in on necessary expenses (not explicitly in the agreement) for many years, despite a more than ample income and a steady job. One of those expenses has been car insurance for teens.

Don’t let your attorney get away with saying “oh, you can always modify your agreement.” Not so simple, and with an uncooperative ex, nearly impossible without great expense and significant time. Some of that depends upon the state you live in, but why leave things to chance if you can make provisions now?

Teenage car insurance can run $3,000 or $4,000 or more per year, in addition to your current cost of car insurance. Furthermore, some states require specific driving classes not provided in high school, and they run into the many hundreds. In my case, $700 for each of my kids. More that I just had to suck up out of borrowed money. And those are 2009 dollars. What will those figures be when your children reach 16?

And let me be clear – I am not talking about the purchase of a car. I am talking about the incremental increase to your auto insurance premium, once you have to add a teen to your policy. It can add $300 to $350 / month, in today’s dollars. And if you are a solo parent – as I am – you need another driver in the family if you can possibly have one. By the time kids are teens, you’re more tired and they’re more involved in necessary academic and social activities, or have jobs of their own. Furthermore, a teen who can legally drive may be of assistance:  if you are sick, if you’re swamped with work, helping with younger siblings who need to be chauffeured, or just lending a hand with the errands when you need it.

College Expenses

As for other expenses – college expense provisions are often very loose in divorce agreements. Particularly if your children are young. Push for more than “standard” language or – again – “you can always modify your agreement.”

If you are likely to be the lesser earning parent, or if your employment status is or has been a roller-coaster, assure yourself that you don’t have to fight covering expenses on no income. (In other words, more legal battles or more debt based on an old agreement.) Make sure that phrases like “college expenses at a state school” or “agreed upon school” are elaborated and explicit relative to tuition, books, room and board, fees, supplies, required computers, and travel home from out of state. Make sure there are clear provisions if you are not the primary bread winner, and provisions if you are out of work at the time that college expenses come into the picture.

So much in divorce is negotiable, but what I’ve learned (the hard way) is to never assume. And that means taking the financial reins in hand, for your future and that of your children.

Again – a little knowledge goes a long way. Serious issues require serious thought, and real-world handling. Now.

© D A Wolf 

These days, Big Little Wolf (”Ms. Big”) reflects on life and her Daily Plate of Crazy, where she writes essays on everything – sometimes serious, sometimes fun – whatever strikes her on a given day as interesting, unusual, entertaining, or of concern.