Why a financial advisor may be helpful for divorce planning

Going through a divorce can take a toll—it's often a mentally and emotionally draining process. And then there's the financial side. In most cases, you'll need to untangle your assets and finances from your spouse while also considering your retirement savings, income and taxes.

Facing all of that on your own can feel daunting. The fear of tackling this by yourself might add an extra layer of stress, especially if you didn't play a big role in managing your family's money. But don't worry, divorce financial planning and working with a financial advisor to prepare your assets for a divorce can help ease the transition.

No one goes into a marriage expecting a divorce. But, unfortunately, sometimes it's unavoidable. So while it may feel like you're the only person going through it, the reality is divorce is relatively common, especially among older age groups.

According to the Centers for Disease Control and Prevention (CDC) National Center for Health Statistics, among 45 states in the U.S., a little over 2 million people get married each year, while around 750,000 get divorced.

The U.S. Census Bureau found among married adults over 20, about one-third of men and women have divorced. However, the percentages tend to rise among those ages 55–64, where about 43% of men and women divorced. This phenomenon is known as "gray divorce." For those who are close to or are just entering retirement, divorce at this time can cause some financial turmoil. You may have confusion about the impact on your Social Security benefits, taxes and retirement income.

When preparing for divorce, you need to be proactive with your finances. Three important ways to be proactive with your finances that can help are: build a team of experts for guidance, look at your current financial situation, and discuss important questions with a financial advisor.

To help you get through your divorce, you may want to turn to some trusted experts for guidance, such as family counselors, psychologists or even divorce coaches. These experts can help you and your loved ones process some of the changes that come with divorce. During this time, also consider speaking with lawyers, a mediator, a tax expert and other professionals to start mapping out your financial needs. While working with so many people may feel overwhelming, each can offer invaluable insights and expertise to help you navigate divorce.

Many people also turn to a financial advisor for help with divorce financial planning. A financial advisor is someone who can be by your side and help you not feel overwhelmed with some of the decisions you'll need to make about your finances.

As you prepare to work with your financial advisor, it's essential to get organized, especially if you weren't actively responsible for your finances before.

Here's some of the information you may want to gather:

• Personal information, including your birth certificate and marriage license.
• If you have children, documents including their birth certificates and custodial arrangements, if applicable.
• Documents relating to your marriage or divorce, including prenuptial agreements and date of separation notice.
• Employment information and job history.
• The previous year's tax returns.
• A list of your personal and joint assets, including your home and cars.
• A list of your personal and joint debts, including credit card statements, recurring monthly bills, and any outstanding loans or debt.
• Your retirement savings, including Social Security statements, 401(k), IRAs, or pension funds.
• Healthcare information, including any health savings accounts.
• Life insurance information, including contracts and beneficiaries.

The more information you have, the better. This will help your financial advisor get started with a complete picture of your finances, so you'll know what's required to meet your needs moving forward.

Working with a financial advisor for retirement and estate planning is common. A financial advisor is there to help you navigate challenging times, so it shouldn't come as a surprise that they can also guide you through how to prepare for divorce and your new financial future once the papers are signed.

As part of your dedicated divorce plan, you may want address a few essential areas:

You'll need to look at all of your assets and decide with your spouse and attorney how these will be separated, as well as the financial ramifications of the separation. Your dedicated divorce plan may analyze proposals to illustrate impacts of settlement options or division of assets or debt.

Your financial advisor can help answer the following questions:

• What is the financial impact of a proposed settlement?
• What happens if you sell your home?
• Is buying another home or renting a better fiscal option for you?

This will not include recommendations for a particular settlement option or method of division of assets or debt.

Thrivent and its financial advisors and professionals do not provide legal advice.  Therefore, your dedicated divorce plan would not include recommendations for a particular settlement option or method of division of assets or debt.  Divorce laws and related guidance on division of assets vary by state.  As such, you should consult with your attorney.

Divorce may impact your income tax, not only due to the potential change in your income. There may also be tax impacts due to the following: any divorce settlement, property sale(s), alimony and/or child support.

Your financial advisor can help answer the following questions:

• How may the divorce impact your income bracket?
• What tax considerations or exemptions exist for child support?
• How does your divorce settlement and any proceeds from it affect your taxes now and moving forward?

There are special considerations around divorce for those in retirement or actively retirement planning. Your financial advisor can help you understand how divorce may impact your long-term savings.

Some questions for your financial advisor may include:

• Can you still claim your ex-spouse's Social Security benefits?
• How do you determine the value of retirement accounts?
• How can assets from a 401(k), IRA, or pension be split, and are there any tax implications or penalties before you access them?

Going through a divorce is hard, but asking for help from trusted experts when you need guidance will help you get through it. Creating a divorce plan with a financial advisor can help you understand and apply critical financial information that may likely affect your overall dedicated plan. Connect with a Thrivent financial advisor for guidance.