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Financial planning

Why a financial advisor may be helpful for divorce financial planning

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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.

Remember, you're not alone

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.

Three ways to financially prepare for a divorce

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.

Build a team of experts to guide you through the process

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.

Take inventory of where you stand now

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.

Ask your financial advisor key questions

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.

You may want to address a few essential areas with them as part of the divorce financial planning process:

Division of assets

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. Divorce financial planning service 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.

Tax planning

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?

Retirement savings

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?

Divorce financial planning can help you move forward

Going through a divorce is hard, but asking for help when you need it will help you get through it. Working with a financial advisor can help you make those critical financial decisions and stay on track with your planning. Connect with a Thrivent financial advisor for guidance.

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Review the Thrivent Financial Planning Services Brochure Thrivent Financial Planning Services Agreement, and Thrivent Financial Planning Services Agreement Schedule for a full description of the services offered and fees.

Divorce financial planning is provided through the One-Time Service to individual clients only.

Refer to the Thrivent Investment Management Inc. Form CRS Relationship Summary for more information about us; our relationships and services; fees, costs, conflicts, and standard of conduct; disciplinary history; and additional information. Available upon request from your financial professional and on thrivent.com/disclosures.

Thrivent and its financial professionals do not provide legal, accounting or tax advice. Consult your attorney or tax professional.

Thrivent financial advisors and professionals have general knowledge of the Social Security tenets. For complete details on your situation, contact the Social Security Administration.
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