How Should My Financial Plan Change After a Divorce?
Why Affluent Individuals Need a Strategic Approach—and the Right Advisor—After a Complex Divorce
For affluent individuals, divorce isn't just an emotional transition—it's a significant financial event with long-lasting consequences. When substantial assets, business interests, retirement plans and investment portfolios are involved, the financial fallout can be both complicated and far-reaching. Once the dust settles, the next critical step is ensuring your financial plan reflects your new reality.
Start with a Comprehensive Financial Reassessment
Divorce can fundamentally reshape your net worth, income streams, tax situation and estate plans. Even if you've secured an equitable settlement, your financial post-divorce picture is likely very different from before. It's essential to:
- Reassess Your Net Worth: Take stock of your updated asset base. This includes real estate, investment accounts, retirement plans, business holdings, and any newly acquired or retained assets from the divorce.
- Understand Your Cash Flow: Alimony, child support or changes in household income can dramatically alter your monthly cash flow. High-net-worth individuals often face complex cash flow patterns due to investments, trusts or business income, making a detailed cash flow analysis vital.
- Review Tax Implications: Divorce can often trigger significant tax consequences, especially for those with substantial assets. Capital gains, alimony deductibility (or lack thereof), and the division of taxable investment accounts can create tax challenges that need professional navigation.
Update Your Estate Planning
Your previous estate plan likely reflected joint decisions with your former spouse. Now, it's critical to revise:
- Beneficiary Designations: Retirement accounts, life insurance policies and brokerage accounts often list an ex-spouse as beneficiary by default. Updating these ensures your wealth goes where you intend.
- Wills & Trusts: Affluent individuals frequently use trusts for tax efficiency and wealth preservation. Post-divorce, these structures may need to be revised or replaced entirely.
- Powers of Attorney & Health Directives: Ensure that someone you trust—other than your ex—is designated to make financial or medical decisions on your behalf if needed.
Select the Right Financial Advisor Post-Divorce
If you shared a financial advisor with your former spouse, it's often wise to seek your own advisor after your marriage is dissolved — someone objective, loyal only to your interests and experienced in managing complex, post-divorce financial situations.
If you’re ready to engage a post-divorce financial advisor, here’s what to look for:
- Fiduciary Responsibility: Your advisor should be legally obligated to act in your best interest.
- Experience with High Net-Worth Clients: Complex asset division, private investments, business valuations and tax-efficient strategies require an advisor well-versed in affluent financial management.
- Divorce Financial Expertise: Make sure your advisor has extensive experience working with clients following a divorce.
- Collaborative Approach: Your financial advisor should coordinate seamlessly with your attorney, accountant and estate planning team to ensure a cohesive strategy.
Key Planning Considerations Moving Forward
- Investment Strategy: Your risk tolerance, goals and time horizons may have changed. A personalized portfolio review is essential.
- Retirement Planning: Dividing retirement accounts or pensions may significantly alter your retirement timeline and income needs.
- Wealth Preservation: Ensure proper insurance coverage and asset preservation strategies are in place, especially if you retain substantial wealth or business interests.
- Philanthropic Goals: For those engaged in charitable giving, reassessing donor-advised funds, foundations, or gifting strategies is prudent.
Divorce is often described as one of life's most stressful transitions—and for affluent individuals with complex financial pictures, the challenges can feel overwhelming. But with a thoughtful, strategic approach and the right team of advisors, you can transform this period of upheaval into an opportunity to realign your financial life with your personal goals.
If you're navigating life after divorce, don't make financial decisions in isolation. Surround yourself with qualified professionals who can guide you through the complexities and position you for long-term stability and success.
Any opinions are those of Southern Springs Capital Group and not necessarily those of Raymond James. Expressions of opinion are as of this date and are subject to change without notice. There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Investing involves risk and you may incur a profit or loss regardless of strategy selected, including asset allocation and diversification. Individual investor's results will vary. Past performance does not guarantee future results. Future investment performance cannot be guaranteed, investment yields will fluctuate with market conditions.
As Financial Advisors of Raymond James, we are not qualified to render advice on tax or legal matters. You should discuss tax or legal matters with the appropriate professional.
Securities offered through Raymond James Financial Services, Inc., member FINRA/SIPC. Investment advisory services are offered through Raymond James Financial Services Advisors, Inc. Southern Springs Capital Group is not a registered broker/dealer and is independent of Raymond James Financial Services.
David Jackson, MBA, CFP®, C(K)P™, is the Managing Partner at the Southern Springs Capital Group. For more information on Southern Springs Capital Group,