Financial planning after a divorce or death can be trying, but with the right approach and the right advice you can turn a difficult situation into empowerment.
Divorce or the death of a spouse can turn the best laid wealth plans upside down. An income stream dries up; assets may be divided; in short, where life had a feeling of certainty, you may now be standing on shifting ground.
Whatever the circumstances, if you haven't been closely involved in investing or other big-picture financial decisions, taking the lead on money matters can seem daunting.
To be sure, women are increasingly active in wealth planning. But even so, women who outlive their husbands, or who experience a so-called silver divorce—a split that occurs later in life, sometimes after decades of marriage—can be caught off guard by the magnitude of the decisions they must make alone, not least those concerning their home.
You don't want to delay key steps in the planning process, but you also don't want to rush into decisions
A survey conducted by WISERSM (Women’s Institute for a Secure Retirement) showed that three out of ten widows did not have an emergency fund prior to their husband’s death. And about one in four couldn’t easily locate important information such as investment, bank and credit card account numbers.1
And while most women were primarily worried with their emotional and physical health following the death of a spouse, financial issues cannot be ignored. So while you don't want to do anything in haste after a transition, you do want to take steps to take control of your finances.
The sooner you start down that path, the better your odds of success. With the right approach and the right advice, the process need not be onerous. On the contrary, it can be empowering.
Here are some ideas on how to manage the transition:
To help you get started, ask a couple of money-savvy friends or family members to act as a sounding board. They can go with you when you initially meet advisors and help you ask good questions. While it's helpful if your confidantes understand the basics of investing or estate planning, they needn't be experts. Their role is to help you take the steps you need to make good choices, not make them for you.
Depending on the complexities of your situation and your financial savvy, you may want to seek out several experts, including an attorney, tax professional and financial advisor. Because you don't know what you don't know, getting the right advice is critical in the early stages of a transition. In fact, a common mistake is to delay wealth planning until after a divorce is final or the estate is settled. But by then it might be too late because you want to understand what you're up against financially before you agree to anything.
If you don't have a financial advisor, finding the right one is not unlike finding a good doctor or general contractor. Get two or three recommendations from other professionals (e.g. your attorney) and people who have been in similar circumstances. Then meet with them to see which advisor has the right mix of experience, personality and approach.
An advisor can walk you through all the steps you need to take to get organized, but you can facilitate the process by tracking down key documents, including: recent brokerage and bank statements; life and health insurance policies; recent tax returns; loan documents; and Social Security statements.
As you go about gathering these documents, you'll want to update your information—including beneficiaries—and start taking steps to protect your assets and your heirs. Among other things, you will want to update your will and any trust agreements, and look at life insurance and long-term care needs and policies.
Finally, create an inventory of your accounts and financial interests—everything from bank accounts to recurring bills—and store the information in a safe place, or with your attorney or advisor. Let your loved ones know that such a document exists and where they can find it.
At the heart of wealth planning is understanding your goals, where you currently stand toward those goals and creating a road map to achieve them.
A key part of the process is reconciling your income and savings with your spending. For this reason, your advisor will likely ask you to track your spending for several months, either with a spending journal or financial software.
You don't want to delay key steps in the planning process, but you also don't want to rush into decisions. The first year after a death or divorce can be very rough, so it’s best not to make any major changes, such as selling a house, right away.
The same is true of coming up with a wealth plan—it’s best to take Your time, build a solid foundation and create a plan that is realistic.
Morgan Stanley Financial Advisors can provide the guidance, tools and information to help you navigate through uncertain events like these. Talk today with a Morgan Stanley Financial Advisor. Because the next chapter of your life starts here.