Getting a divorce can be a painful process. The emotional costs are high and those involved often go through a lengthy period of uncertainty. But you need to immediately consider the financial repercussions. Here are a few things to think about to make sure you are protected and on the right track financially.
Cancel joint accounts. If you haven’t already done so, cancel and close all joint accounts with your ex-spouse. Joint accounts that remain open are liabilities that could come back to haunt you. The last thing you need is to be on the hook after your ex-spouse runs up charges on credit cards or goes into overdraft on a bank account. You don’t want to be paying for a spouse’s golf club membership or a spa weekend, says Christine Van Cauwenberghe, vice-president, tax & estate planning with IG Wealth Management.
Review your will and other beneficiary accounts. It’s critical to change the beneficiaries on your financial accounts and on your will. Failing to do so could mean that your ex-spouse is entitled to your RRSP savings and other assets when you pass away. Changing beneficiary designations is an easy process that can usually be done with a simple form. Review your powers of attorney also to ensure that the right person is taking care of your finances if you can’t do it yourself.
Sell key assets. After filing for divorce, you will likely want to get rid of assets that are jointly owned, such as a house and its contents. Figure out what you want to sell and what you want to keep, says Van Cauwenberghe, who adds that this process should be undertaken in consultation with a family lawyer or financial planner. The sale of assets should be done as quickly as possible as it can delay divorce proceedings.
Start saving in your own name. “You need to start saving now based on your new situation,” Van Cauwenberghe advises. Make a list of all the accounts you had while married and seek to replace them as soon as possible. This includes bank and investment accounts. It also might make sense to apply for new credit cards as you might need a small bridge loan after a divorce while you get back on your financial feet.
Create an emergency account. Now that you are single, it makes more sense than ever to have an emergency cash safety net. Set aside enough to cover 3-6 months of living expenses. Consider putting the money in a high interest savings account, so it’s immediately accessible.
Divorce proceedings can be complex and exhausting. Having a checklist of things to take care of can assist in the process. Focusing on your financial security will help you create a new, independent lifestyle.
Written and published by IG Wealth Management as a general source of information only. Not intended as a solicitation to buy or sell specific investments, or to provide tax, legal or investment advice. Seek advice on your specific circumstances from an IG Wealth Management Consultant.
