Navigating the Financial Waters of Divorce

By Jessie Foster Financial Planner, First Republic Investment Management
September 17, 2019

Divorce is one of the most challenging events many people go through. Beyond the emotional turmoil and family changes that can be involved in ending a marriage, there are many short- and long-term financial concerns. How will assets be divided? What if there are complex situations involved? How will the divorce affect both spouses’ future financial security?

Your options

Before you delve into those matters, one of the most important decisions you need to make involves determining the process by which you will get divorced. In the past, most couples getting divorced automatically hired lawyers and headed to court. These days, while you’ll still need legal counsel and other professionals to assist in your divorce, you have a number of options around how best to use those professionals. Choose the process that’s right for you and your family, and you may reduce the financial and emotional burden and gain more control over how you go through your divorce.

If you are dealing with divorce, the following options are worth your consideration:


Mediation is a cooperative process in which you and your spouse come together with a mediator – a neutral third party who assists both spouses in reaching agreement on the issues that must be decided. These may include equitable distribution of assets, child custody, child support, alimony and others. Using a mediator can help you reduce costs, reach settlements faster and give both spouses a higher level of input and control. If your mediator is not an attorney, you will need to retain an attorney to draft your settlement agreement. You each will want your own attorneys to review this document before you sign.

Collaborative divorce

Sometimes called the “no-court” or “peaceful” divorce, this is a voluntary process that brings you, your spouse and your respective attorneys together to negotiate the settlement agreement. A collaborative divorce offers more professional guidance and input than with mediation, but like the name suggests, it’s a collaborative process and generally less expensive than litigation as you, the client (rather than the courts) control the process.


If you and your spouse are facing a particularly contentious or legally complex situation, you may need a formal court proceeding. This is generally the most expensive and time-consuming route, primarily because the courts will dictate the pace of your process and the time required by your attorney to advocate your case.

Your three-point plan

Regardless of which process you use, there are generally three financial steps involved in beginning a divorce.

Step 1: Collect documents

In order to compile your financial data and so that you can give your professional team a full view of the assets, liabilities and other financial matters that must be addressed in the divorce process, you will need to present the team with the following:

• Financial account statements
• Income tax returns
• Pay statements
• Real estate title documents
• Loan documents, including your mortgage and credit card statements
• Health, auto and life insurance policies, including annuities
• Retirement and pension plan documents
• Long-term care insurance policy documents
• Business ownership records, such as operating and partnership agreements and financial and tax records

Step 2: Plan ahead for the transition

As you are going through the divorce (but before it is final), there are several considerations that may need to be addressed:

• Where will each of you live? Will you continue to share the marital home or will one person move out?
• How will you pay bills and family expenses in the interim?
• How will bank and credit cards be handled?
• If you have children, when will you tell them about the divorce, and what will you tell them?

Step 3: Don’t forget special financial-planning considerations

Beyond the common financial steps of a divorce, more unique and complex situations may need to be addressed as part of the settlement process. Such situations make it all the more essential to have professional legal and financial guidance. For many couples, considerations must be made around:

• Health insurance coverage (if one spouse doesn’t have access to coverage through an employer)
• A child with special needs
• A spouse who hasn’t worked and may not be able to find a job immediately
• Whether one or both spouses are already retired
• Complex financial assets such as stock options and other types of executive compensation, business ownership and private equity
• Hiding assets — if one spouse suspects there are assets not being disclosed

Doing the best for yourself and your family during a divorce

Despite all of the financial considerations, costs and potential consequences of divorce, going through the process doesn’t have to be more emotionally stressful and burdensome than it already may be.

To make the divorce as stress-free as possible for you and your family, it’s important to have a team of experienced advisors on your side and to assemble that team early on. Interview professionals so that you can find ones you are comfortable with and who understand your issues. A good team will help keep your process moving forward and get you to resolution.

Choosing the right divorce process is equally important as it also sets the tone for communications – both during the process and once your marriage is resolved. After all, the type of relationship you have post-divorce can be impacted by how you navigate getting divorced and work through difficult decisions. Take the time now and your efforts will pay off in the long run.

The strategies mentioned in this article may have tax and legal consequences; therefore, you should consult your own attorneys and/or tax advisors to understand the tax and legal consequences of any strategies mentioned in this document. This information is governed by our Terms and Conditions of Use.