Divorce is tough on both the husband and the wife, but often, it is very hard for the wife to re-establish herself if she has been out of the workforce for a number of years.
The challenge of finding a job and re-establishing herself financially can be overwhelming. In many cases, the terms of the divorce settlement, while seeming fair, can work against the woman from the standpoint that they ignore the weekly or monthly cash flow needs she may have.
Women can have an attachment to the family home and have a desire to keep it after their divorce. Maintaining the home where they raised their children, hosted large family parties or entertained their grandchildren is often a tremendous financial drain. The cost of taxes, insurance, utilities, and maintenance can add up significantly.
Women who choose to keep the home as part of the financial settlement usually forgo other financial assets that can be more valuable such as cash, securities, IRAs or other retirement plans. These types of assets can easily be used to cover cash flow needs. Real estate cannot easily be converted to cash.
While it may be a difficult emotional decision, moving to a smaller home, condo or apartment is often the best decision that the woman can make.
Women who do not have full-time jobs must provide for their own health insurance once a divorce is finalized. For a woman who is over 50 with some health issues, this can be very expensive. Cost for a personal health policy can range from $500 to more than $1,000 per month depending on the type of coverage that is selected.
Life insurance benefits provided by the ex-husband’s employer are also lost when a divorce is finalized. Many people do not purchase life insurance beyond what is provided by their employer. This is a big mistake. First of all, they are often under-insured as the employer provided coverage is usually a nominal amount. Second, if they lose their job, they lose their coverage. Purchasing a term policy to at least cover the cost of burial would make a lot of sense and should not cost that much.
Finally, if you do have life insurance, annuities or IRAs, it is very important that you update your beneficiary designations if your ex is listed as your beneficiary. Failing to do this will result in any proceeds going to your ex. This seems like a really simple thing, but this is often overlooked.
Jim Heisler is a Certified Financial Planner with Family Wealth Services in Holmesburg. You can read all his Financial Perspective columns here.
Registered Representative, Securities offered through Cambridge Investment Research, Inc., A Broker/Dealer, Member FINRA/SIPC and Investment Advisor Representative, Cambridge Investment Research Advisors, Inc. a Registered Investment Advisor. Family Wealth Services, LLC and Cambridge are not affiliated.
Jim Heisler, CFP®, CDFA™, CASL™ Family Wealth Services, LLC is located at 8275 Frankford Ave. (215-332-4968)