Financial Steps to Take Before, During, and After a Divorce

03.17.2021 - Leticia Hernandez, Trust Counsel

Although divorce is an everyday occurrence in the US, it can be one of the most emotionally and financially draining experiences a person goes through in life. In fact, the only event more stressful than the dissolution of a marriage is the death of a spouse, according to one study.[i] And older couples are not immune. In fact, the divorce rate for adults over the age of 50 has almost doubled over the past 20 years.[ii]

But ending your marriage doesn’t have to ruin your financial life. In this Q&A, Trust Counsel Leticia Hernandez offers steps you can take before, during and after a divorce to protect your wealth, maintain your current standard of living, and emerge with your financial well-being intact.

Q: What is the first thing a woman should do to protect her finances in a divorce?

LETICIA: Hire a qualified divorce attorney. That might sound obvious, but you would be amazed at how many women say they are still on good terms with their spouses and are convinced the divorce will be amicable and uncomplicated. So, they don’t need guidance from a legal professional. That can be a costly mistake, because an experienced divorce attorney knows how to access the financial information you’ll need during the negotiations, including details about marital assets you might not even know exist. Divorce agreements are complex, so each spouse should always have an attorney.

Q: How much influence does a prenuptial agreement have over the way property is divided?

LETICIA: Generally, the courts enforce prenuptial agreements, mainly because the contract is signed before a couple gets married or has any jointly-owned property. However, in order for a prenuptial agreement to be valid in the eyes of the court, each spouse must provide the other side with “reasonable financial disclosure”, that gives everyone a complete and accurate picture of their finances.

Q: What are the most common financial mistakes women make before a divorce?

LETICIA: The biggest mistake I see women make is failing to understand what they own or create a budget that shows all of their income and expenses. It’s important at every stage of a marriage—whether you are engaged, happily married, or considering a divorce—to sit down with your partner, talk about your finances, and develop a long-term financial plan.

Women who are not involved in financial conversations enter the divorce negotiations at a significant disadvantage because they lack information. Does your spouse have cash set aside for emergencies somewhere? Is he overspending and accumulating credit card debt you could be held liable for? Open and honest discussions about finances are critical if you want to be fully prepared in a divorce.

Q: What are the most important steps to take during and after the divorce proceedings?

LETICIA When the divorce negotiations are underway, make sure you remove any authority your spouse might have to make financial or medical decisions on your behalf with a power of attorney directive. In most cases, you should wait until the divorce is final before updating your will, estate plan and trust documents, as well as the beneficiary designations on your insurance policies and retirement accounts. But revising these documents is essential. The last thing in the world you want after a divorce is for your ex-spouse to inherit those assets, serve as the executor of your estate, or become the trustee of trusts you funded.

Q: Are taxes a major factor when negotiating for certain property?

LETICIA: One of the biggest concerns for many women is staying in the family home, especially when children are involved. But it’s important to be careful with property that has gained significant value over the years. You could be hit with a large capital gains tax bill when you sell that property unless you can offset those gains by harvesting investment losses.

Also keep in mind that a spouse will pay income tax on distributions from an IRA, 401k account or other tax-deferred retirement account, but not on retirement accounts that were funded with after-tax dollars, such as a Roth IRA. If your spouse has been the primary breadwinner in the relationship, you might also want to look at the liquid assets you own together and try to negotiate for enough cash to pay your divorce-related expenses and stay on your feet financially for a while.   

Q: How does a postnuptial agreement work? Why would a couple sign one?

LETICIA: A postnuptial agreement is similar to a prenuptial agreement, but it is signed while the couple is married. It establishes each spouse’s rights and obligations and determines how property will be divided in the event of divorce. Some couples sign postnuptial agreements because they were contemplating a prenuptial agreement before they got married but never followed through, for one reason or another. Others do it for religious purposes or because they choose to live separately and don’t want to proceed with a divorce.

A postnuptial agreement might also be helpful if there has been a significant change in one spouse’s finances during the marriage, such as a large inheritance, or if you think it might ease your stress. The terms of the postnuptial agreement should be fair and reasonable. Otherwise, it could be overturned in court.

Q: After a divorce, what do women regret doing or not doing financially?

LETICIA: As I mentioned, women are often disappointed at the limited amount of involvement they had in the couple’s finances while they were married. Sometimes women look back at their married lives and regret not creating their own financial plans—including alternatives for dealing with “what if?” scenarios like a divorce and having their own safety net, savings, and emergency contingency plan. If they could go back in time, other women tell me they would have saved for retirement in their own accounts and kept their pre-marital assets separate instead of mixing them with assets their spouses brought into the relationship.


For more details on protecting your finances before, during, and after a divorce, please contact your Fiduciary Trust International representative or call us at (877) 384-1111.


[i] Holmes-Rahe Stress Scale, American Institute of Stress, April 22, 2020.

[ii] Source: Pew Research Center, March 2017.

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