It Pays to be Prepared: Financial Planning for a Divorce

July 26th 2024,

Financial planning for a divorce has become a necessity for married couples and individuals. It may seem unromantic to acknowledge the possibility of a marriage ending – especially when the union is still going strong. However, divorce is a very real possibility, with about half of marriages in the United States ending this way. Even if you are going to be among the lucky couples who stay together, it is better to prepare for the possibility of divorce. With divorce, as with so many other things in life, it is better to have prepared and not need it, than to have a need for which you are not prepared. Professionals in the BioTech, Pharma, and Life Sciences sectors already face a number of financial uncertainties thanks to the nature of their industries. It is best to manage finances carefully so that all potential risks, including those associated with divorce, are provided for.

How, then, should you prepare financially for divorce? It is important to have a very open and honest discussion about this early on in your marriage – preferably even beforehand – and get a professional financial advisor involved as soon as possible. A financial advisor can act as an objective party who can help make divorce preparations without any emotional attachments.

It is a hard fact of life that financial planning for divorce is something that should start before the wedding. It doesn’t mean that you are dooming your marriage before it is even solemnized. You are just being realistic and making preparations to provide for the worst-case scenario. In the midst of planning for the wedding, take some time to sit together and consider the financial and legal implications of your marriage. What are your state’s divorce rules? Make sure you know them and how to be prepared for them. 

It is best not to dive into a marriage in community of property. Rather, go to a lawyer and draw up a prenuptial contract that will set out how assets are to be divided in the event of a divorce. Once you are married, consider keeping your accounts and assets separate; this will make the divorce settlement a lot less complicated. Be sure to keep records of everything. If you should ultimately get divorced, you will need to gather all your records, determine ownership of your various assets, and ensure that you have an ongoing record of income and expenses.

When a divorce is underway, the division of assets is best undertaken with the assistance of a financial advisor, especially when many of these assets form part of a larger investment portfolio. When you work with a family CFO at LRVS Advisory, we use a proven process to review a client’s financial situation before, during and after divorce to identify the best ways to divide up assets and make the most equitable adjustments to the changing circumstances. We do an investment and risk audit, and a balance sheet analysis. We then take a close look at your cash flow before examining any relevant wills, trusts and retirement plans. We consider any debts that might be outstanding for both you and your spouse, and determine how this will affect the final division of assets. 

Your marriage regime will form an important part of our assessments, as this will help determine which assets should be awarded to whom. The risk and investment audit will include a careful analysis of your portfolio.

As already mentioned, your financial considerations must begin before you even get married. Considering a prenuptial agreement is the first and perhaps most important step in the process. The terms of this agreement will generally override your state’s asset division laws. A prenup can be especially useful when one or both partners bring considerable assets or debts into the marriage. If you already have an investment portfolio, own a business, or expect to inherit assets, a prenup can prevent you from having to give up any of these valuable assets in the event of a divorce.

Then, during your marriage, have plenty of open and honest discussions to decide how you are going to divide up accounts and assets. Mixing assets and accounts will generally cause them to be considered joint marital property, and it will be very difficult to disentangle them. Always keep business assets separate from personal ones.

LRVS Advisory offers professional wealth and financial management advice to professionals in the Life Sciences, BioTech and Pharma industries. If you are a professional in these industries, and are looking for help with financial planning for a divorce, contact us and speak to one of our experienced family CFOs.