Helping clients after they are divorced.

Author:Wilsey, Megan
 
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After a divorce is finalized, the client must consider some key questions: What can I afford? How do I make my cut of the pie last? Will I be able to retire? Here are the top five ways CPAs as trusted advisers can help clients through this process.

EMPHASIZE THE IMPORTANCE OF A SUSTAINABLE BUDGET

The first step in budgeting is to determine financial priorities. Encourage clients to honestly assess what is necessary versus unnecessary and then work with the client to create a budget that he or she can stick to.

The division of income and the determination of new expenses can be overwhelming at first, but creating a budget can help clients be more strategic with their financial choices.

Taxes are a critical component to any budget. Bear in mind that the IRS considers individuals to be unmarried for the whole tax year in which their divorce or separate maintenance agreement is finalized (IRS Publication 504, Divorced or Separated Individuals).

HELP CLIENTS THINK ABOUT WAYS TO MITIGATE RISK

In addition to having a cash safety net of six months or so, clients should give thought to the insurance coverage changes that may have taken place as a result of the divorce and begin to think through whether they need to modify or replace any policies.

Navigating the world of insurance can be daunting, but the following types of coverage should be considered:

* Life insurance (income protection), especially if the divorced couple have children;

* Umbrella, homeowner's, or renter's insurance (property protection); and

* Health insurance (current employer, COBRA, or from a health care exchange).

HAVE CRITICAL DISCUSSIONS ABOUT RETIREMENT

Dividing retirement savings between the former spouses generally results in a less-than-rosy retirement picture. If your client originally had retirement planning prepared on a joint basis, it is critical to reassess the client's goals, assets, and overall plan.

Start by focusing on the client's current retirement savings. Discuss when he or she wants to retire and the lifestyle desired upon retirement. In this area, it may also be wise for the client to consult with other qualified advisers who can help determine how much is needed to meet his or her retirement goals.

DO NOT FORGET ESTATE PLANNING AND BENEFICIARY DESIGNATIONS

After the divorce paperwork and fees are settled, estate planning is a significant task...

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