By FPA Members Elaine King, CFP®, CDFA™ and Philip Herzberg, CFP®, MSF
Last Updated: September 6, 2011
What steps can you take during the emotionally-draining and uncertain divorce process to financially plan for relocation? In concert with seasoned family law attorneys and divorce financial planners, you should ascertain that relocation is overall the most feasible financial solution for your family, accounting for the monetary and environmental adjustments this transition will have on your children and their welfare.
To further guide you and help alleviate concerns, follow these planning perspectives on how to financially plan for relocation.
Evaluate the diverse financial considerations and custodial ramifications of relocation
- As you begin to develop a comprehensive financial plan for relocation, make sure you estimate comparative living costs, including housing, schools, and food, as well as the quality of these services. Identify and factor in job prospects and family arrangements, and lower expenses for these same services in your budget.
- Consult with a legal professional during your divorce who can help you establish custody arrangements and advocate proper motives for relocation. If you depart with your children out-of-state without your divorcing spouse’s consent, you may face severe legal penalties, and risk jail time or losing custody. Be well-versed on your case-specific custody provisions, which vary from state to state.
In addition, be cognizant that if you move out of the house during the divorce, you may still consider it as your primary residence as long as your divorce agreement allows for this, and you meet IRS ownership use tests. If you retain it as your primary residence, you should include language in your divorce agreement that addresses any potential taxes on capital gains upon its sale.
Pay attention to your credit matters, retirement benefits, and investment assets prior to relocation
- Assess closing joint credit accounts, since you will not be able to control your spouse’s use of them during relocation. First, check to see if any balances are owed and who will pay them. Secondly, determine how your individual credit may be impacted by closing all joint credit accounts. Recognize that you may need to retain joint accounts and credit to buy maintenance items for your children and house.
- Monitor your retirement plan interests (i.e. 401(k), profit-sharing plan, and pension funding) and obtain a copy of the benefit brochure issued by your own or your former spouse’s employer. Remember that several factors affect your retirement benefits and could differ significantly from one portion of a year to the next.
Verify the valuation of investments and business assets, knowing that states vary in valuing assets at the date the divorce becomes final. You may wish to negotiate a specific cutoff date for valuing assets if you know your relocation is imminent. Note that your relocation may be dependent upon knowing when funds are actually transferred and accessible to you for necessary expenses.
Tackle anticipated monetary commitments and strategize for future financial goals
- Do an inventory of all shared or individual property and begin substantiating the financial information and documents (loan applications and insurance policies) you will need for relocation during your divorce. Discuss and confirm with your divorce attorney that you may initiate changes in your marital estate before your divorce is final. If you wish to change the title of assets or the nature of investments, you must be absolutely sure your attorney has cleared this with your former spouse and their attorney. While still married, specific kinds of assets require legal notice or waiver by your spouse to make any changes in beneficiary designations. If you are not allowed to change title or the nature of the assets, you are permitted to protect your assets. You can tell your financial institutions to freeze your accounts and transfer no assets or money during the divorce process without knowledge and consent of both you and your spouse.
- Clarify your financial goals and list upcoming life events to direct you in making monetary decisions during your divorce. For example, you may need to borrow funds when relocating to pay for the children’s food and medical care necessities. If utilizing credit cards, search for those with the lowest interest rate possible and maintain detailed records of any money spent to support yourself and your kids.
Clearly, you can prepare for pivotal events and financially prepare for relocation during your divorce. Face the future by strategizing and implementing a plan that will serve to avoid financial problems and accomplish your life desires.
FPA member Elaine King, CFP®, CDFA™, is the founder of Family & Money Matters Institute in Miami, Fla. FPA member Philip Herzberg, CFP®, MSF, is Director of Media Relations & Public Awareness for FPA of Miami-Dade.