Divorce
Divorce is a time of major change at all levels. They need to bring in a skilled and ethical financial planner to help them re-calibrate their finances and reduce their financial risk. Areas to look at include:
Maintenance cover
What will happen to maintenance payments should the payer:
- Die?
- Become permanently disabled?
- Become ill and cannot work for an extended period?
One can take out insurance on the payer’s life and have the proceeds payable to the child (or a trust) each month till the child reaches an agreed age. This protects the single parent from the risk of the maintenance disappearing should anything happen to the ex-spouse
This can be written into the divorce agreement.
Investment of lump sum proceeds
If the divorce agreement results in a payment of a lump sum.
A skilled certified financial planner can ensure that this be invested wisely to meet the specific needs of the family.
Bond cover
Often a new property is purchased. This will result in the need to have bond cover. A skilled financial adviser can get the right shaped cover at the best price.
Pension payout
Spouses are entitled to a payout from their spouse’s pension fund.
This needs to be invested correctly in investment portfolios that are appropriate for the lifestage of the divorcee. Getting the portfolio wrong by 1% can have up to a 20% impact on the final return.
Re-calibrate finances
Divorces are costly. Savings will have been used up. Moving onto one salary will have an impact on the longer term plans.
This requires that a new financial plan be drawn up.
A certified financial planner can help ensure that:
- There is sufficient risk cover to look after the children.
- The correct medical aid gap covers are in place.
- The correct beneficiaries are noted.
- The longer term retirement needs are understood and longer term plans are in place to address them.
There are often short term cashflow issues at the time of a divorce and people often do not want to think about the longer term. A decent planner can help quantify the need and assist in prioritizing those issues that are critical and figure out a plan of action to address the longer term issues in the future.
If you are going through or have recently divorced, contact me.
I can help put the right structures in place.
Kenny Meiring CFP®
