Dear Kim,
I’m in the middle of divorce negotiations with my husband of 22 years. He is offering a lump sum settlement instead of ongoing spousal support. What are the financial questions I need to ask/consider before taking any further steps in this area?
Sincerely,
Worried about my Future
Dear Worried about my Future,
This is where a CDFA® can be of assistance to you. As a Certified Divorce Financial Analyst® (CDFA®), I can help you evaluate the lump sum settlement your husband is offering and compare it to the long-term value of ongoing spousal support. This analysis goes beyond just looking at the dollar amounts—it takes into account factors such as inflation, investment growth potential, and your future financial needs. While a lump sum may seem appealing upfront, it’s important to determine whether it will provide financial security over time, especially if you have ongoing expenses or are not currently working. My role is to ensure you have a clear understanding of how each option affects your financial future.
Beyond comparing the numbers, there are additional financial considerations to weigh. For example, will the lump sum be taxed differently than spousal support payments? In some cases, a lump sum may be subject to capital gains or other tax implications, while spousal support payments might provide a more predictable, steady income stream. If you choose the lump sum, I can help you develop a strategy to invest and manage those funds so they support you in the years to come.
It’s also essential to think about lifestyle changes and unexpected expenses. Will you need to adjust your standard of living? Do you have a plan for health insurance, retirement savings, or other long-term financial commitments? Additionally, if your ex-spouse has life insurance, you may want to ensure that policy continues to support you if something happens to him. By having the owner changed to yourself, you can ensure the policy stays intact. These are all critical questions to address before making a decision. By working with a CDFA® like me, you can approach your divorce settlement with confidence, knowing you are making the best financial choice for your future.
Kim
If you need help navigating your finances, talk to Kim Spencer by clicking the link below!
Ask Kim