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Solopreneur Money

May 17, 2021

Unfortunately, 50% of all marriages end in divorce. In addition to breaking up a marriage, a divorce can unravel a financial plan. What happens to your financial plan if you lose 50% of your assets? Where will the money come from when you reach a settlement? Have you ever wondered how the financial side of divorce works? 

This may not be the most cheerful episode, but it is important to understand the basics of the financial side of divorce so that if it ever affects you or a loved one you can be prepared. Click the play button to learn how to handle the financial side of divorce. 

You will want to hear this episode if you are interested in...

  • A client divorce story [3:22]
  • Learning how to move money from one spouse to another in a divorce [7:04]
  • How will a divorce affect the financial plan? [8:45]

What happens in a divorce? 

I recently had a client come to me who was caught off guard by an unexpected impending divorce. Not only was he dealing with the emotional side of this momentous life change, but he was also trying to deal with the financial ramifications of the divorce. He had no idea what to expect and asked me how this would affect his finances. 

First, I explained the divorce process. Once both parties come to an agreement the lawyers draw up the agreement and take it to the judge to begin the settlement process. The judge then signs a divorce decree. This divorce decree clearly identifies all parties involved and dictates the division of property and any provisions for spousal support. The divorce decree becomes the law that all parties must follow. 

How does the financial side of divorce work?

My client wanted to know how his retirement savings would be affected. He had to split the retirement savings with his spouse. Did that mean that he would be taxed on these withdrawals?

Fortunately, you do not get taxed on these withdrawals if you use a qualified domestic relations order (QDRO). A QDRO is one of the best ways to move retirement assets from one spouse to another. This allows you to move the assets from your 401K to an IRA in your spouse’s name tax-free without taking a penalty. The QDRO also prevents you from having to dip into your cash assets to make the settlement. 

How will divorce affect your financial plan?

Once the dust has settled, it is important to sit down and review your financial plan. Your assets have likely been cut in half, so now you will need to come up with a new financial projection. You’ll also need to review your will, beneficiaries, and any trusts. 

Divorce is a challenging time, but you don’t want it to completely derail your hard work. If you prepare yourself for what lies ahead you can get back on your feet quickly and keep working toward your goals. 

Before you go make sure to head on over to and subscribe to our newsletter. When you do so, you’ll be the first to get our free worksheets and planning guides as soon as they come out. 

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