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Divorcing parents need long-range financial planning

Posted on Monday, March 4, 2013 at 8:41 am

Editor’s note: This is the second in a series of articles on how to make sound financial decisions for divorcing couples.

Some of the most difficult decisions divorcing parents will ever make involve their children.

Informed decision-making can help minimize the negative effects of financial changes during a divorce, according to University of Missouri Extension family financial specialist Vivian Mason.

Careful planning and calm thinking can help parents reach decisions that will help their children, she says.

One thing parents can do during the divorce process is understand the cost of raising children. Mason recommends that parents sit down with a list of the costs of raising children during the past 12 months. This might include day care, food, clothing, school supplies, medical care and extracurricular activities, Mason said. Inflation needs to be a consideration as well, she said.

Parents need to have an honest discussion on how the divorce will change the lifestyle of the parents and their children.

One of the biggest decisions will be regarding the family home. Will the custodial parent continue to live there? The custodial parent usually wants to keep disruptions in their children’s lives to a minimum and provide a stable home.

But there are times when it may not be wise to continue living in the marital property. The custodial parent must determine if he or she can afford continue paying the rent or mortgage payment, insurance, utilities, taxes and other household expenses without benefit of the second person’s income. Many times, it will be a financial hardship for the custodial parent to continue living at the same pre-divorce standard.

“Can I really afford to stay here? Too often the answer is no,” Mason said.

If the custodial parent decides to move out of the home, there are many other financial considerations. Part of the divorce settlement should address the sale of real estate, and include a provision to allow for who pays the costs of selling the home, such as real estate commissions, attorney fees or improvements to make the home more marketable.

Additionally, couples will need to consider the tax ramifications of selling property, Mason said. In most cases, a house will not be sold prior to a divorce, but couples should have legal documentation of what will happen when the house sells.

Divorcing parents also need to decide who will claim the children as tax dependents and who will be responsible for health care coverage costs for the children. Health care discussions should include the cost of deductible and non-covered items. Additionally, divorcing couples should have conversations about life and disability insurance to provide for the children in the event of death of the parent who is responsible for paying child support and/or alimony. By putting safeguards in place, parents can help to secure their children’s future.

For more information on financial planning and divorce, go to

Related MU Extension publications available for free download:

GH6130, Developing a Parenting Plan: A Guide for Divorcing Parents:

GH6601, Focus on Families: Divorce and Adults:

Next: Little tidbits that make big money sense for divorcing couples.