Divorce is challenging for parents, but it can be especially hard on children, creating an increased risk for adjustment and a negative effect on academics. While parents are tending to their children’s emotional needs and creating a plan to act as coparents, they also need to focus on what they can do to lessen the financial impact of divorce and deliver the best care for their children. Here’s how to start the process.
Create a plan for child-related expenses
Any marriage settlement agreement should include a plan for costs related to all children. Details should cover what is included in child support and who will be responsible for things such as tuition, insurance, medical bills, childcare, activities and clothing, to name a few.
Outline what to do about unexpected expenses
Take the time to create a financial emergency plan. Inevitably, circumstances and accidents may lead to expenses not outlined in the divorce agreement. For example, who pays for an out-of-network trip to the emergency room or last-minute supplies for sleep-away camp? Define what constitutes an emergency, determine which parent will pay for it, and agree on how either side will be reimbursed.
Review the divorce’s impact on taxes
Planning for divorce should also include planning for the details on taxes. For example, one person will be able to claim “head of household” versus single; that choice can reduce tax liability by several thousand dollars. To be eligible, a parent must have a child live with them for more than half a year. Which parent claims this status is usually decided during the divorce process; one idea is for coparents to alternate years.
Plan for children’s insurance and benefits
During a divorce, you may need to change the beneficiary designations on your life insurance policies. This is also a good time to adjust coverage amounts based on your changing financial situation. Talk with your State Farm® agent and divorce attorney to arrive at a specific amount.
Continue to save for college
Divorcing parents must also discuss what will become of their children’s college savings plans and joint bank accounts between parent and child. Will one parent remain the account custodian or will the account be divided? How much will each parent contribute toward the child’s savings?
Establish a routine so your children benefit
It’s important to regularly communicate with your ex about finances related to your children. There are online tools that can simplify this process and allow you to upload receipts, deposit money, and review data, for example. At the same time, establishing a process creates a paper trail to help ensure that both parents uphold the divorce agreement.
Be open to adjustments for your children
Financial needs may evolve over time. Keep your children and their health and welfare in mind, then try to discuss these changes and work together to amend the divorce agreement if necessary. Divorce is difficult, but creating a plan that tries to help everyone, including your children, can help.