Financial Clarity During a Major Life Transition

by Kristin Larson, CFP^®, CPWA^®, Founder & Wealth Advisor

A major life transition can quickly change your financial life and leave you facing decisions you did not expect to make.

For successful women accustomed to handling complex situations, some of these financial questions may be entirely new.

A good place to start is understanding which decisions require attention now and which can wait.

Different Transitions Bring Different Decisions

The loss of a loved one, a divorce, an inheritance, the sale of a business, or another significant transition can bring different financial decisions and responsibilities.

For example, the death of a spouse may require you to address estate administration, trusts, life insurance, investment accounts, property and tax matters. Income and cash flow may also change, and you may find yourself handling financial decisions that you previously managed together.

Divorce can raise questions about the division of assets, a home or other property, retirement accounts, insurance, beneficiaries and taxes. These issues can become more complex for executives or business owners with company stock, deferred compensation or an interest in a privately held business.

An inheritance can introduce significant wealth, creating questions about taxes and how the new assets fit with the wealth you already have. For example, an inherited IRA may need to be distributed within ten years, depending on the circumstances. For someone already earning a significant income, those distributions can add to taxable income, making the timing an important part of broader tax planning.

The sale of a business can create significant liquidity and raise questions about taxes, investing the proceeds, estate planning, charitable giving and how much you want to use to support the life you envision after the business.

Decision Buckets: Separating the Immediate from the Important

A major transition can add another layer of financial stress to an already complex financial life. We find it helpful to separate decisions into three buckets: what needs attention now, what should be addressed in the months ahead, and what can wait.

For example, a home may require immediate attention during a divorce, while allowing more time for consideration after the death of a spouse. An inheritance may require prompt attention to tax deadlines or account requirements, while decisions about how to invest or use the assets can often be considered as part of a longer-term plan.

The goal is to identify deadlines and financial needs first, then give yourself time for decisions that do not require an immediate answer. Understanding those differences and creating that separation can provide valuable breathing room.

A significant transition can also involve several professionals, including your financial advisor, CPA, estate attorney, insurance professional and other specialists, depending on your circumstances. We can help you understand who needs to be involved, what each person is responsible for, and how decisions in one area may affect another. We then coordinate the pieces to reduce the amount you have to manage yourself during an already demanding time.

Understand What You Have Before Deciding What Comes Next

A transition creates an opportunity to review your complete financial picture, including what continues to serve you well and which areas deserve attention.

Start by understanding where you are today. What do you own and owe? Where does your income come from? How are assets titled? What insurance coverage is in place? Are estate documents and beneficiaries current? Are there concentrated investments, stock options, business interests or other assets that require special attention?

From there, consider how the transition has affected your income, cash flow or expenses, or whether it has created new responsibilities that require attention. Liquidity can also become important, especially when there are near-term expenses, taxes or other commitments to address.

Before making significant changes, understanding how all the pieces fit together provides a stronger foundation for the decisions ahead.

Reconsider What You Want from Your Wealth

A major life transition can affect what you need and want from your wealth.

Your resources and responsibilities may be different, as may your perspective on risk, family, work and the future.

You may want to reconsider your priorities and how you want to use your wealth, including supporting family members or philanthropic causes, traveling, starting a business or new career, or having greater financial freedom to spend your time as you want.

Major life transitions can come at a time when you already have a great deal to manage. Having a clear sense of what requires attention, what can wait, and who can help with the details can make the financial decisions ahead easier to manage.

At NewSpring Wealth Partners, we help you understand your choices, organize the financial pieces, and develop a clear plan for what comes next.