Life's Tragedies Take Toll on Finances

BOSTON (TheStreet) -- Death. Divorce. Disability.

No one wants to think about life's more tragic twists. But these transitions can be devastating to your finances if you are ill-prepared.

Women in a divorce often take assets that can cost them in the long run, and they can be blindsided by financial mysteries when a spouse dies.

Carole Peck, president of Carole Peck Financial Center, with offices in the Chicago area and Florida, is a certified financial planner and certified divorce financial analyst. She specializes in those crossroads and milestones that can alter one's life, and balance sheet, forever.

DIVORCE
Even in an amicable separation, divorces can be highly emotional and surprisingly complex, she says.

Couples often overlook the financial ramifications of their split, or assume lawyers will hammer things out to everyone's satisfaction. Even a mutually agreed upon, 50-50 split of assets may not be as straightforward as intended, however.

"Very often the woman with the children will say, 'I want the house -- I will take that side of the assets and you can have the IRAs and all those other long-term assets,'" Peck says. "When we do financial modeling, we find that, in most cases, the one who takes the house generally does not have a very good long-term outlook."

A spouse without a comparable work history to his or her ex, lacking their earnings and benefits, may soon discover they are ill-prepared to handle the expensive prospect of homeownership once repairs, maintenance and property taxes start to add up. Over time this "asset," especially in the current market, may prove to be more burden than benefit.

Meanwhile, the other half of the marriage will keep benefiting from the returns on their portfolio, IRAs or 401(k) assets.

"There is a big disparity in 10 or 15 years when you look at the charts," Peck says.

Even alimony and child support agreements may prove inadequate. The spouse, for instance, can pass away or become disabled, leaving those dependents cash-strapped.

Preventing this requires some upfront planning.

At the time of a divorce, the more financially secure spouse can take out a life insurance policy that includes children as beneficiaries until they are of a certain age.