You’re divorcing. You have a million things to think and worry about. Your divorce professional (whether a matrimonial attorney, mediator, or collaborative lawyer) is asking for all kinds of information and documentation. You’re worried about your kids and custody. You’re wondering whether you’ll stay in your home. You’re emotionally raw and trying to hold it all together. And the last thing you want to think about is your financial plan, but that’s one of the most important aspects of divorce. Aside from custody, divorce is about the money. Going through the process without dealing with finances just to get it over with or because you’re not well-equipped to deal with them is not a good excuse. You shouldn’t feel embarrassed about not having the knowledge or desire to do it – there are resources to help you.
The reason you should meet with a wealth advisor before settling your divorce is so that you can be better prepared. As a wealth manager and Certified Divorce Financial Analyst® professional, I’ve seen many clients post-divorce who haven’t even read their divorce decree, are surprised by what they’ve agreed to, and don’t understand that it may make things harder for them going forward. Many mistakes can be avoided by negotiating better and knowing what you’re agreeing to ahead of time.
It’s normal to concentrate on the kids’ visitation plans, vacation schedules, and joint custody, but you also need to focus on child support and spousal support (alimony). For example, agreeing to keeping the house without understanding that there is a large outstanding mortgage, plus maintenance and taxes that go up annually, could lead to financial ruin or having to sell the one thing you were determined to keep. Agreeing to state college tuition will have major repercussions if your child decides not to go to a state college and instead wants to go to a private or out-of-state school. Agreeing to take the investment account instead of cash, without understanding that if you sell securities to raise cash you could be liable for a lot of capital gains taxes, leaves you in a tough position when taxes are due.
A wealth manager should be called in as soon as you know you’re going to get a divorce. They can work with you to fill out your statement of net worth, which will be needed by your divorce professional to file with the courts. It details what you own in your own name, what is owned jointly, and what debt you have, including your mortgage, personal loans, car payments, and credit cards. It details what insurance you own, and what artwork, jewelry, vacation homes, vehicles, boats, and other prized possessions you have. It looks at what income you make, what income your spouse makes, what taxes you pay. It considers your lifestyle and what you spend on groceries, self-care, childcare, and pet care. It even includes what you spend on vacations, household help, and recreation. Everything your household spends needs to be detailed. This document can provide a clear picture of where you are today and what your life will look like after divorce. If you’re not involved in the preparation of the document or you just hand over documents to your divorce team without understanding the details, you’ll be at a disadvantage after the divorce is settled.
A wealth manager will also help you put together a budget to show you how your life will look after your divorce. They’ll work with you to create a financial plan which will be the road map from where you are today, factoring in child support and matrimonial support. It will factor in your salary if you’re working or determine if you’ll need to go back to work to maintain your current lifestyle. Many clients fail to see that the money that was supporting one household must now support two separate households. If it was only one salary doing that, tradeoffs will have to be made. Expenses will have to be cut, downsizing may be a reality, or you may not be able to help the kids with college or a house down payment. The plan will include how to invest your assets so that it can last your lifetime. It will take into account what cash you need day to day, month to month, and year to year. It will consider what future expenses are likely to be (such as healthcare and long-term care). It will consider inflation and the fact that the average life span continues to rise, so it may need to last well into your 90s. Your financial plan will look at all the options and leave you understanding your situation so that you can move forward with confidence.
Once the divorce decree is signed, you can’t claim that you didn’t understand it! As an advisor, it’s heartbreaking to read through a divorce stipulation with a client after the divorce has been finalized and learn that what they thought they were getting is not in fact what they got. Arm yourself against this by taking control and work with a wealth manager before or during the divorce process. Don’t wait until it’s too late.
Once the divorce is finalized, your wealth manager can help you monitor your budget, maintain an emergency fund, and manage your investments to make sure you stay on track. If you don’t have one, contact us to learn how we can help you take control of your finances before your divorce happens.
