The best advice I can give to couples who are in the midst of a divorce and dividing responsibilities and assets is to stay calm. And, if tempers flare, take a “pause”. Wait 24 hours before you respond when you are angry…or sleep on your response. This bit of advice will help the process move more smoothly.
When helping clients through this type of transition, we sit down together and review any prenuptial documents. In addition, we discuss a spending plan. In this part of the process, “budget” is too strong of a word to use. We also look at other factors that have an impact on the division of assets.
For example, if I’m working with a spouse who has stayed home raising the children, we look at what education or training they would need in order to return to the workforce. We create a plan on how long it will take to complete the education and training and what resources, including financial, are needed in order to complete the path back to the workforce.
This gives us a foundation for when we look at the assets that need to be divided. This process isn’t as simple as taking the values and dividing equally. We must first consider what assets are liquid and what, if any, are the tax consequences. Other items to consider:
- Assets in qualified accounts vs. non-qualified accounts
- Child support vs alimony vs property settlement
- Values of assets that are not marketable securities
- Who will decide the values of the assets in question?
While assets and children are usually what is top-of-mind to those entering divorce proceedings, expenses must be considered as well. Specifically, items like who will pay for education, health insurance and extracurricular activities for children? Depending on the size of the family and assets, the divorce decree can become quite lengthy. In some cases, it can take years to complete the divorce decree and that decree may include years of payouts.
In addition to expenses, the divorcing couple must also consider:
- Evaluating employee benefits and health insurance
- Filing final tax returns
- Determining who will claim the children as dependents
During this time, it is very important to have a team to help guide you through this transition. It is important to bring your attorney, accountant and wealth advisor together to create one strategy. The entire process can be a very traumatic time that is intensified because cognitive skills are lowered.
As a Certified Financial Transitionist™, I not only help my client with the financial aspect of divorce, but also with the emotional and technical pieces. Those going through the divorce process typically go through four phases of transition:
- Anticipation (preparing to file)
- Ending (divorce is complete – no turning back)
- Passage (figuring out what is next)
- New Normal (a new me!)
At times, my most important skill is the ability to listen. I can’t fix the marriage, but I can provide the tools and listening ear to help my client move through this life transition while standing on their own two feet!