Navigating the emotional complexities of divorce is challenging enough, but there is a world of financial and legal decisions that must be addressed as well. How do you balance these emotional components with the numerous financial and legal decisions you need to make? The financial aspect of divorce is in many ways like any other major life transition for which you would seek the advice of a financial advisor with specific expertise. Decisions around finances made during this time are often complex, with long-ranging effects on your life in the future. While we sincerely hope you never need this specific expertise, your Wetherby team is uniquely qualified to help you or your loved one through this process. Members of our Wetherby team are Certified Divorce Financial Analysts, a designation for advisors with expertise in understanding the financial implications of divorce. Most people do not take advantage of this type of know-how of a financial advisor experienced in divorce settlements as they go through the process. Only 5% of women in a recent survey knew about using a financial advisor as part of their divorce team, but 61% of divorced women said that they wish they would have.1
Numbers Don’t Always Tell the Whole Story
One of the many reasons for including a financial advisor in your divorce team is that equitable settlements are not as simple as splitting the current value of assets in accordance with the law. Some assets may have significantly different values in ten, twenty or more years than they do now. Decisions about the distribution of assets can also have unintended ramifications down the road. Consider the decision regarding who will keep the marital home. Your home is so much more than an asset. There is often an emotional attachment to this home, particularly if there are still children used to the stability of living there. If one spouse keeps the family home and the other keeps the more liquid assets that are roughly equivalent in current value, the spouse who retains the house may not have the cash to fund their daily lifestyle, the upkeep of the home or future retirement. In some cases, this could result in a sale of the home down the road, with potentially higher tax consequences and less cash in the end. In contrast, the other spouse has funds available to pay for their routine living expenses and other longer-term needs. There are sometimes solutions that allow one spouse to retain the home while avoiding these future negative consequences.
Many of the couples we have worked with have a much more complex mix of assets and income streams, making the decisions seem overwhelming. In working with someone making these types of decisions, we can look at multiple scenarios and offer solutions that seek to address both short-term needs and long-term sustainability. It’s important to remember that, particularly after a lengthy marriage, equitable distribution of assets must consider the future lifestyle of each party. What kind of settlement most allows you to create a new financial life and maintain your standard of living 10, 20, 30 years or more down the road?
Accurately Understanding Assets and Income
Particularly for individuals of significant wealth, understanding the current and future value of complex assets can be challenging. For standard publicly available investments, such as stocks, these values can be straightforward. When we begin to consider private investments, art, jewelry and illiquid investments like closely-held equity positions, stock options or businesses, the picture can become murkier and financial expertise becomes necessary.
Aside from choosing how to split marital assets, understanding the role and need for spousal support can be crucial. Spousal support, also known as alimony, is sometimes paid by the higher wage earner to maintain a comparable post-divorce standard of living in both households. Support can be paid as annual or monthly payments for a set number of years or satisfied with a lump sum payment in cash or other assets. Modeling the different options can be crucial to demonstrate which option is more likely to ensure a comparable standard of living for both parties. Sometimes the offer on the table does not allow for long-term economic sustainability for one party.
Planning For Your Future
The impact of divorce proceedings doesn’t end when the ink is dry on the settlement. The choices made while going through the divorce process can have a significant impact on your family’s lifestyle. Marriages often come with complexities that will continue even after divorce, including considerations like ongoing co-parenting, your children’s education expenses, and shared ownership of a family business. It may seem impossible to visualize this new life while living through the turmoil of a divorce. It is one of the most stressful life transitions a person can go through. However, divorce can also provide a fresh start and a chance to reimagine your future. A dedicated financial advisor can help you imagine this future and guide you to a settlement that will help you meet your goals.
It’s Never Too Early, or Too Late, To Seek Advice
Working with a financial advisor is a key way that you can help ease the transition after divorce and thrive as an individual for years to come. Your advisor can seek to advocate for your financial well-being, both in your divorce settlement and in the future and can be as involved as you feel is helpful both in the settlement process and your long-term financial planning. You don’t have to commit to working with a financial planner for years down the line to take advantage of their expertise and guidance during the divorce process. That said, clients who come to an advisor during a time of acute need often find that the relationship they develop is something they find valuable for their financial health far beyond what initially drove them to seek guidance.
Regardless of what stage of the divorce process you find yourself in, it’s never too early or too late to seek advice.
While we believe there are clear advantages to including a financial advisor in your divorce team earlier rather than later, you should feel comfortable reaching out to a financial advisor well-versed in the financial implications of divorce at whatever stage you realize you need additional guidance. If you are deep into negotiations on a settlement and tensions are rising around assessing and dividing assets, a financial advisor can step in and provide needed insight and tools to help guide decisions. Even if a settlement has already been reached, a financial advisor can help you plan for your independent future and make the most of the resources you have available. You have an entirely new financial life ahead of you, and you deserve the support and guidance of someone with your best interests at heart.
Divorce is rarely a simple process. Untangling complex practical matters in the midst of heightened emotions is understandably challenging and can prove a heavy load to bear even for the most accomplished and independent people. Your Wetherby team is available to help you or your loved one through the process and to help you see the future waiting for you on the other side.
Resources
1Forbes. “Women Don’t Consult Financial Advisors When They Get Divorced. Here’s Why They Should.” January 20, 2020.
