Transitioning Through Divorce

Life transitions occur for everyone because humans are in a constant state of change. We know that sometimes, there are big, sometimes unfortunate events that shift our perspective, our focus and often our finances. This is often the time clients reach out to a financial planner.

One of the most common and most difficult shifts in life is divorce. Divorce is an incredibly emotional and often expensive process that requires major life adjustments. Finding the right support and a trusted team of advisors to guide and help you is paramount.

Depending on the stage of the process, certain necessities and personal goals are highlighted. In the very beginning, even with the emotions at a peak, it is important to step back and look at the big picture. If you have legal counsel, they will likely ask you to create quantitative forms like balance sheets and a budget. This can be overwhelming, especially if it is being done for the first time. The initial review of the marital balance sheet is important. Know which assets are considered marital assets and review what liabilities are at play. You cannot make projections of what will be awarded to each party at this time because you don’t know how it will all work out. There are so many details that will be considered and negotiated, and the process takes a while.

Depending on the stage of the process, certain necessities and personal goals are highlighted.

The most important thing to do in the early goings is to envision what you want for yourself at the end of the road. At a time when you feel out of control and subject to the process, focusing on one or two things that you know you want will help.

In studying divorce planning with the IDFA (Institute for Divorce Financial Analysts), I learned that the process of dividing assets is intended to create an equitable divide. The settlement is rarely fair and never equal. Financial decision making during the divorce process can come fraught with negative feelings. While almost impossible to take the emotions out of the decisions, by engaging the help of an experienced advisor, you can begin to formulate what you ultimately want and make informed and thoughtful choices as you go.

Once you are in the midst of the asset split negotiations with the attorney, you can review the choices before you. The advisor can review the tax consequences with the help of a tax advisor and discuss the pros and cons of selling property now or later. Often one spouse wants to stay in the marital home, but the question is, for how long? It is important to discuss the need for liquidity/cash vs assets to hold long term. It is important to look at cash flow and income needs to determine spousal support or lump settlement options. Reviewing the life insurance to make sure there is coverage on the spouse promising to pay the support is crucial. It is important to weigh the desire for immediate gratification vs the longer-term financial implications for every choice.

Once you are in the midst of the asset split negotiations with the attorney, you can review the choices before you.

As a divorce client approaches the end of the rocky road and finalizes the divorce, it is ideal to formulate and illustrate the individual financial and retirement plan. At this point there is a clearer picture of the asset values, what the income sources will be and what you might expect from social security and portfolio distributions in retirement. Reviewing and updating estate documents, insurance policies, mortgage and tax plans are also key and require some professional referrals and teamwork. Sometimes even building credit is necessary for the first time. Having the right resources and trusted contacts can make all the difference in starting out on the right foot. Education and clear communication is key throughout the divorce process. Make sure to select a “dream team” to support you! We are here for the hard conversations.

As always, we want our clients at all stages of their messy and beautiful life to BE BOLD and LOVE their LIFE!

Brandon Cabaniss, CFP®

Brandon Cabaniss, CFP®...

brandon@wwmgreenville.com

This material is provided as a courtesy and for educational purposes only. Please consult your investment professional, legal or tax advisor for specific information pertaining to your situation.