Older couples are divorcing in increasing numbers. Financial advisors can show up as strong advocates by providing comprehensive educational and emotional support on the complexities clients face when going through “gray divorce.”
Collaborate, cooperate, and work together. At age 60+, people have reached, or are close to reaching, the peak in their earning capacity. They may be past the time when they can easily make up for the substantial financial set back of a separation and it may be harder to qualify for a mortgage. Separating couples need to apply intelligence and collaboration when they work together if they want to preserve what they have and minimize spending on lawyers and other professionals.
To help you work collaboratively with a former spouse and minimize the legal fees, you need to first work through your own feelings about your life and the separation. It is no longer taboo to get help through a personal development course, a personal coach, a therapist, a support group, or similar healing services. In fact, the opposite is now the reality: you may be perceived as the weak one if you don’t access such services.
Anger and resentment towards your former spouse likely occupy a large part of your thoughts. The danger is that people do not know how to differentiate between their anger towards their spouse and the legal issues that have to be decided.
Further, you may not have the skills to handle strong emotions you may experience – such as guilt, anger, or sadness arising from how your children or family members react to the separation. It won’t help you to negotiate while you are consumed with these sentiments.
During a lengthy marriage, you will also have created several counterproductive ways of dealing with one another that will make it difficult to work constructively with your former spouse during the legal process.
Finally, you likely lack the skills to communicate your opinion in a manner that your former spouse can calmly accept and understand. Instead, you’ll probably push each other’s buttons when you discuss what you want to achieve in the divorce.
In addition to taking care of your emotional well-being, you also need to become familiar with your financial situation. If you were not the spouse who regularly handled the family’s finances, you should sit down with a trusted financial advisor to acquire a good understanding of your financial situation before you start to negotiate your legal issues.
You need to know the sources of income that are available both now and after retirement, what assets and debts your family has at this time, and what are the big expenditures that will surface in the future –such as children’s university costs, weddings, long-term care, caring for elderly parents, etc.
You need to understand which healthcare benefits exist now, and which will be available after a divorce and at what cost. Several health plans do not permit a former spouse to remain a beneficiary after a divorce.
Find out what life insurance is in place on your and your former spouse’s life. If life insurance is needed but the spouse does not qualify because of health reasons, find what other means there are to secure a financial obligation.
A Will remains valid throughout a separation but becomes null and void after a divorce. You may need to re-think your Will and also update your Powers of Attorney for your personal and financial care.
In most couples, one person is more financially savvy than the other. Not to worry. The legal system is designed to ensure that both spouses receive the financial information they need to help them make decisions about their legal separation.
Once you have the financial information, you can work with your lawyer and a financial professional to develop a financial picture for your future. Financial professionals provide invaluable assistance in working with you to understand your budget and seeing how that will be achieved before and after retirement using all income streams available now and after retirement, your assets, retirement assets, pension plans, inheritances, and if applicable, the financial support of your spouse.
Don’t fall into the trap of formulating a rigid position for your legal separation before all of this work has been completed. I had a case where the former stay-at-home wife, aged 70, had built up so much anger and resentment towards her husband that she could not wait to finally get her “payback” through spousal support. At the time of separation, the retired husband was receiving fixed income from a work pension and modest Social Security benefits. The problem was that the wife had recently received a sizeable inheritance, which put her standard of living substantially above that of the husband. It took some time for the wife to come to terms with the fact that even though she had an entitlement to spousal support to compensate her for the sacrifices she made, she now found herself in a much more favorable financial situation than her husband, foreseeably for the rest of their lives, and she would not be receiving any spousal support.
In that case, the wife’s pre-conceived ideas about what she was entitled to resulted in her spending much more in legal fees because her lawyer needed to take extra time to explain the situation and bringing her to a place of understanding and acceptance.
When couples work together to find intelligent ways of sharing their assets and to make sure that each has what they need for their future life, they inevitably find creative solutions that both can live with – without needlessly depleting life-savings on professional fees.
There are three things separating people should implement to minimize the trauma of a separation:
1. Take care of your own emotional situation,
2. Have a clear understanding of your and your former spouse’s financial needs, and
3. Work with one another, not against each other.
The rest – meaning your work with lawyers and other experts, getting through the actual physical separation, dealing with your children, and achieving a fair financial settlement – will fall into place. Be the leader of your life and demand that your legal team helps you work together to preserve your family’s wealth through the divorce process.
There are various options that can be used to settle and complete a divorce. Determining which one is right for you is a key consideration. In the following article, we provide a review of the various options and key points to consider.
Anyone who has gone through a divorce can tell you what an emotional drain the whole process can be. You are not in the ideal state of mind to be making important financial decisions that will have both an immediate and lasting impact on your financial future.
Here are some of the most common money mistakes that are made while getting a divorce.
Copy Your Records. Before your divorce, make you sure to make copies of all your financial records. Put them away in a safe place away from your spouse. These documents should include, but are not limited to, personal and business tax returns (for the last three years), bank and brokerage statements, pay stubs, life insurance information, credit cards, receipts of larger purchases, 401k and pension statements, list of stock options and other benefits. Copy anything that you think you might want to refer to down the road. If you can make digital copies and save them on a thumb drive, even better. Obtaining copies of records through the discovery process while in the midst of a divorce is more difficult and can be expensive.
Get Copies of Credit Applications. Obtain copies of any credit or mortgage refinance application, especially those completed in the 12 months prior to separation. Those applying for loans tend to list all possible assets and income in order to qualify for credit. As a result, this can be a good source of asset discovery when one spouse believes that the other is withholding information on marital property.
Don’t Let Your Attorney Do The Talking for You. If you and your spouse are able to have constructive discussions together, you’ll both save money. If you both have your attorneys do the talking for you, the meter is running at $500-plus per hour and it can add up fast. Get over your anger and talk about what can work for the two of you. Hopefully, there are some win-win solutions out there.
Follow The 5 D’s For Alimony Deductibility. If you want deductibility for spousal support that you pay, it must be paid in dollars, under decree or written agreement, and cease upon your ex-spouse’s death. After the divorce you must keep your distance (live separately form your ex), and payments cannot be designated as non-taxable child support. The recipient spouse will pay taxes on the marital support received.
Joint Debt. Any joint credit cards, mortgages, or credit lines remain the responsibility of those who signed the application, regardless of what the divorce decree says. If your ex-spouse is late or defaults on a payment, YOU will responsible and it will impact your credit rating. Refinance any mortgage that was obtained in both names, cancel and credit cards or lines of credit that were obtained or incurred during the marriage.
Understand Your Social Security Benefits. If you have been married for 10 years or more, you are eligible for 50% of your ex-spouse’s benefit or 100% of your own accrued benefit, whichever is larger. This does not impact your ex’s benefit and it is not a negotiation point in divorce.
Review and Make Appropriate Changes to Your Beneficiary Information. After the divorce is over, be sure to change the beneficiary information on your 401k, IRA’s, life insurance. People often change the titles on these accounts, but forget to change the beneficiaries. If you’re making your minor children your beneficiary, be sure to select a custodian for these assets.
Sharing the family home after divorce while the children stay put requires rules abut privacy and other considerations. This is a good article that speaks to those considerations.
By Hayley Krischer
In TV shows and movies, the typical divorce narrative is to portray women as celebrated victims. Meanwhile, men are depicted as silent sufferers who feel resentment, anger, depression and fear over lingering financial issues, relationship turmoil and worries over breaking up their families.
Off camera, the truth is that men don't always have the tools — or the support — to deal with these very real concerns.
"Divorce is difficult for everyone involved, but it can be especially challenging for men who don't typically express their feelings," says David Blaylock, a LearnVest Planning Services certified financial planner™. "They want to keep their divorces private — and that's not a good policy. You want a support system in place, just like any other major life change."
Sure, the old adage is true: Time heals all wounds. But good advice helps too. The more men know about what to expect when they're dissolving their marriages, the easier the process can be. So we consulted Bari Zell Weinberger, a matrimonial attorney at Weinberger Law Group, as well as Blaylock, for the key dos and don'ts of what men need to know about the financial side of divorce.
1. Do know the numbers
For an average divorce, Weinberger says you should expect to pay about no less than $20,000, which includes lawyers and experts, real estate costs to divvy up shared marital property, finding a second place for you to live, as well as financial advice and therapy for you or your children.
That said, the cost of a divorce can still vary — and widely.
For instance, says Weinberger, the price can increase exponentially if your divorce requires niche experts, like a forensic accountant or a co-parenting counselor. Other pricey scenarios: You need to get your business evaluated (your ex is entitled to equitable distribution if you launched the business during the marriage, and even if you started your business before you were married, a spouse may be entitled to part of the increase in the business's value), you have high net worth and need a best-interest evaluation or you're facing a hotly contested custody battle with your soon-to-be ex. All of these situations could bump the price of your divorce up to the $50,000 to $100,000 range, and in some cases much more, Weinberger estimates.
However, adds Weinberger, if a man comes to her office with a straightforward divorce — where all the terms have already been decided, and communication is open between the partners — then the cost could be as low as $3,500. In fact, if you have a particularly simple situation, with no minor children or unusual financial circumstances, a divorce can run less than $500, with filing fees, Blaylock adds.
According to Weinberger, one other crucial element that men — and women — who are parents should think about if they're embroiled in extreme litigation: The more money you spend on your divorce, the less money you have to give your kids. "You're taking your children's [college] education savings," she says, "and you're kissing one semester goodbye."
2. Don't be too proud to pay alimony…
Alimony offers monetary help to the spouse who was supported financially during the marriage — especially if one parent left the workforce to focus on the family for a long period of time. Spouses usually provide alimony in one of three different ways, depending on state laws: As a lump sum, in regular payments, or in another predetermined arrangement — say, if you cut a check to a third party to pay an ex's mortgage. (It's also important to note that alimony is separate from child support.)
But the impact of alimony isn't just financial — there's also a psychological component. Men may feel that a former spouse doesn't deserve to receive "free" income based on their hard work. Weinberger notes that many of her clients are resistant to paying because no one — man or woman — wants to have to write out a check to an ex.
Weinberger's advice? "While no one wants to pay alimony, if we're working out a global package, then it could make sense from a tax perspective," she explains, adding that alimony is tax-deductible. (Just be sure to file a separate tax return using a 1040 form.)
3. …And don't be too proud to collect alimony
If a woman is making more than her spouse or if the father is a stay-at-home parent while the mother works, then the ex-husband could be entitled to receive alimony. According to the American Academy of Matrimonial Lawyers, 56 percent of divorce lawyers have seen an increase in mothers paying child support, and 47 percent have seen more women paying alimony, as well.
But being an alimony recipient can sometimes bring about feelings of insecurity, notes Weinberger. "I have men who say, 'How is the community going to look at me?'" she says. "I tell them that they're entitled. If they're a stay-at-home dad or there is a large discrepancy in income, they should receive it."
4. Do create a post-divorce life budget
When a man going through a divorce comes to David for financial planning advice, he sits him down to talk logistics. "We try to make a budget for his new life," Blaylock says. According to Blaylock, men typically think about the money that they'll have to pay upfront for divorce-related expenses — the actual divorce, child support, alimony — but forget that everyday expenses are going to change once they're newly single.
For example, if you have joint custody, you'll need things like clothes and toys so your kids can live comfortably in your house. Some co-parenting experts say that many kids who split the week between moms and dads actually prefer to have all of the items they need at each house, so they don't lose anything in the transfer.
5. Do divide things equally
A half-half split is easier said than done — just because you're getting divorced doesn't mean that you won't still feel tremendous attachment to your ex. Because of this, says Blaylock, many men (and women) cave to lopsided agreements — and this is often the case with men who are used to taking care of a spouse financially.
"A lot of men want to continue that role, even though they no longer have that obligation," says Blaylock. "I just had a best friend go through this issue. He gave her everything, much to his financial detriment." Dividing your property — furniture, artwork, camping gear, music equipment — should be done in a way so that you don't end up with resentments or regrets. It's O.K. not to let your ex have it all.
6. Do look into alternative child support solutions
Typically, child support covers basic necessities — food, clothing, shelter. Depending on how you arrange your settlement, it may also include uninsured medical expenses, educational fees, child care, transportation, travel, entertainment, college and extracurricular activities. Many arguments can erupt between ex-spouses over managing these costs.
"Children are expensive," says Weinberger. And, unfortunately, all of those expenses may be tough, if not impossible, to itemize. "It's never going to work out that Dad is going to feel secure that the child support is going to be applied directly to the child," she explains. "I have so many dads who want everything identified with invoices, slips and statements. And they're not going to get them."
That's why Weinberger advises her clients to come up with what she calls "hybrid" solutions. For instance, if you can pay a service provider directly, like a child-care provider, then you can avoid fighting over the money. One father I know, Weinberg recalls, even prepaid medical providers, as well as contributed to the mother's share of their 529 plan.
7. Do set up a cellular plan
For children who are old enough, buy them a cell phone that's designated for the sole purpose of contacting you. Call it the "Dad Phone," and ask your ex to leave it in a spot where your child can always find it. Adding an additional line to your plan should be relatively inexpensive, though the cost will vary depending on your provider and whether or not you opt for a pricier smart phone.
8. Don't make impulsive financial decisions
"Divorce is more like death than you can ever imagine," says Blaylock. "It's O.K. to be emotional. It's O.K. to be hurt. It's O.K. to grieve." This is precisely why Blaylock urges men to treat their divorces with a sense of gravity — and not make any major financial decisions for six to 12 months. Don't switch jobs. Don't move to a new city. "Hold status quo in your life," he says, "as you deal with this adjustment."