How a Divorce Financial Planner Can Ease Your Transition
Every month, I offer a workshop to women in my community who are either contemplating divorce or in the early stages of divorce. On the second Saturday of each month, we invite a therapist and a family law attorney to discuss various dynamics of divorce: emotional, legal, and financial. We cover a lot of basics. Most interesting is the fact that many attendees don't even think to involve a financial planner in the early stages of their divorce ... but that is exactly when they should be involved.
A well-trained divorce financial planner can help you understand the value and tax pitfalls of your marital estate. They can help propose or analyze settlement options, assist in completing your mandatory financial disclosure, and accurately estimate child and spousal support.
When your divorce finalizes, your divorce financial planner can also make sure your settlement is optimized to put you in the best position to thrive.
Many people feel intimidated about leaving their current marital situation, even when they know it's unhealthy. Why? Often, they just don't know how to plan for the transition.
In an emotionally charged time of uncertainty, a divorce financial planner will advocate for you, provide a transition plan, and help you follow it.
What a divorce financial planner helps you do
As a divorce financial planner, my job is to help you plan for three distinct phases of the divorce process.
Phase 1: Preparing to separate
Preparing to separate takes intentional emotional and financial planning.
Emotionally, you are transitioning from part of a marital unit to independence. This entails living on your own, organizing your own budget, and spending your time in new ways. In many cases, a therapist can be a helpful and objective third party to assist with the emotional transition.
Financially, your data gathering needs to start here. You need easy access to all financial statements, online access to accounts, tax returns, pay stubs, employee benefits plans, stock option and RSU plans, and so on. I advise collecting this documentation as a first step. The reason is that in divorce, things tend to go "missing" very quickly. You want to be proactive about your preparation – not reactive.
Advice: Before you separate, use joint funds to repair or buy your automobile, pay off bills, or repair your home. Begin your divorce with joint expenses already paid rather than arguing about who should pay them later. Cancel all joint credit cards. You don't want to be liable for charges your ex puts on the cards since debt is community property as well.
Phase 2: Preparing to divorce
During this phase, a divorce financial planner's job is to analyze. Once you separate and decide to move forward with a divorce, you must begin the process by filing initial paperwork. (Hello Divorce helps you with that.) Then, you must disclose to each other what your income and expenses are as well as your assets and debts. Since you have already done all of your data gathering, it's now time to analyze which assets to keep and what your support options are, if any.
Your divorce financial planner can help you make sense of all the assets you own. More importantly, they can help you understand how they can facilitate your transition through divorce and beyond.
Common questions we address are:
- Should the home be sold?
- Does it make sense to buy out my spouse or let them buy me out?
- Should you be positioning for real estate, retirement, or pension assets if you need cash now?
- What are the true values of RSUs and stock options, and how can they be divided fairly?
Your tax returns and paystubs are important items to analyze when it comes to child and spousal support. I like to take an educational approach with clients and collaborate with them because, for some people, this is the first time they've even looked at such documents in detail.
Advice: Divorce is a cash-intensive process. Once you separate, if you are working, open a separate account. Divert your paycheck to that account. Make sure you have access to other forms of cash as well (i.e., bank or brokerage accounts, credit cards, home equity line of credit, or 401(k) loans).
Phase 3: Life after divorce
Once your divorce finalizes, it's time to put yourself first. You want to thrive in your next chapter. Your financial disclosures are now a planning tool that, with the help of your financial advisor, will help you do just that.
Many people haven't set goals or don't know where to start, so we work on them together. It may be retirement, a new home, a large move, a career change, travel, or caring for elderly parents. Whatever it is, the portion of the marital estate you end up with defines your ability to fund these goals.
The goal-setting process is an important time to ask yourself some overarching philosophical questions. Many of us struggle to form an identity after marriage because it's been all about our spouse and children.
Advice: I am giving you permission to start taking care of you. What do you want your life to look like? How do you want to spend your time? What inspires you? How can your money and resources help you live the life you want to live?
We implement your financial plan based on your answers to these questions. This includes updating beneficiaries on your accounts, tax planning, retirement planning, analyzing stock options, and updating your estate plan.
If you're feeling lost and alone right now, know that there is hope. I am here to help facilitate and inspire an otherwise less-than-desirable situation, and Hello Divorce is full of articles and resources to help show you the way.
It was Socrates who said, "The secret of change is to focus all of your energy not on fighting the old but building the new." With the right help and planning, the "new" will be easier to build than you think.