As a wealth manager who often works with women going through divorce, I’ve become very familiar with the financial woes of divorcees. I’m going to let you in on a little secret. When it comes to divorce, there’s an “in” spouse and an “out” spouse. The “in” spouse knows everything there is to know about the couple’s finances -- how much they’re worth, where the money is, and the different types of assets they own. The “out” spouse may know some of this information, but probably doesn’t know all of it.
So, which one are you? Are you the “in” spouse, or the “out” spouse? Here’s another secret: it really doesn’t matter. Because, if you take the right steps and follow my advice, you can become a member of the “in” crowd. How? By seeking the help of a financial advisor, even before you find an attorney. A good financial advisor will not only walk you through the monetary aspects of your divorce, but also allay your fears and help you figure out the important stuff.
The three common fears I address with women clients facing divorce are: 1) what am I really getting, 2) am I getting my fair share, and 3) how drastically is my life going to change. When most people think about getting divorced, they feel ashamed. Feeling in control of your finances will give you confidence and stability. The first thing you’ll need to do is make a list of your assets and expenses. This includes tangible items you own, like your house, car, artwork and jewelry. It also includes liquid assets, which can be converted into cash quickly without being viewed as a taxable event, such as cash or investments that are not in a retirement account (including alimony). You may have to do some research to find this information. Look for bank statements in the mail. If you have a joint checking account or credit card, look for monthly payments to figure out your expenses.
You want to get a full picture of what your assets are. It’s important to know this because not all assets are created equal. Let’s say your husband keeps $200,000 in cash and gives you $200,000 worth of stock; when you go to sell that stock, it will trigger a taxable event, so in reality, you won’t be getting the full $200,000. If he gives you the house and it’s already paid for, you still may need to take out a mortgage to have something to live off of. If you don’t have regular income through full-time employment, you may have trouble even getting a mortgage.
If you do this financial homework ahead of time, it can save you money in the long run. You’ll need access to money right away. Your financial advisor can help you figure out how much you can spend on a divorce attorney, and even refer you to those she trusts and has worked with previously. Once you’ve chosen an attorney, bring your financial advisor to your second meeting along with the information you’ve both put together to make the process go more quickly and smoothly.
Many women fear getting taken advantage of in a divorce settlement. Your advisor can help you figure out how much you’ll need to live on and where it’s going to come from. Dissecting the assets and making sure everything is split equally depending on the asset class is tantamount to making sure you get your fair share. Many divorcees don’t talk to an advisor until the very end of the divorce process. Things can shake out differently if you work with an advisor earlier on.
Finally, in order to ensure minimal impact to your lifestyle, make a list of what it looks like on paper; what are your expenses, how much does it cost and how much time do you spend taking care of your kids? A financial advisor can create a financial plan to help you determine how to properly reinvest the assets and/or alimony you receive to help you sustain your lifestyle. You may not have worked while married, but you may want or need to work now. Planning for your future before the divorce is final can help you avoid unanticipated stressful situations, such as not being able to rent a new place because you don’t have a job with regular income.
In going through this process, you may realize that you’ll need to cut back on spending and significantly change your lifestyle. Whether you’re the breadwinner or haven’t worked in years, your income may be affected. One solution may be acquiring loans off of your assets with the help of your advisor, especially in the current market when interest rates are low. Or, this may signify that your divorce attorney has to go back to the drawing board and work out a new agreement. Your advisor can help you figure this out so it won’t come as a surprise after the divorce papers are signed. The financial plan she creates for you can be used by your divorce attorney to present to a judge so they can take the hard numbers that encompass your contribution to the marriage into consideration before making a decision.
At the very least, as soon as possible, make an appointment for an initial consultation with a financial advisor. Most will offer to meet you the first time for free. While you’ll most likely pay for their services, in the long run, it will save you from worrying about your financial future. Divorce is emotionally and mentally stressful enough without having to fret about money; if you find the right advisor, you won’t have to.
Francesca Federico is a wealth advisor and co-founder of Twelve Points Wealth Management, with offices in Concord and Boston, Massachusetts. She can be reached at email@example.com or 978-318-9503.
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