People of all ages divorce but there seems to be a rise in the percentage of people who are divorcing later in life. Why does that matter? The one very profound fact is that when you are left with half of your wealth it may not be enough to support the retirement lifestyle that you’ve worked so many years to accomplish. With half of the retirement income gone to support your spouses income needs, ‘gray’ divorcees may have to look for other alternatives for income such as going back to work or taking in a boarder to two.
‘Gray’ divorcees have less time to recover financially so their financial needs become a big motivating factor in their life. Because they realize that living with someone is less costly than living alone they may be drawn to find someone to co-habitate with or they may even consider remarriage for financial reasons. These options may bring about a whole host of other considerations such as how to co-habitate or remarry while ensuring that your new spouse doesn’t have a foothold into your children’s intended inheritance.
Depending on where ‘grays’ live, sometimes downsizing the family home home and moving to a more rural community could be an answer. Of course, this brings a host of other issues such as proximity to children or other important family members as well as having to find new friends to socialize with in an environment in which there is no familiarity.
The golden years may not be looking so golden! Of course, I’m biased when I say that a good financial planner can go a long way in ensuring the right choices are considered. I would also suggest seeking legal advice before co-habitating or remarrying to ensure you aren’t in a position to have to share your half of your half!
It seems so simple! Divide the property in half, use the guidelines to calculate spousal support, and use the tables to calculate the child support. How difficult could that be?
Unfortunately it is like when you are told that all you have to do to lose weight is to “diet and exercise.” Again, the concept seems simple enough. But as many of us know, you quickly find out there are obstacles that get in the way of your success when you go at it alone.
The same goes for separating couples and their finances. The good news is that they don’t have to go at it alone. In the last decade, a different kind of financial professional has come on to the divorce scene. They are Financial Divorce Specialists (FDS) or Certified Divorce Financial Analysts (CDFA). Applicants for either accreditation must already have a recognized professional designation in accounting or financial planning. Financial professionals that have an affinity to conflict resolution may also choose to be trained as mediators. And financial professionals that would like to be part of a Collaborative Law Practice Group are required to take the same courses on collaborative procedures that are required of the collaborative lawyers. However, what all of these financial professionals have in common is that they are all able to provide clients with a thorough evaluation of the financial ramifications of divorce settlement options. This is of benefit to the process because the client is being asked to make irrevocable financial decisions during an emotional roller coaster ride.
That is why more and more lawyers, call on these financial professionals to assist their clients in arriving at a settlement. The lawyer may not feel comfortable giving out some types of financial advice. And it isn’t always cost effective; or they aren’t always able to take the time to analyze the future financial impact of alternate proposed settlements, or educate a client that has less financial knowledge.
These financial professionals:
1) Can work with the spouse that is less knowledgeable financially, so that they come into the negotiations on equal footing
2) Organize financial data that comes in from both spouses and prepare various financial documents, and
3) Prepare financial scenarios around future cash flows and net worth
Financial issues in a divorce can be a challenge. This is exaggerated by the emotional turmoil the couple is experiencing. They say that for married couples, financial stress will magnify any bumps in the road ten-fold. So for separated couples, it follows that the financial stress, will be that much worse.
When trying to put together the “dreaded” financial statements or budgets for your lawyer or looking at your spouse’s financials, it can trigger feelings of anger, mistrust, fear and inadequacy. This explains why a client may freeze in the middle of this process. The financials then go on the shelf until the client is ready to face those numbers or “emotional triggers” again.
Individuals, couples, lawyers and family professionals that are interested in “collaboration” enlist these financial professionals. Their approach to a legal settlement includes the usual analysis of the “Valuation Date Needs.” However, there is an additional component which is the analyses of future financial needs. We know that financial stress is compounded by fears about your financial future. In a separation, there is the added resentment that the other spouse will be unduly better off. Adding this future component to the analysis can reduce these fears and resentments, which will help bring the settlement to resolution sooner, which in turn will save time and money for all involved.
