Let’s face it. Divorce is not a topic couples want to talk about. They probably don’t want to talk about it with their friends or their families, and they would certainly prefer not to discuss it with a financial advisor, divorce attorney, tax specialist or other professional. No one wants to look down the road and contemplate the realities of a split, so there can be a tendency to ignore the signs or to put off dealing with the practical details. You have enough to do holding it together emotionally during such a stressful time.
But there are steps a financial advisor and other professionals can take to make sure both married clients (and any children they may have) are well taken care of, and the sooner those plans are begun, the smoother the process will be.
In my more than 30 years as a financial advisor, I have received dozens of phone calls from clients who confide that their marriage is on the rocks. Sometimes it’s a surprise, and other times I’ve had some warning. The first thing I say is, “How can we help?” This initial conversation is an opportunity to find out where the person is in terms of his (or her) thinking, to see how he or she is doing and how the spouse is doing. Often, when people are divorcing, one spouse leads the effort, and it’s good to know who that is. I’ve found that it’s rare for a divorce to be a completely mutual decision, and the fact that the spouses are not on the same page may create problems when it comes time to make decisions.
I like to check in on the kids, too, and ask how they are dealing with the news. If the kids are young—college age or younger—the situation can be complex, because there will likely be the issue of financial support for them and the matter of financing their college educations, as well as possibly thorny issues of custody or visitation. But divorce affects the family even when the children are older, and adult children’s reactions can also create difficulties for divorcing couples. While there is no child support or visitation to deal with per se, the split may leave the children shocked or upset. If the sale of the home they grew up in is involved, they may face deep feelings of loss, realizing that the center of their childhood life, and the site of holiday celebrations and other family traditions, will soon be gone.
A number of adult children may be depending wholly or partially on the financial support of their parents (or even living with them). This makes the divorce even more complicated, both from a financial perspective and in terms of the family dynamics. Adult kids, like younger children, may feel greater allegiance to one parent, especially if one wants the divorce and the other does not, leading to feelings of anger or guilt.
Taking the emotional temperature of the situation helps me prepare for the way the scenario might unfold and offer the kind of help the couple is likely to need. I might ask if they have sought counseling and if there is any hope of reconciliation. This can give me some idea of the likelihood that matters will indeed progress and also provides some sense of the time line. Whatever the answer, it tends to be a slow process; a very efficient divorce might take nine to 12 months, but the more normal course is two years or more. The more complicated the financial scenario and the more difficult the family dynamics, the longer the divorce will take. Some people are able to manage the entire process amicably and with a great deal of respect for each other, but I’ve also seen cases where things got very nasty.
Be Prepared
Our role as financial advisors is to provide our clients with objective information about their finances and the impact different scenarios will have on their financial future—and also to bring some sanity to the process. Because the dissolution of a marriage is such an emotional topic, tensions can run high even in the most cordial of circumstances. We help people step back and look at their financial options calmly and in a way that will lead them to more thoughtful decisions. Advisors must offer clients advice tailored to their situation: So clients must be as open and honest about the divorce as possible. If they are comfortable doing so, they must share with us their personal needs and expectations for what will happen during the divorce and afterward.
Clients also need to share all their financial information, including tax returns, financial statements, income and expenses for the past year and insurance policies.
Clients should also write down any future expenses they anticipate, such as education for children or grandchildren, major home repairs, family health issues, new cars, and so on.