The most important thing a financial advisor can do for clients who divorced after decades of marriage is to listen, said Kimberly Foss, president and CEO of Empyrion Wealth Management.

“They are going through emotional trauma. Sitting in front of them with charts and graphs and looking at their numbers of how they are going to have a Monte Carlo and not having to worry about outliving their income is just not the time for that,” said Foss, who spoke yesterday at the Invest in Women virtual conference sponsored by Financial Advisor. “At this point in time, a reflection on what went wrong in the relationship, what’s important, what would they do differently, looking forward to the next level.”

Foss, who participated on a panel titled, "Gray Divorce and Re-Partnering: What You Need To Know," said these are delicate questions and advisors have to somewhat be in tune with their clients to have these kinds of conversations. But it is important to have them six to 12 months after a divorce, she said.

She added that the emotional aspect has become a big component when dealing with divorce, especially with women because they have a higher sense of emotion and are in a fight-or-flight mode. “You have to understand how to get in through a sympathetic and empathetic way so you could calm them and then their logical brain can step in,” she said. 

Research has shown that women in their 60s are instigating most of the divorces, she said. The divorce rate, which includes those 50 and older, has doubled since the 1990s, according to data from the U.S. Census.

Carol Lee Roberts, president of the Institute for Divorce Financial Analysts, said advisors can spend hours discussing the technical issues involved in a divorce, but they must realize that there are a lot of communication and emotional issues involved. And she said it is for that reason she added a certified financial transitionist (CeFT), a person who helps people navigate through major life events, to her CDFA designation.

“I was so drawn to that because it’s great that we are comfortable with spread sheets, and we can do cash flow analysis … but if the client is in a situation that is so fraught with emotions, they are not going to follow where we are leading,” she said.

As with the emotional aspect of a divorce, the panelist said advisors need to broach the following topics with clients to avoid big pitfalls:

Alimony Payments Or Other Streams Of Payments
Individuals in the process of divorce always set up some stream of payment from one spouse to the other, Roberts explained. She said it’s important to guarantee that stream of income with life and disability insurance. But she said oftentimes, the discussion starts but is not finished. “You have this lovely settlement, and everything is in place as it should be, but the income stream is supposed to be guaranteed by life insurance or disability insurance and the person waits until after the divorce to apply for the insurance. Well, what if the individual is uninsurable or what if the insurance rates are so high that it makes it impractical to insure the individual?” she said. If the divorce has been finalized, it’s a difficult problem to solve, she added.

Long-Term Care
Married couples frequently assume that their long-term-care provider is going to be their spouse. But once the divorce discussion begins, that probably isn’t going to happen anymore, Roberts said. So, you need to get an alternative to the spouse providing the long-term care. Roberts said discussing long-term care and applying for it prior to divorce can be beneficial to the couple. Foss noted that it has become more expensive to secure long-term-care insurance. Advisors, she said, should urge clients that have a divorce pending or thinking about it to get long-term care insurance as soon as possible.

Beneficiary Designations
A lot of people are well-intentioned in trying to put things in place for themselves, children and future spouses or partners but they usually do not act on their intentions, Roberts said. As a result, many individuals who have gotten divorce have had to change their beneficiary designation on life insurance policies, IRAs, and similar documents that transfer at death through the law. Because it created a problem, most states have adopted an automatic revocation statute, which says that a designation you make while you were married is automatically voided by the divorce process. There, however, are a few exceptions, one of which is if the divorce decree specifies that the designation remains to the ex-spouse. So it is important to know whether your state has an automatic revocation statute. Roberts further noted that even if you are in a state that does not have an automatic revocation statute, your client could still be impacted because some custodians have included the language into adoption agreements for their accounts.

Cohabitation And Re-Partnering
Whether to cohabitate or get married after divorce is an issue many older people wrestle with, noted Catherine Seeber, vice president and CEO of CAPTRUST. Seeber said it is important to have the “what if …” conversation with clients. She relayed a story where a woman decided to cohabitate with someone she met after a divorce to save money. But three months into living together, he became terminally ill and she ended up becoming the caregiver, using the proceeds from the sale of her home to take care of her partner. “Whose responsibility is it if something happens to one of us and what happens to our finances? Those are the conversations that we really need to be cognizant of with our clients ahead of time,” she said. Further, Seeber said because divorced clients more than likely will meet someone else, during the grieving period they need to make an agreement with themselves as they think about what went right and what went wrong and memorialize it, so they can revisit it when they do meet a new person.

According to census data, the rate of older widowed or divorced people cohabitating has risen 75% since 2007.