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Divorce Financial Planning Process

The Divorce Financial Planning Process

Planning for separation and divorce from one's spouse requires careful planning and professional counseling and guidance. A well laid out financial plan can be a necessary step in helping work towards a positive outcome for one or both spouses who are contemplating getting divorced.

Because couples have so much invested in their marriages, when the idea is proposed by one or both spouses to end a long-term marriage relationship, such a decision necessarily brings with it many deep-seated and potentially polarizing emotions.

If these emotions are not managed by the spouses properly, then it can serve to jeopardize any future hope of amicable relations during and following the divorce and property settlement process. Such an outcome can have disastrous long-term implications where children are involved. And even when there are no children involved, mounting legal costs from political gamesmanship and "get-even" or "make-you-pay" stratagems will only serve to significantly reduce the proposed financial settlement to the two parties.

With the help of experienced financial counseling and proper guidance, the end result can mean much less frustration and anger by the two parties towards one another and potentially lowered legal expenses. More time can be spent in addressing new problems that generally arise when trying to divide up assets and re-allocate income and resources to support two households where there used to be just one.

Things to Keep In Mind When Engaging a Financial Counselor:

  • Because emotional pain accompanies planning and preparing financially for divorce, you need an adviser who can directly relate to what you are going through. That is to say it really can help if your adviser has been through the divorce process personally because it means that he/she has walked in your shoes.
  • Because divorce can exact a huge financial toll from your savings, it is important that you be able to leverage your adviser's experience in a way that will potentially result in fewer hours spent in your attorney's office and less time in the court room. Proper divorce financial planning has the real potential to save as many as two to three hours of legal billing for each hour that you engage your financial planner. Be sure to do your "homework" when selecting a financial adviser to make sure he/she has demonstrated working knowledge in the area of divorce financial planning.
  • Trying to use your attorney and the family court as a weapon intended to exact the maximum price from your spouse will only serve to polarize your relationship with your spouse, and to the extent that you engage in such behavior the end result may mean significantly less in your property settlement than you would have hoped for or imagined as a final outcome. It is seldom in either spouse's best interest to try and "game" the legal process. Think of the legal process as a gigantic washing machine that will turn you (and your spouse) around and around and around again until you feel like you are spinning in circles where your only thought is to jump out of the "wash" and into the dryer. Unfortunately the dryer also will throw you into a spinning mode but with a modest amount of heat turned up in good measure to try and get all of the "wrinkles" out. The wrinkles involve such things as custody issues and child as well as spousal support just to name a few.
  • Many of the "tools" that you used in the past to try and manipulate your spouse into doing what you want have no place in a divorce proceeding or in your proposed property settlement-at least not if you want to come out of this doing the "victory" dance with a financial outcome that makes proper sense for the two of you. To accomplish such an outcome you will need (with the help of your financial adviser) to develop an entirely different skill set and you will need these skills at the very outset of the divorce and property settlement process. Your adviser will help guide you into the mind of your spouse to help you understand the psychology of the process which is involved in helping you get what you want and need from the marital assets as it relates to the rearing of the children from your marriage and providing for you in your own retirement years. This is no easy task when going it alone or when sitting in your attorney's office-or in the court room in front of a judge. This is where your financial adviser becomes also your confidant, your advocate and one of your biggest supporters
  • Advance Preparation can yield exceptionally big results. That is to say that the earlier in the divorce process that you engage your adviser, the better the potential outcome. This is because it is quite common for spouses to attempt to hide assets and try to minimize their income in an attempt to deal to you the shorter end of the "financial" stick. Your job is to "walk softly and carry a big stick". Walking softly means that you don't telegraph your intentions to your spouse until you have discovered all of the assets your spouse may be trying to hide from you. Carrying a big stick means working with a financial adviser who can teach you how to become a financial "sleuth" by helping you detect all of the marital assets through the collection of financial statements, tax returns, bank account statements etc. before announcing to your spouse that "it is over" and you want a divorce. This keeps the element of surprise in your favor which is kind of like saying that "possession" (of all of the financial records) is ninety percent of the law.
  • Finding your spouse's "HOT" Button means essentially that the proposed property settlement should be built around what your spouse wants (or demands) the most from the marital assets and then using this as leverage to get for yourself a disproportional share of the marital assets in return. By focusing your proposed division of assets around the most important asset to your spouse (e.g. 401k plan, marital residence or vacation home), you create a tremendous amount of emotional and financial leverage to aid you in getting what you need most from the marital assets-i.e. a disproportionate share of the assets. True that the courts may ultimately award you with a similar amount, but not until after much wrangling with your spouse, multiple trips to the court house and HUGE legal bills. In the end by working with your spouse rather than against your spouse, you come out with a much more favorable outcome in that you have someone you can "work" with after the divorce and property settlement proceedings have been finalized. You also will find smoother sailing during the proceedings and you might even end up with a friend in your ex-spouse after your divorce has been finalized. Think of how that not only can benefit you when collecting half or more of the pension or 401k during your retirement but also when making arrangements for the shared custody of your children.
  • Past years tax returns can provide an audit trail of shifting asset positions from one financial institution to another and may help locate "hidden" assets when your spouse is the one wanting the divorce rather than you. A type of forensic accounting may be needed to "find" the assets in more difficult cases.
  • Life insurance can play an important role in your ongoing future financial security to secure the alimony payments and child support payments that your spouse is ordered to pay to you. There are really only two known ways to insure that your spouse doesn't change his beneficiary designation to his new girl friend or spouse once the divorce has been finalized. Sure he can be court ordered to name you as the beneficiary but this is rarely enforced by the courts. The only real way to protect yourself is for YOU to either own the policy and be the premium payer OR for you to be named as an irrevocable beneficiary. As an irrevocable beneficiary your spouse can not change the beneficiary of his life insurance policy without the insurance company receiving your written consent. Never-the-less there is nothing that can really prevent your spouse from letting the insurance policy lapse for non-payment of the premiums. Hence the only real way to protect yourself is for you to be the owner AND the premium payer of the new life insurance policy.
  • Kindness, courtesy and respect will yield huge dividends for you and your spouse during the period that you are separated from one another. What you do send out to your spouse will surprisingly return back to you in ways that will sometimes make you question why you are getting a divorce in the first place.
  • And a final thought, most women will "throw in the towel" within the final two or three weeks that precede finalization of the property settlement. Why this is can easily be explained by the observation that men tend to live "in their heads" while women "live in their hearts". So emotions will get the best of the woman unless she has a wise financial adviser and advocate helping her stay the course and not give up at the last minute by saying, "I don't care any more, he can have all of it." The financial adviser's job is to prevent her from living through her emotions and instead follow the lead of her financial adviser's mind. To win this fight it is the mind and not the heart that must rule the day. To the woman it may feel as if the fee she paid to her financial adviser will be a small investment indeed when placed along side of her side of the settlement sheet when the judge enters his decree.

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