A divorce doesn’t have to drain a couple of their time and money. There are alternatives to spending years in litigation and racking up thousands in fees in order to reach a fair divorce settlement. The key is planning ahead and making rational decisions.
The dissolution of a marriage is an emotionally charged time and it’s not easy taking one household and splitting it in two. As a financial mediator, I help couples set realistic expectations as well as explain the financial implications of their divorce. Once they get past their financial issues, they’ve avoided one of the biggest battles faced by most divorcing couples.
But what seems fair and equitable today may not be in the future. Complications arise when divorce decrees don’t take into account future events such as what happens to alimony obligations and retirement plans if a spouse becomes disabled or dies. A settlement that requires a life insurance policy can secure those payments if the former spouse is named as the beneficiary – and if safeguards are put in place to ensure that the premiums are being paid.
Even simple arrangements such as splitting an IRA fund can become an expensive nightmare if certain precautions aren’t taken before the divorce is finalized. In one case, a woman went looking for her share of a former spouse’s IRA 10 years after the divorce decree. Unfortunately, she discovered too late that the money was gone because the husband had spent it. Dividing retirement assets is tricky; an experienced financial advisor can explain the different methods and which alternative would work best for a particular case.
How to best allocate retirement assets is just one of the many decisions divorcing couples need to consider – others include how to maintain a household on one income and structuring alimony to avoid future acrimony. In some scenarios, for instance, it may not even be possible for one spouse to keep the family home and qualify for a mortgage. A family can end up in financial trouble if they’re not balancing their desires with the financial realities of life after divorce. A financial mediator can help you determine what’s best for your family in the long run.
Many of the common costly mistakes that couples make could have been avoided if they had sought advice from a financial professional working in the divorce arena. If you’re contemplating divorce, here are seven tips for streamlining the process and avoiding costly court battles.
1. Consider mediation with an experienced financial advisor.
One of the biggest battles that couples encounter is splitting their assets. A financial mediator is a neutral third party whose job is to assess a couple’s financial picture and prepare them for the financial consequences of their divorce. A financial mediator can help the couple In addition to splitting assets, and address issues involving alimony, child support, beneficiary designations and retirement plans.
Divorce can be a very emotional process and an experienced financial mediator can help couples set realistic expectations. It’s important to note that not all advisors are trained divorce mediators. Consider working with a financial advisor who specializes in divorce and will collaborate with other professionals on a case. A trained mediator will guide a couple through the difficult financial decisions that need to be made, and once a financial agreement is reached, they can consult with an attorney who will handle the legalities of the divorce. A financial mediator will expedite the process, which in the end will save the couple money.
2. Seek out professionals who specialize in divorce.
Don’t try to save money by hiring inexperienced professionals! Divorce cases can be complex, so it’s important to work with professionals who have the right skill-set for your needs. Whether it’s an attorney, mediator, financial professional, or therapist, experienced professionals can help couples make the best decisions about their future. If these professionals are working together as a team, then in the end you are saving money. Each professional is focusing on his/her specialty and handling separate issues, and you’re only paying them when services are needed. The therapist, for example, is not handling the legal portion and the financial mediator is not providing therapy.
3. Gather information about marital finances.
Understanding how assets get divided in a divorce can be challenging. At the beginning of any marriage, people should show an interest in the family finances. But if you’re at the point where you’re contemplating divorce – and if you weren’t the spouse who was handling the family finances – then your spouse may no longer want to share all information with you. You need to start taking a look at tax
4. Stay on top of family expenses.
This is an emotionally charged time and any unnecessary spending can create a financial mess. Think first before you start spending out of anger. Bills need to be paid on time because failure to do so could affect your credit rating. And if there are joint credit card accounts then you need to get a copy of your credit report to see what the other spouse is spending. If there is shared debt, you should try to clear it up and close joint accounts before the divorce is final if possible. If there is cash sitting in a low- or no-interest account and you are paying high interest on your
5. Learn the difference between marital separate property.
6. Don’t take financial advice from friends and relatives.
The mean well, but they probably don’t fully understand your specific financial situation. Their advice may be detrimental because it could affect your ability to make good decisions. For instance, if your friends are telling you to ask for an unrealistic settlement, the end result might be a protracted and expensive legal battle while you fight for something you won’t get. Each person’s divorce case is like a fingerprint: it’s unique to their life, assets, income and expenses.
7. Consider working with a therapist who specializes in divorce coaching.
Divorce is a stressful time and many times logic goes out the window. A coach who specializes in divorce can bring reason back into the picture and help divorcing couples get through the process.
Vicky Tomaro is founder and president of Tomaro Financial Group in Wall, NJ. A trusted advisor and mediator, she helps clients create a personalized, disciplined, long-term strategy for fulfilling their financial goals. She is an active member of The Women Presidents’ Organization, Jersey Shore Collaborative Law Group, and International Academy of Collaborative Professionals. www.tomarofinancial.com