How a Financial Professional can Ensure a Good Divorce Settlement

A divorce has a lot of costs — many financial, many emotional, some that go beyond either one. While the emotional and other costs can affect your life for years, the financial costs can ruin it, both for you and for any children you’re caring for. A skilled financial professional can help you understand the legal situation, help you translate that situation into a comprehensible dollar cost, both in the immediate and ongoing senses, and evaluate your alternatives.

Your attorney is, clearly, the centerpiece of the team that will be handling your case — but it’s a very rare circumstance where your lawyers will be the only one on your side. You may need an arbitrator, an appraiser, and you will most certainly want a financial advisor to help you deal with the money issues.

Financial issues in a divorce are generally divided into two basic areas: division of property, and arrangements of support.

Division of Property
Every state in the Union has its own unique rules for division of property, but there are nonetheless only two general ‘theories’ of property division: the “community property” model and the “equitable division” model.

Under the “community property” model, all assets and debts that belong to either partner are considered to belong to the couple as a unit. This means that upon divorce, they are split between the partners evenly, with little to no attention paid to any external factors (see below.)

Under the “equitable distribution” model, the court will take a number of factors into account when deciding how property is split, including both the past (how an asset came into the marriage, who used it, who grew its value) and the future (which spouse has the greater earning potential, which spouse is caring for the children, which spouse is most likely to put a specific asset to good use.) Even under this model, assets will generally never fall beyond 1/3rd going to one spouse or rise above 2/3rds going to the other.

In both cases, a financial expert’s input will be invaluable to you; they can:

• Help discover property that might not have been properly revealed to the court,
• Help evaluate the monetary worth of particularly complex assets,
• Help balance your desires for particular assets vs. the practicality of choosing those assets over other less-exciting but higher-performing assets, and
• Help the court understand how any children will be relevant to the distribution of assets, in terms of financial impact on the custodial parent.

Arrangements of Support
As with disposition of property, every State has unique guidelines on how child support and alimony arrangements should be made — but there are some items that are always up to the couple to decide. For children, special expenses like activity costs (i.e. learning cello or skiing lessons), unusual medical bills (i.e. tattoo removal or orthodontics), some school (private schooling or post-secondary education), and other uncommon costs are almost always left to the parents to discuss. Also, the couple can and should decide up-front if the payments are going to be indexed to inflation or otherwise change in a regular fashion over time.

Alimony — not to be confused with the umbrella category ‘spousal support,’ of which alimony is only one kind — can be more difficult to determine. Alimony can be arranged as a short-term affair designed to help one spouse get by while they get their work and financial lives in order, or is can be a permanent situation to maintain a spouse in a manner to which they have become accustomed. (The latter is especially true for older couples, where expecting a spouse to re-enter the workforce is unrealistic.)

In both kinds of support cases, a financial advisor can be immensely valuable, helping to:

• Forecast the long-term effects the settlement is likely to have on both parties,
• Help you understand the tax consequences of the settlement,
• Assist in creating a plan that will deal fairly with each spouse’s pension, HCAs, stock options, and other complex financial assets that aren’t intuitively comprehensible to a layperson, and
• Leave both parties with an understanding of what kinds of events, from ‘normal’ life changes to significant black swan events, could (and often should) results in a re-writing of the settlement.

Risk Assessment and Planning for the Worst
The final part of every divorce settlement that needs a financial expert’s help: risk assessment and protection. Each divorce settlement should address the potential that one or both spouses will die unexpectedly during the term of whatever arrangement is made. Ideally, every divorce settlement would have a specific plan in place for how the deceased’s estate will continue to honor the terms of the settlement. That’s where the financial expert comes in, operating as both rick assessor (because the more likely a spouse’s death is, the more effort needs to be put into this part of the agreement) and, once again, to help all parties involved to understand how that death would affect the assets involved in the plan.

If you’re unsure of how to get a financial expert on your side to help you set up your divorce settlement, call Gucciardo Law today, at (248) 723-5190. We can guide you to an expert who can help.