When I work with a client who goes through divorce, my first response is not “sorry.”
Divorce is not merely emotional, it is economical. If they don’t help clients plan early, they risk making decisions based on anger or fear instead of fact. This is how I guide the conversation.
Key takeout
Early financially organized, clients can help avoid emotional or rushing decisions. Classifying income possibilities, pre-marriage assets and legacy priorities can become clear during this challenging time. A proper team of neutral experts can help clients to be fairly divided and avoid unnecessary legal battles.
What I’m telling my clients
I start by counselling my clients to stop thinking of money as “he” and “her” and start thinking with three buckets.
1. Probability of income: Who earns what and are they married?
2. Separation vs. Marriage property: What is premarital birth? What did the couple build together?
3. Legacy for children/family: What will you give? (This is a massive one, even if the couple is split up.)
Real-world scenarios
You may be thinking about whether you are already thinking about these questions. For example, one woman I worked with had been married for 18 years, had three children, and managed the house while my husband was building a business. She didn’t even know what was included in their investment account when she was encouraged to consider these three buckets.
So we started out simply – repositioning what they owned before marriage, what they had now owned, and what they grew up during marriage. She was shocked to see the amount of business growth while they were married (yes, it is considered a married couple’s property). A forensic accountant checked the numbers and gave them leverage during mediation.
In another case, the couple wanted to keep it peaceful for their teenage daughter. They sat with me and we did “cut off the draft.” We reviewed their accounts, retirement plans, and family condos. It wasn’t always easy, but we got closer like a financial puzzle rather than a war, so they went outside in a fair split and didn’t spend a lot of money on legal costs.
Notes
According to the central bank, each divorced individual needs an average income increase of 30% or more to maintain their standard of living before separation.
Choosing the right team
The right team makes a big difference. I always recommend a family mediator or lawyer in addition to a neutral CFP (someone like me who can become a CDFA), depending on how things are going.
Choose wisely because you need experts who know what you are doing and can work with each other.
Conclusion
Divorce is not easy for clients, but it doesn’t have to be a disaster. By implementing the right financial framework, taking into account the important buckets and building the right team, it is possible to make decisions that benefit clients and reduce the stress that comes with these difficult times.
