“I’m sad and happy for you.”
Some might consider that an odd response to news of a divorce. I have found it to be the best way to acknowledge a very complex situation. I lead off my response with sad, as divorce is a uniquely painful experience. On top of the emotional and psychological challenges, there are many impactful financial matters to be worked through.
Division of Financial Labor
In many couples, there is one partner who gravitates toward doing more of the financial workload. It is common for us to hear comments like, “I just want to know we’re OK, but Partner would love to hear more about the details.” This arrangement can work beautifully … until Partner is no longer part of the team. Many divorcing clients will benefit from a competent guide they can trust to level the playing field of knowledge during the divorce and help them learn to operate financially day-to-day as a newly single person.
Fair Does Not Mean Equal
While we frequently hear about someone getting “half ” via a divorce, courts focus on reaching outcomes that are fair. As I’ve told my children many times, “fair does not mean equal.” Reaching fair financial outcomes in a divorce is not trivial. Does $1 of IRA equal $1 of Roth IRA? Would you rather have $1 of appreciated stock or $1 of cash? How do you properly account for differences in future earning potential, especially when the couple decided it was best for one partner to focus on family instead of professional advancement? The best answers to those questions and many others require an integrated understanding of a divorcee’s situation, goals, and values.
It Takes a Village
While you can obtain a “do it yourself ” divorce, many will benefit from professional help. A divorce attorney will often provide counsel and shepherd the process. Financial professionals with expertise in financial planning and modeling, taxes, investments, insurance, employee benefits, and estate planning can help guide a divorcee in shaping and evaluating proposals and counterproposals. Professionals with the Certified Divorce Financial Analyst (CDFA®) certification have obtained additional specialized training to assist in working through divorce. In an already overwhelming situation, the ability to access more specialists under one roof can save precious time, reduce strain, and often improve the outcomes.
Who are You Calling Gray?
In recent decades, the term “gray divorce” has become familiar, as divorce rates involving people age 50 and older have rapidly increased. These cases often feature bigger balance sheets, higher incomes, more complex family situations, and fewer years to recover post-divorce. Since the financial stakes are heightened, people in this situation can benefit even more from seeking the right professional guidance.
So, Why the Happy?
My personal and professional experience is that as painful as divorce can be, it can often be the beginning of a happier future for both partners. As the great philosopher Rocky Balboa told us, “…it ain’t about how hard you can hit. It’s about how hard you can get hit and keep moving forward.” Divorce is one of life’s hardest hits. I generally find folks are better off in their Plan B (or C) a few years later. Having the right guidance along the way can help accelerate that process.
Our team stands ready to help families navigate a range of life transitions. Talk with your CCM advisor for more details or to refer someone you care about for financial advice that considers their personal situation.
NOTE: The information provided in this article is intended for clients of Carlson Capital Management. We recommend that individuals consult with a professional adviser familiar with their particular situation for advice concerning specific investment, accounting, tax, and legal matters before taking any action.
PLEASE SEE IMPORTANT DISCLOSURE INFORMATION.