Reclaiming your financial life and future
By Dana Ragiel
We all know women who find themselves suddenly single and one frequent cause is divorce. In some cases, the wife may see the impending divorce or anticipate it. In others, she is blind sighted when her spouse announces he wants to end the marriage. My experience shows that some couples might wait for the children to leave the home to split up.
In this post, we will review issues that will face you from a financial standpoint regarding divorce. As someone who never married, I’m not the most qualified to discuss the emotional issues of divorce, but my experience from 17 years as a trusted family advisor working with women, allows me to provide guidance in what actions to take. Ultimately, you need to determine what is your fair share of marital assets and plan for the best way to break up the marriage with as little stress and hard feelings as possible.
The main topic usually discussed is separation of assets, but just as important is the concept of income and how much you need to maintain your lifestyle. It is important to take the stance that you will be on your own after the divorce, at least financially. You more than likely have a support system of family, friends and your adult children. I have worked with women who believe that a reconciliation was a possibility. In these cases, the woman may be less likely to stay focused on the financial resources and to fight hard for what she deserves and needs. Your financial advisor and attorney can help with these calculations and concepts. If you reconcile in the future or if he returns and you take him back, you will have the peace of mind that you received your “financial due”. Ask friends for a referral to one or more divorce attorneys who are also known as “family law” specialists.
Mediation – Mediation is the process of you and your soon to be ex-spouse negotiating the divorce settlement without a court trial. A judge will still have to enter the divorce decree in the legal records, but if a settlement can be agreed to in mediation a lot of time and cost can be saved. The mediator is an independent neutral third party to who will go back and forth between you and your attorney in one room and your spouse and their attorney in another. While you could enter mediation without an attorney, it may not be the best idea. If mediation fails, you will end up needing an attorney and an experienced attorney will be a good resource during the mediation process. Mediators are trained to negotiate the give and take between the two sides. Mediation is usually less stressful and less expensive than a divorce trial and it usually proceeds much faster. As you and your spouse have final say over your divorce matters, mediators also allow couples to maintain the power and control in their divorces as opposed to a judge making the final decisions.
Interview Family Law Attorneys – The goal of the initial meeting should be to determine if there is a mutual fit. You should be comfortable and get along well with your attorney. As mentioned above, it is a good idea to meet with two or three attorneys to compare and contrast their approach and recommendations. If you have a good relationship with your financial advisor, they may be helpful in locating a suitable attorney and may be able to attends at least the initial meetings. When seeking a professional service, it is wise to ask for referrals but make sure you meet these recommended individuals. Some questions you may have: What is the hourly billing rate? What type of divorces does this attorney handle? Is he or she familiar with divorces of couples with similar levels of assets, income and situations, such as business ownership? Although divorce is an emotional experience, you need to approach your settlement as a business decision. It can be difficult to maintain objectivity but you need to focus on the end game, which is reaching a settlement so you can move on with your life,
Forensic Accountant – Where are the assets? Is there any chance your spouse has been hiding income or assets? If he has been having an affair, has his demand for a divorce been preceded by his financial planning? A forensic accountant can help develop a picture of assets, income, and where expenditures are being made that you may not know about. These assets may be accounts held in his name only or real estate purchased without your knowledge. Your chosen divorce attorney will be able to recommend a forensic accountant to work with if necessary.
Asset value vs. Cost to maintain the asset(s) – The need for asset appraisals. It is important to address a potential landmine for women facing divorce. You and your advisors need to have a current appraisal on real estate or other tangible property that comprises a significant part of you overall award. Tangible property or hard assets include, but are not limited to the following: primary houses, second homes and other real estate such as raw land or commercial property, art, cars, antiques and jewelry.
You need a firm grasp on the current appraised value of these assets from a licensed professional property appraisal company. What is today’s asset value, which in plain speak means, what could I sell this asset for today? I had one client, her husband awarded her a vacation home on Lake Michigan which was supposedly worth $6 million. It was appraised before the financial crisis of 2009. The home was not worth anywhere near $6.0 million as there were no buyers for an expensive lake front property. No one was seeking a second home in the midst of the financial crisis. Her lawyer and accountant were not thorough enough nor understood the real estate market where the vacation property was located.
Moreover, the cost to maintain this “Four-Seasons” type asset required in excess of $85,000 annually to cover the property taxes, heating and cooling, landscaping, light bill and keep the pool functioning. Consider you may be forced to maintain the property while you are awaiting a sale. In this case, the ex-husband signed over a property that had a low value at the time and was a huge drain on ex-wife’s cash flow.
In another case, the ex-wife receiving the high-end city condo, which had been the primary residence. The issue here was that she had no idea the monthly maintenance was $6000 for the homeowners association fee alone. Make sure to understand the ramifications of the assets you take as part of the divorce settlement.
Budgeting – You need to get your arms around your monthly maintenance costs and expenses. Three months out at a minimum of these expenses while you work through the settlement, although most divorces do not settle for a longer period. Some states require a minimum separation of six months prior to the divorce decree. Your monthly maintenance should include everything you spend on keeping a roof over your head. If there was a division of labor with your ex-husband, now is the time to seek help to determine all the expenses related to your home, car, groceries and essentials as well as your social activities – clubs, gym, etc. You need to put pen to paper and review your budget with your trusted financial advisor. Your advisor should be objective and tell you what you need to hear, not what you want to hear.
The goal of the accounting and negotiated settlement is to reclaim your financial life and maintain your financial future.
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