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Roughly half of marriages in the U.S. end in divorce –odds implying that advisors likely have at least a few clients that are divorced.
Owing to the highly personal nature of divorce, there’s a reasonably fair chance that clients that are on that precipice or going through it aren’t telling advisors about. Likewise, advisors probably shouldn’t broach the subject because they’re not qualified family therapists or marriage counselors. That said, advisors should be prepared to assist clients that come to them and say they are filing for divorce or planning to do so.
Divorce is an emotional, time-consuming issue and while it may not be front-of-mind for many clients to reach out to their advisors upon deciding divorce is their best option, they would do well to put the advisor high up on the to do list. The reasoning is simple. Divorce comes with a slew of financial complexities and the need for experts beyond lawyers. Nothing against divorce lawyers, but their competency is navigating legal issues, not helping clients with nuts-and-bolts financial issues.
How Advisors Can Keep Divorcing Clients on Task
If there’s one thing about anything that involves, it’s likely that there’s a substantial paper trail involved. As such, clients going through divorce are likely up to their eyeballs in documents and not looking for more of the same. However, advisors should assist clients going through divorce in getting their financial documents organized.
“Locate and make copies of important documents such as insurance policies (life, health, auto, and homeowners), property deeds, car titles/lease agreements, mortgage or home equity loan documents, federal and state tax returns from the past three years, and if applicable, wills, trusts, prenuptial agreements, and other estate planning documents (power of attorney, health care proxy, etc.),” notes Susan Hirshman of Charles Schwab.
Next up, advisors can help clients ending marriages with important tasks such as getting an exact assessment on net worth and determining their living expenses. Arguably, a divorce lawyer should help with the latter, but advisors might be better suited for that task. They probably are. Then there’s thorny but important issue of determining which party handles specific expenses.
“The divorce process typically takes some time, and in the waiting period before the divorce is finalized, you'll have bills and expenses to pay. Determining who pays for which expenses until the final division of property occurs is handled in a separation agreement. In the agreement, outline who will pay for which expenses, how often, and reevaluate as needed until the divorce is finalized,” adds Hirshman.
Other Divorce-Related Tasks Advisors Can Help With
Clients nearing or going through divorce likely also need assistance with mundane but important tasks such as opening new and updating existing accounts. Related to that is the vital issue of update beneficiary information, which is particularly important for clients that parting from a marriage in which the spouse brought children to that union.
Then there’s the issue of creating a new financial plan – clearly territory for advisors and one clients shouldn’t procrastinate on.
“Work with your financial advisor to prepare a financial plan so you can understand what your financial situation will look like today and in the future. As you walk through the divorce process and negotiations, you may need to make several updates to your plan as things change. Having a clear financial plan can help you make informed, data-driven and disciplined decisions during this very emotional time,” concludes Hirshman.
Related: Gen X Women: A Demographic Meriting Advisors’ Immediate Attention