When people are getting ready to walk down the aisle to say “I do” to the person they want to spend the rest of their lives with, divorce is often a passing thought, an experience reserved for others. Many of us have heard the statistic that roughly half of all marriages in the U.S. end in divorce. That statistic still holds true for first marriages. But if you’re going through a divorce, statistics are irrelevant: It’s your life that’s being impacted.
If you find yourself in a position where your marriage is coming to an end, having a good understanding of the divorce process and key professionals to involve can help alleviate some feelings of anxiety. It is essential to carefully think about financial matters when going through a divorce. This decision is a huge one — and has consequences that will impact the trajectory of one’s financial future, family and retirement.
Over the years, I have helped advise dozens of people through their divorce, and I have found the following suggestions to be helpful.
1. Get organized.
Make sure you have an understanding of your assets, liabilities, income and expenses. Gather statements for each checking, savings, retirement and investment account and collect pertinent life insurance policies and documents on any property you own.
You should build an emergency fund, setting aside separate funds to pay for legal expenses related to the divorce. The national average cost of a divorce is $15,000. There are several factors that impact the cost, including the divorce method you choose and whether children are involved.
2. Understand the process.
One of the biggest things you should prepare yourself for: Often, the decision to get a divorce doesn’t immediately offer that sense of relief that you may be searching for. The process often takes months at the very least, up to years!
As I mentioned, the cost of divorce is often influenced by the method you choose. There are several methods, including litigation, collaborative divorce, mediation and DIY divorce. If your divorce is more amicable, you may want to consider mediation or a collaborative divorce, which involves you and your ex negotiating the divorce with professional help. In a collaborative divorce, each party hires their own team consisting of an attorney and sometimes a psychologist or financial specialist who will help negotiate the divorce.
The key factor in a collaborative divorce is that each party must agree that no one involved will pursue litigation. Each state has its own divorce laws, so learning about your own state’s legal approach will help you stay protected.
3. Enlist the help of professionals.
Create a team that consists of an attorney, a financial adviser, certified public accountant (CPA), insurance agent and a certified divorce financial analyst (CDFA®). You may want to research and interview several divorce attorneys and get references. It’s critical that your attorney has an understanding of your ultimate goals for the divorce.
The financial adviser and CPA can help you understand the financial and tax implications of the asset split, and an insurance agent can help you understand any policies that are in place and how they are impacted or need to be modified in light of the divorce. A CDFA is a professional who is specially trained in addressing the financial issues of divorce to help achieve an equitable settlement. The strength of your partnership with your team will impact the process and potentially the settlement agreement.
Your team’s counsel can help to prevent you from making any rash decisions. For many people who go through a divorce, it's not a quick process. They get worn out, and toward the end, many just want to give up and say, “Hey, you know what? I don't even care anymore.” It helps to have the advice of someone with the foresight to look ahead and say, “No, you don't want to give up on this and give the other person X, Y or Z: You could really benefit from this in the future.”
4. Set reasonable goals.
Ask yourself the tough questions: What is most important to you? What are you willing to let go of? Knowing your non-negotiables will help you gain clarity around your ideal division of assets.
Also, remember that you can’t control everything. If there are kids involved in the divorce, remember to prioritize their well-being first. Reminding yourself of this will hopefully help keep things from escalating and becoming contentious.
5. Give yourself time to mentally process and grieve.
I have heard from many that divorce can feel like the death of a loved one. You are letting go of a life you once had and the hopes for a future with your spouse. Build a strong emotional support system. Divorce can be very draining. Having the support of friends and family will help you get through the process; you might also want to consider working with a therapist at this time.
Here’s the bottom line
The divorce process is never fun and sometimes can get ugly. Do your research, stay organized and set expectations early. Be realistic about time frames, because the process can be lengthy and filled with many ups and downs. Be kind to yourself and remember that this too shall pass. You can’t control how your former spouse acts, but you can make the decision to bring your best self to negotiations, which will help keep things rational and help you make decisions you won’t regret later.
Julia Pham joined Halbert Hargrove as a Wealth Adviser in 2015. Her role includes encouraging HH clients to explore and fine-tune their aspirations — and working with them to create a road map to attain the goals that matter to them. Julia has worked in financial services since 2007. Julia earned a Bachelor of Arts degree cum laude in Economics and Sociology, and an MBA, both from the University of California at Irvine.
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