The Gray Divorcée
When someone wants a divorce, the knee jerk reaction is nearly always “I’m calling an attorney!” But for the Baby Boomer generation, that may be a mistake. Seeking financial advice before seeing an attorney may save divorcees thousands of dollars. Financial counsel is just as important as legal advice and in some cases more so as Boomers have less time to recover.
Gray divorcees want to know how they should divide money and property in a tax efficient manner and how long their money will last. They want to know whether or not they can retire as planned. To answer these questions, they need the most capable financial planning possible…a service that lawyers are not prepared to provide.
Gabi and Dave wanted to talk about their divorce on their own terms before seeing an attorney. They were in their 50s and their adult children were on their own. They had planned to retire early on Dave’s inheritance, so even though they both worked, neither Gabi nor Dave ever contributed to their own 401Ks or retirement plans. After reviewing their finances they recognized that Gabi was going to need help for her own retirement. A financial planner estimated what the couple could have saved in their 401Ks if they had fully participated. As a result of this discussion, Dave was willing to talk about giving Gabi a portion of his inheritance before they talked to an attorney.
This kind of coming together isn’t always possible, but it’s worth trying. Without that discussion, Gabi might have left the marriage having to work many years longer than she’d planned. Legally the inheritance might have been Dave’s separate property and not part of the property divided in divorce.
When a divorcing individual or couple evaluates their financial picture before filing for divorce, they create space to think through how their financial futures will play out. To accomplish this, divorcing couples must first gather bank and investment statements, mortgage and credit card information, tax returns, employee benefit plans, and the like. By understanding current resources the couple can generate financial projections beyond divorce and arrive at a fair division of assets. The process can bring clarity and reduce the fear of financial ruin. Moreover, this frees all parties to move forward and weigh their emotions more appropriately.
This is an interests-based, client-centric approach. By comparison, the legal tact is often a rights-based approach. Those “rights” come in all methods of interpretation and are what lawyers are paid to fight over in court.
Family law as it relates to the division of property and income is a one-size-fits-all approach. It doesn’t address the wide range of informal financial arrangements couples make during a long marriage. Many divorcing couples are not aware that they can create their own plan. Some hand over the work of divorce to attorneys who use the law as the standard to make financial decisions that impact future stability, sometimes to the detriment of the couple.
A rights-based approach is an expensive, time consuming and emotionally draining process. A lot of grief can be avoided (or at least made more manageable) with an interests-based approach. Even when couples work individually with different financial planners, there are typically only a few areas of disagreement that can be resolved through mediation instead of decided by lawyers and a judge.
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Silicon Hills Wealth and Divorce Planning of Austin work with clients and their attorneys to help insure that financial accounts are divided in the most efficient manner possible. Please contact Pam Friedman, CFP®, CDFA™ at email@example.com
Neither Silicon Hills Wealth Management nor Divorce Planning of Austin offer legal or tax advice. Please consult the appropriate professional regarding your individual circumstance.
Investment advisory services offered through Silicon Hills Wealth Management, LLC, a registered investment advisor.
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