divorce
January – March 2017
$19.95
Financial Analyst Journal
Reprinted with permission from the January-March issue of the Divorce
Financial Analyst Journal, Copyright 2017. THE INSTITUTE FOR DIVORCE
FINANCIAL ANALYSTSTM.
For more information, please see: www.institutedfa.com
How to Keep Divorce
from Ruining Your
Client's Financial Future
IRA Contributions and
the Divorced Individual:
How to Advise Clients
Post-Divorce
Financial Planning:
Focusing on What’s Next
InstituteDFA.com
2
6
10
16
Contents
2
How to Keep Divorce from Ruining
Your Client's Financial Future
6
IRA Contributions and the Divorced
Individual: How to Advise Clients
10
Mary Ballin, CFP®
13
Howard Hook, CFP®, CPA
Finding the Vision, Part 2
Post-Divorce Financial Planning:
Focusing on What’s Next
Adrienne Rothstein Grace, CFP®, CDFA ®
16
With Shrinking Options
for Alimony, a
Lump Sum Can Be
Your Best Strategy
Jeffrey A. Landers, CDFA®
Looking Within:
The Anatomy of a Divorce
Financial Analysis Practice
Karen Sparks, JD, CDFA®
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Divorce Financial Analyst Journal | January — March 2017
1
How to Keep
SET EXPECTATIONS FOR INCOME AND EXPENSES
Many factors contribute to the disproportionate financial impact
of divorce. For example, while a woman may have continued to
work after marriage and motherhood, it is still likely she earns
less than her spouse. When she must survive only on her own
income, she may struggle.
From Ruining
Your Client’s
Financial Future
Post-divorce, she will be responsible for a variety of expenses
that had been shared, including housing, utilities, food,
childcare, insurance, and health care.
Divorce
Mary Ballin, CFP®
Divorce is usually traumatic for everyone involved — well,
except seasoned divorce attorneys— but ample research
shows that in many ways it’s harder on women.
Women who divorced at least once in their life were 24
percent more likely to have a heart attack than women who
stayed married, according to a 2015 study by Duke University
researchers, and divorcing more than once pushed the risk to
77 percent. Even after remarriage, women’s risks remained
higher. Conversely, men’s risks increased only after two
divorces, and remarrying wiped away the higher heart attack
potential.
Within a year of divorcing, more women than men live in
poverty and receive public assistance. They earn less money
and are less likely to be able to afford to live independently,
according to 2009 U.S. Census Bureau data. Divorce can
hurt not just a woman’s income but her credit standing and
retirement savings as well.
Those of us who work with divorcing clients need to develop
a partnership that fosters trust in order for these clients to
feel successful. It’s important that you help your clients
understand how these issues are likely to affect them, so they
can prepare themselves as they transition into the next chapter
of their lives.
2
Divorce Financial Analyst Journal | January — March 2017
Many women, especially those who grew up when gender roles
were more rigid, married into partnerships in which men handled
the finances, which can lead to serious gaps in knowledge
post-divorce. Whether a woman stayed at home or was in the
workforce, she may be unaware of what it will really cost her to
live month-to-month on her own. She may be unaware of the
family’s total assets and which ones have the greatest value for
her. Or, she may have unrealistic expectations about what she
can hope to receive in a divorce settlement.
Additionally, retirement accounts may be primarily in her
spouse’s name; even if she receives part of those monies in a
divorce settlement, she likely will still need to save more money
toward retirement. If credit cards, titles, and loans were issued
in the ex-husband’s name, as opposed to jointly, women may
find their personal credit score is lower than that of their ex—or
at least lower than they had expected.
All these factors, along with the emotional toll, can mean it
takes a woman longer to recover financially from a divorce. It is
possible, however, to take steps to speed your client’s recovery.
HELP PUT HER FINANCIAL HOUSE IN ORDER
First, work with a good divorce attorney, preferably one who
understands the value of having a certified financial expert on
the team. We are seeing more divorce lawyers encouraging
their clients to work with a CFP® or CDFA® professional. A CFP
can help your client understand the assets at stake, which
ones might be most valuable in the future, how the divorce will
affect personal finances, and what steps exist to regain a solid
financial footing as quickly as possible.
Once the divorce is over, here are some key points to consider:
Estate planning: If your client has sole custody of minor
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Divorce Financial Analyst Journal | January — March 2017
3
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children or shares custody with their ex-partner, estate
planning is important. At the minimum, she will need a will
and a plan detailing who will care for her children — and
how — should something happen to this parent.
Insurance: If your client’s health insurance was through
her spouse’s employer, she will now have to secure her
own. She may want to continue health benefits through
COBRA, or if she is employed, she may choose employersponsored health benefits. If neither of those is a viable
solution, your client can use the government Health
Insurance Marketplace to find coverage.
Life and disability insurance: Your client needs to
consider both of these insurances, and to decide whether
they are appropriate for her personal financial situation. If
your client has dependents who rely on her for financial
support, she will want to consider having both types of
insurance: life insurance in case she dies prematurely and
disability insurance should she become unable to earn
an income. Both may be available through an employer’s
benefit package. Have her start researching both insurance
options now.
Beneficiaries: Your client probably doesn’t want her
former spouse to collect the benefits of life insurance or
her retirement accounts. Get the names changed on these
documents.
Long-term care: Long-term care insurance can help
ensure your client has money available to pay for
4
Divorce Financial Analyst Journal | January — March 2017
residential or facility care, should she have a long-term care
need and can no longer take care of herself.
Taxes: How will your client file her taxes now? Single?
Head of household? Who gets to claim the children as
dependents? How are child support and spousal support
taxed? Getting professional tax advice is a good idea, even
if your client thinks her taxes will be simple.
Remind your client that it is important to take care of yourself no
matter what your position in life, but after a divorce, you have to
be a little bit selfish. Your client’s priority needs to be securing
her financial well-being, and yours is to guide her through the
process. No one likes to think it could happen to her, but if
divorce is unavoidable, it is important to take steps to ensure a
good financial life afterward.
About the Author
Mary Ballin, CFP®
Mary is a Client Advisor with
Mosaic Financial Partners. Her
passion is to provide education to
women in transition about a wide
variety of personal financial topics. Mary co-founded
Mosaic’s Women’s Circles, quarterly gatherings where
women come together to explore their relationships with
money and learn from each other’s experiences. She is
a 2016 recipient of the Women’s Choice Award. Learn
more at www.mosaicfp.com.