Thinking about Your Money

    Divorcing clients need to make important economic decisions as they go through the process. If they make bad decisions, they will more than likely have to live with financially and emotionally devastating consequences. That’s why people going through divorce need expert financial advice. While they have traditionally relied on the attorney or the mediator to provide such advice, and while many mediators and attorneys have come to accept this role, the requisite financial knowledge and skills are often outside their areas of training and expertise.     

Some divorce professionals realized they can better serve their clients by incorporating financial experts — particularly financial planners — into the pre-divorce process. Because of that, a new trend is emerging: divorce financial planning.           

Most financial planners have the relevant tax and financial knowledge to act as outside experts in a divorce. However, their best contributions come from a more intimate involvement in the process. Because planners have traditionally helped individuals achieve long-term financial goals, saving for college or retirement for example, they have specialized training and skills that enable them to analyze financial issues in their long-term context. During the divorce process, this often sets a more productive tone for discussion, empowering individuals to make workable decisions and lifestyle adjustments.           

The earlier the financial planner becomes involved in the process, the more likely the situation will not escalate out of control, and the more likely good financial decisions will be made. The financial planner can help stabilize the situation, including helping determine short-term support needs or paying abilities, closing or re-registering accounts, changing beneficiaries on insurance policies, notifying credit card companies or establishing credit.            

One of the most important steps in the pre-divorce financial planning process is the collection of accurate, complete and reliable financial data. Collecting, inventorying, organizing and analyzing historical data is one of the cornerstones of the financial planning process and is probably best done by the divorce financial planner. The less reliable the information, the more likely bad decisions will be made.           

In addition, a financial planner will examine financial position and cash flow. These are important because clients need to understand their current and future assets and liabilities and their current and projected income and expenses. Historical information provides insight into pre-divorce lifestyle and standard of living.