Planning for Divorce
Client Scenario: The client used in this example is a woman with two children who has been married for nine years and is now going through a divorce. She presently has a job with a flexible schedule (to allow time for her children’s needs) and only took a few years' leave when they were born. She bought a home together with her husband seven years ago using the equity they had from their previous residence, a condominium.
Action Plan: Obviously, the most pressing concerns of this client relate to her divorce, and that will take priority over other issues, although there is still her family’s future to discuss as well as her own personal goals.
1. Costs and earnings. The client was concerned about income and expenses, so our plan addressed the following:
- Home issues; more specifically, how much value the couple’s house has at the present time, whether the client should keep the home as a primary residence or sell it, and specifics concerning mortgage payments
- Making a decision regarding how much spousal support she will be receiving after the divorce and how much weight her present income will carry toward providing for herself and the kids
- A diversified investment plan catered to different possible outcomes from the divorce
2. Shared assets and estate planning. There will need to be reviews conducted because of the shared assets with the client’s husband after their divorce. The following items relating to her assets, estate, and insurance information were discussed:
- An extensive review of existing life insurance plan policies, as well as retirement accounts, from which to remove her husband and replace him with her children’s co-beneficiary information
- Analysis of her children’s individual trusts for any issues regarding their benefits and any needed amendments to her will pertaining to said trusts
- A closer look at any and all assets brought into the marriage by the client, as well as any acquired during the marriage, since her personal assets would indeed be a part of the divorce process
3. Retirement strategy. On top of the issues relating to current income and expense concerns, the client wished to take hours out of her work schedule to care for her children. Retirement savings were previously handled by her husband, and the couple was on track for an early retirement before their divorce. Due to these issues, we further reviewed:
- All existing accounts and the possibility of splitting their retirement assets in order to create a retirement income strategy for current assets
- Tax minimization strategies and additional ways to save in order to protect assets for the future (Due to their marriage lasting for less than 10 years, the client wouldn’t receive social security benefits from her husband.)
- The prospect of taking greater advantage of employer benefits and an increased salary by getting a full-time corporate job for the short term (Not only would this help with retirement plans, but it would help with education expenses for her children.)
The preceding is a hypothetical case study and is for illustrative purposes only. Actual performance and results will vary. Past performance is no guarantee of future results. This study does not represent actual clients. Any resemblance to actual people or situations is purely coincidental. Commonwealth Financial Network® and Robert L. Stern Financial Services do not provide legal or tax advice. You should consult a legal or tax professional regarding your individual situation.