Marriage can be expensive. Especially if it ends. The possible $4.5-billion divorce settlement of a Russian billionaire is absolutely higher than average but relatively speaking, a division of assets and future support can be much more crippling for the rest of us regular Joes.
If Dmitry is left with only a few billion dollars, he’ll still be able to afford all of his homes around the world. On the contrary, the breakdown of a household for us 99-per-centers can leave both parties facing a significant downsizing and major change in lifestyle.
The emotional aspect of marital breakdown is trying enough, but proper handling of your financial affairs is crucial. Not everyone ends up in court in a nasty, prolonged legal battle. But whether you have a collaborative divorce complete with a divorce party for all your friends and family to attend, or end up spewing venom at each other across a courtroom, this will be one of those moments in life in which you need to be especially attuned to your financial planning.
In situations where one partner is head of the couple’s financial matters, this becomes a problem. Hopefully this doesn’t draw out any paranoia, but on a list of ten signs your spouse may be planning to divorce you, most are financially motivated.
Regardless of the reason, both partners should be involved in the family’s finances. You might choose to believe that your love will conquer all and that there’s no chance of a breakdown, and I hope you’re right. But what if the family CFO dies? The same problem arises. A baptism by fire, with the potential of getting burned. So as a general rule of thumb, having both partners involved in the financial affairs is a best practice, no matter what.
Your financial adviser should play an important role in the planning of your post-divorce finances. One possible problem that might arise is that the adviser may only choose to work with one of you going forward. Conversely, you may feel uncomfortable sharing the same financial adviser going forward.
A Certified Financial Planner (CFP) will be able to handle the special considerations of a divorce, but some advisers additionally have a Certified Divorce Financial Analyst (CDFA) designation. Either way, you should be looking for assistance in creating a financial plan for your new reality. Many things will change. Your discretionary spending will drop, you may have to move, your insurance and benefits will all need to be reviewed, and much more.
I recently met a lady whose husband had suddenly passed away. He had an ex-wife and their settlement agreement stipulated that his group life insurance had to remain assigned to his ex-wife as beneficiary in trust for their children. Years later, he had the policy beneficiary re-designated to his then current wife. Upon his death, the ex-wife went after the life insurance payment, and got it. This was a case of simply not reading the fine print, of which there was plenty. Having professionals, lawyers and financial planners, work with you sorting out the details may be tedious, but clearly can be very necessary.
Think a $35,000 wedding sounds pricey? That’s potentially chump change if it doesn’t work out.
Preet Banerjee, a personal finance expert, is the host of Million Dollar Neighbourhood on The Oprah Winfrey Network and author of the new book, Stop Over-Thinking Your Money!Report Typo/Error