What You Need to Know About Divorce and Money - Opal Wealth ...

 
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What You Need to Know About Divorce and Money - Opal Wealth ...
What You Need
to Know About
Divorce and Money
What You Need to Know About Divorce and Money - Opal Wealth ...
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What You Need to Know About Divorce and Money - Opal Wealth ...
Despite our best intentions, divorce sometimes happens. Marriages
evolve, and people grow and change over time—sometimes
together, sometimes apart. The truth is that every relationship is
different, and none of us can really say for certain what brings
couples to this difficult decision.

In the past, toughing out a rough marriage and      children are involved. If you’re currently wading
“making it work” was seen as honorable, while       through these waters, you don’t need us to tell
leaving was interpreted as weak. That paradigm      you that separating your money and sorting
has shifted, according to psychotherapist and       out your new financial reality can be incredibly
relationship expert Esther Perel. These days,       stressful. Your best approach is having an expert
staying in an unhappy marriage is often viewed      team of advisors in your corner that’ll be on
as the weak thing to do. Our culture has evolved    your side through thick and thin, leading without
and now celebrates the idea of honoring             judgment and always with your best interests
yourself, whatever that may look like. For many,    at heart.
that means exiting a marriage that no longer
                                                    A divorce marks the beginning of something
feels right and forging a new path forward on
                                                    new; a chance to begin again, embark on a fresh
their own.
                                                    chapter, and create a new life that honors who
Whether this resonates with your own journey or     you are today, in this moment. Sure, there’s
you’ve been blindsided by a breakup you never       work to be done, but with the right attorney,
wanted, divorce is rarely pain-free. Untangling     financial advisor, support system (friends, family,
your lives, both emotionally and financially,       therapist, life coach), and mindset, you’ve got a
usually hurts. In fact, researchers say that the    whole new world ahead of you.
same parts of the brain that are activated when
                                                    It doesn’t matter if you’re at the starting line of
we feel physical pain also light up when we’re in
                                                    a divorce or are already knee deep in the
the trenches of heartbreak.
                                                    process—it’s never too early to begin cutting
For most people, navigating a divorce is one of     through the stress and making a plan for your
the hardest things they’ll ever do—especially if    financial future.

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What You Need to Know About Divorce and Money - Opal Wealth ...
MAKING SENSE OF
                                    YOUR FINANCES

Get Clear on Your Rights                            If you live in an equitable distribution state, a
                                                    number of factors could wind up affecting your
The first order of business is getting clear on     divorce settlement.1 You and your spouse’s
your legal rights. The financial repercussions of   employment and income, for example, may
divorce are hinged on the type of state you live    come into play. While a competent divorce
in. Nine states (listed below) are community        attorney is vital when it comes to understanding
property states where all assets and debts are      your legal rights, having an experienced financial
divided 50/50. If you live anywhere else—states     advisor on your side is absolutely critical to
                                                    safeguarding your wealth and putting you on a
known as equitable distribution states—a judge
                                                    path to financial security.
will determine how to divvy up your debts and
assets in a way they deem fair.                     Clarify Your Assets
•    Community property states: Arizona,            This begins with creating a comprehensive list
     California, Idaho, Louisiana, Nevada,          of all your marital assets. If you can do this
     New Mexico, Texas, Washington and              together, all the better. Every couple is different,
     Wisconsin. Alaska also has an optional         but common marital assets to consider include:

     program where spouses can make certain         •   All bank accounts. Consider ordering
     assets community property.                         December bank statements for the last three

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What You Need to Know About Divorce and Money - Opal Wealth ...
to five years to track where your money has             If you’ve already established a profitable
    gone. Even if your divorce is an amicable               business, it’s a worthwhile question,
    one, money is a powerful motivator and your             especially if there’s potential for future
    spouse may feel justified in hiding money.              growth. It’s a good idea to conduct a
•   Joint real estate properties (your shared               fresh valuation before making any moves.
    primary residence along with any rental                 If continuing the business together
    properties or a second home)                            doesn’t feel right, it’s time to make a viable
                                                            plan for exiting the business. This may
•   Vehicles, boats, and planes
                                                            require hiring professional management
•   Investment accounts (retirement accounts                to fill key roles, whether that’s with or
    like IRAs, 401(k) plans or pensions, regular            without your spouse.
    brokerage accounts, CDs, etc.)
                                                      Also consider any premarital assets that may be
•   Furniture, appliances, electronics and other      in the mix. These are assets you owned before
    joint household items                             getting married, like inheritances, awards from
•   Jewelry, artwork, antiques and other              lawsuits, or any property that was yours before
    collectibles the two of you may share             the marriage. It also includes anything that
                                                      was listed as a separate asset in a prenuptial
•   Joint business assets, properties, and
                                                      agreement. Protecting premarital assets gets
    other interests
                                                      complicated if you’ve comingled them with your
    –– It may be complicated, but is it possible to   spouse.2 Have an honest conversation with your
       continue running the business together?        attorney or mediator about how to tackle these.

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What You Need to Know About Divorce and Money - Opal Wealth ...
Some assets may actually end up reducing          Secured debt will go to whoever will be keeping
  your lifestyle, instead of enriching it... The    the asset. So if you choose to keep the house,
  most valuable assets are the ones that have       you’ll also get the outstanding mortgage. If the
  potential to grow and generate income.            two of you legally own the home together, then
                                                    any equity will likely be split down the middle.
One other word about assets: It’s easy to fight     You may also choose to sell a secured asset,
for things we’re emotionally attached to, like a    like your home or car, and divide the proceeds
home we grew a family in. But such assets may       equally after paying off any remaining debt.
actually end up reducing your lifestyle, instead
of enriching it. Cars depreciate, and maintaining   Sorting through credit card debt and any student
your current home without your partner may          loans acquired during the marriage is a little
prove financially difficult. The most valuable      trickier, depending on the state you live in. A
assets are the ones that have potential to grow     judge may take into account how the debts
and generate income.                                were used and who benefited from them when
                                                    deciding how to handle them.3 No matter the
Organize Your Debts                                 type of debt, be sure to check your credit report
                                                    with at least two different credit reporting
Just as it’s important to organize your assets,
                                                    agencies so that you leave no stone unturned.
you’ll want to do the same for any debts that
were accrued during your marriage. (Premarital      The biggest factors that affect your credit score
debts are generally delegated to whichever          are payment history and credit utilization. If your
spouse originated them.) Just keep in mind          spouse has been missing payments or racking up
that splitting up your debt isn’t always a          debt on joint accounts, it could have a very real
cut-and-dry process.                                effect on your score. Hiring a forensic accountant

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What You Need to Know About Divorce and Money - Opal Wealth ...
may also uncover malfeasance that could be            so on. Another thing to keep in mind is that
used in court (e.g. a husband stashing money          you’re entitled to receive spousal Social Security
off-shore or paying for his mistress’s rent).         benefits on your ex’s record if the two of you
                                                      were married for more than 10 years—
Your knee-jerk reaction may be to move money
                                                      even if they remarry. You’ll lose it, however,
out of your accounts or change ownership
                                                      if you remarry.4
without consulting an attorney first, but you’re
better off letting an attorney advise you on the          It’s perfectly natural to feel deflated after a
right timing. Such actions could come back to             marriage ends. But your outlook plays a major
haunt you during settlement negotiations. With
                                                          role in your ability to process these feelings
that being said, opening your own new accounts,
                                                          and begin rebuilding financially.
including credit, is necessary once the process is
moving along.                                         While now is the time to create new financial
                                                      goals, it isn’t the best moment to make any big
Think About Your Financial Future                     money moves. Going through a divorce is an
You’re about to embark on a new chapter of your       emotional process, making it all but impossible
life. Divorce will have a lasting financial impact    to think with a clear head. Similarly, freezing
and will also change the way you approach             like a deer in headlights won’t help you, either.
things like investing, retirement planning, and       Financial impulsivity and paralysis are both
estate planning. It may feel daunting at first, but   forms of avoidance. Your best advice? Lean in
a skilled financial planner can help you iron out     with the right people by your side.
the details and get everything in place. It might
                                                      This goes hand in hand with your mindset. It’s
also make sense, depending on your situation, to
                                                      perfectly natural to feel deflated after a marriage
partner with a different professional than the one
                                                      ends. (You’re only human, after all.) But your
you shared with your spouse, who can help you
                                                      outlook plays a major role in your ability to
forge a fresh path forward.
                                                      process these feelings and begin rebuilding
When financially planning for the future,             financially. Do you identify as a victim whose
consider what assets you have now and whether         finances will never recover? Or do you see
they’re income-generating or have expenses            yourself as an empowered person who’s simply
attached to them. Also think about what your          navigating an unexpected road block? The way
income is going to look like after the divorce,       you answer can instantly shift your sense of
taking into account when child support or             personal power.
alimony will end. When this happens, how will
you make up the shortfall?                            To help make the experience run a bit smoother,
                                                      gather up the following documents as soon as
The right financial planner can also help you         you can:
understand your income and expenses, along
with other considerations like paying for             •    Three years’ worth of tax returns
college, health care costs, taxes, insurance and      •    Compensation records

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What You Need to Know About Divorce and Money - Opal Wealth ...
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What You Need to Know About Divorce and Money - Opal Wealth ...
•   Bank statements                             When your attorney says the time is right, you’ll
                                                also want to change your will, power of attorney,
•   Brokerage statements
                                                health care proxy and beneficiaries.
•   Credit card records

•   Mortgage records/lease documents
                                                  Key Takeaways:
•   Other loan records
                                                  •   Clarify what type of state you live in: A
•   Records of gifts                                  community property state or an equitable
                                                      distribution state. An experienced mediator
•   Retirement plan statements/records
                                                      or divorce attorney can help you make
•   Insurance policies                                sense of your rights.

•   Documents related to health                   •   List out all your assets, together if possible.
                                                      Be sure to differentiate premarital assets.
    insurance coverage
                                                  •   Catalog all your debts, distinguishing
•   Documents related to a living will and/or
                                                      between debts you accumulated together
    power of attorney
                                                      and premarital debts you each brought
•   Business financial statements                     to the marriage. Resist the urge to move
                                                      money out of accounts without consulting
•   Marriage certificate                              an attorney first.
•   Prenuptial agreement                          •   Run your credit with at least two credit
                                                      reporting agencies. Connect with a financial
•   Relevant legal records
                                                      advisor to make a plan for your future.
•   Trust documents

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What You Need to Know About Divorce and Money - Opal Wealth ...
MAKING A PLAN FOR
                                   THE CHILDREN

Ending a marriage when there are children            How is Child Support Determined?
involved only complicates the already stressful
                                                     While it’s easy to lose your head, it’s important
business of divorcing. Unfortunately, it’s
                                                     to remember that children aren’t assets to be
something that many people have to deal with.        fought over. Your divorce attorney can help
The silver lining is that kids are generally a lot   you understand your rights and bargaining
more resilient than we think.                        power when it comes to establishing a custody
                                                     arrangement that works for both parties. These
Take comfort in knowing that while divorce is
                                                     nitty-gritty details will likely have a lasting impact
typically traumatic for the entire family unit,
                                                     on your finances. Child support and alimony
research suggests that most children end up          agreements, which vary widely from state to
adjusting well within two years, according to the    state, make up a huge piece of the pie.
American Psychological Association. Not only
                                                     Every state uses its own guidelines to determine
that—they’re actually more likely to experience
                                                     how child support is calculated.5 This means
problems when parents choose to stay in              there’s no blanket rule. The truth is that some
high-conflict marriages; a statistic that shatters   states grant judges a considerable amount
the idea of trying to make a bad marriage work       of leeway, while others have much tighter
“for the kids.”                                      restrictions. Most courts do require each spouse

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to submit a financial statement so that they can       The goal behind spousal support is to help both
better understand their income and expenses.           spouses maintain their pre-divorce standard of
                                                       living. The upside is that this may not come to
Many courts strive to help children maintain           fruition if you have similar incomes or were only
whatever standard of living they had prior to          married for a short time. If alimony is ordered,
the divorce. So who will end up paying child           the amount and timeframe for it can be agreed
support? And how much? It depends on a                 upon by both parties. If not, you can go to trial
number of moving parts, including the needs of         and have the court decide it for you.
the children, as well as the income and needs of
the custodial parent.
                                                         Key Takeaways:

How Does Alimony Work?                                   •   Connect with your divorce attorney or
                                                             mediator to understand how child support
Alimony, more commonly referred to these days                will be calculated.
as spousal support, is a separate issue. While
                                                         •   The same goes for alimony. There isn’t a
most states don’t mandate it, judges may order it
                                                             one-size-fits-all rule. It all depends on
in certain situations. Just bear in mind that if one
                                                             the state you live in, each spouse’s
spouse earns significantly more money than the               individual financial situation, and the needs
other, odds are high that they’ll have to pay some           of the children.
amount of spousal support.6 These payments
                                                         •   Always lead with your children first. Do your
used to be tax-deductible for the payer, but that’s
                                                             best to put your marriage issues aside so
no longer the case under the new tax law. What’s             you can more easily see what arrangement
more, the receiving spouse no longer has to                  will be in the best interest of your kids.
include alimony payments as taxable income.7

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PREPARING YOURSELF EMOTIONALLY
                         FOR THE DIVORCE PROCESS

It goes without saying that divorces take a         This last one simply isn’t possible for every
toll on our emotional and mental well-being.        couple. Know that there’s absolutely no shame
Fortunately, not all separations have to play out   in needing to enlist the help of an experienced
with ugliness and high drama. While you have no     divorce attorney, especially if your spouse is
power over how your spouse will behave, you are     making matters more difficult or painful than
                                                    they need to be. No matter what, ask yourself the
in control of yourself.
                                                    following questions when navigating a divorce.
It can be hard to see clearly and make rational
choices when emotions are running high, but a       What Kind of Divorce Do You Want
peaceful divorce is possible for many. Professional
                                                    to Have?
divorce mediator Joe Dillon tells Working Mother    A collaborative divorce is essentially the one
that it depends on five key factors:                that’s outlined above; where both spouses are
                                                    putting their feelings aside and truly working
•    Ditching blame
                                                    together to make the process as pain-free and
•    Focusing on the big picture                    seamless as possible. Adopting this attitude will
•    Negotiating divorce terms in good faith        move things along more amicably, helping the
•    Always putting kids’ needs first and           two of you ultimately reach a divorce agreement
     committing to co-parenting                     more quickly. The downside, however, is that you
•    Ironing out the details without attorneys      may find yourself agreeing to terms that aren’t

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fully in your best interest out of a desire to get        generally less expensive and tend to move the
the whole thing over and done with.                       process along relatively quickly.

Unfortunately, not every spouse plays nice. One       •   Collaborative divorce. Family law attorneys
party may try to withhold assets from the other           may be involved to help the couple find
or refuse to cooperate with sharing the children.         common ground on sticking points, but both
While it’s never a first choice, sometimes a more         spouses generally want to resolve things as
aggressive approach is necessary in order to              smoothly as possible without going to court.
safeguard your financial future. It may drag out      •   Traditional divorce. This option is usually
the divorce process, but it could be worth it if it       for couples who really can’t agree on divorce
compels your spouse to behave more equitably.             terms and need to have a judge intervene to
It’s bound to be a headache in the short term,            move things along. It’s the most costly choice,
but your attorney may recommend it if they think          but sometimes necessary.
it’s financially wise to push harder for what you
                                                      The thing to remember is that there’s no right or
deserve so that you don’t wind up getting the
short end of the stick.                               wrong way to navigate your divorce. Every couple
                                                      is different, and no two cases are ever the same.
There’s more than one path toward successful
divorce. Here are the most common ways to             Do You Have a Supportive Team
proceed. The one that’s right for you depends on      in Place?
your situation.
                                                      Coming out the other side of divorce strong and
•   Working with a mediator. Mediators are third      confident requires more than an experienced
    parties who are specially trained in helping      divorce attorney or mediator. The best path
    couples agree on divorce terms. They’re           forward is to find your way through this time with

                                                                   What You Need to Know About Divorce and Money | 13
an effective team in your corner so that you don’t     Have a candid conversation with your financial
have to walk this path alone.                          advisor where you play out different scenarios
                                                       together. This should help you better understand
Your team should be made up of people who
                                                       exactly what you’re agreeing to. Again, emotions
have your best interests at heart. This includes
                                                       are usually running high, and these are decisions
strong financial advisors who are a good fit for
                                                       that will have a lasting impact on your cash flow.
you—people you feel comfortable with. These
are folks you’re going to be sharing a lot of
personal and emotional details with. You want            Key Takeaways:
advisors who aren’t just smart and professional,         •   It’s more than possible to have a successful
but also people you can trust and connect with.              divorce. As difficult as it might be, try
Otherwise, they simply won’t be as effective. At             dropping blame and focusing on the big
the end of the day, it’s a partnership, and you              picture instead. Negotiate divorce terms in
want compassionate, thoughtful and meticulous                good faith and keep your children front
                                                             and center.
advisors on your team. Your financial future
hangs in the balance.                                    •   Ask yourself what kind of divorce you want
                                                             to have. A collaborative one that resolves
We say this because it’s important to remember               swiftly? Sometimes a more aggressive
that your lifestyle will change after a divorce. The         approach with a skilled attorney is necessary
same dollars you relied on before will now be                to protect your rights.
going to two homes, and if you aren’t prepared,          •   Surround yourself with a strong support
you may be in for a shock. In the spirit of moving           system. This includes an experienced
things along, it might be tempting to sign the first         financial advisor, legal representation,
                                                             friends and family, therapist or life coach
deal you’re presented with in order to wrap things
                                                             who’ve got your back.
up quickly, but there’s no going back after signing
on the dotted line.                                      •   dvxcxxcvcx

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What You Need to Know About Divorce and Money | 15
SOME FINAL THOUGHTS ABOUT
                               SUCCESSFUL DIVORCE

Few life events have the power to shake up your                        money before, during, and after a divorce—with a
finances quite like a divorce; whether you’re                          compassionate ear, a wealth of experience,
ordered to pay alimony and/or child support or                         and the tools to help you shift yourself into a
receive it. Adjusting to post-divorce life, for many,                  growth mindset.
comes as a shock to the system. It may jump-
                                                                       Our vision is to help you EVOLVE by focusing on
start you to readjust your monthly cash flow,
                                                                       the following financial process:
tweak your investment strategy, and revisit your
short- and long-term goals. This simply comes                          •    Exploration
with the territory. Your financial health isn’t a                      •    Vision
static thing that’s set in stone, but rather a fluid                   •    Obstacles
part of your life that changes as you evolve, age                      •    Leap
and grow.                                                              •    Verification
It can be hard to see the light when you’re deeply                     •    Evaluation
entrenched in divorce, but take heart in knowing                       Our research-backed individualized coaching
that for many, it surprisingly ends up paving the                      services are built on financial planning tools to
way for a deeper, more fulfilling life; a blessing
                                                                       help you create a lasting roadmap for your new,
in disguise, if you will. Rally up your team, move
                                                                       post-divorce life and beyond. A divorce may mark
forward in good faith toward your ex, and make
                                                                       the end of a relationship, but it also signals the
yourself a priority.
                                                                       beginning of something new. At Opal Wealth
When you do these things, it’s more than                               Advisors, we’re here to walk with you on this path
possible to set things right and be happy again,                       and help you do more than just financially recover—
emotionally and financially. Opal Wealth                               we want to set you up to thrive. Are you ready to
Advisors is here to help you make sense of your                        lean into your next chapter?

1
  https://www.legalzoom.com/knowledge/divorce/topic/equitable-distribution-community-property
2
  https://www.legalzoom.com/articles/are-premarital-assets-protected-in-divorce
3
  https://www.magnifymoney.com/blog/news/happens-debt-divorce642808799/
4
  https://www.ssa.gov/planners/retire/divspouse.html
5
  https://www.nolo.com/legal-encyclopedia/establishing-calculating-child-support-faq.html
6
  https://www.nolo.com/legal-encyclopedia/alimony-what-you-need-know-30081.html
7
  https://www.marketwatch.com/story/new-tax-law-eliminates-alimony-deductions-but-not-for-everybody-2018-01-23

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