For most families, separation and/or divorce requires a hard look at finances and goals during a time when many things are uncertain. At minimum, one partner will eventually move from the shared residence and incurring new housing and utility expenses that have not been part of the family budget in the past. Research tells us that, before the separation or divorce, many families have already stretched their resources to acquire housing that is well-maintained and in a neighborhood where there are good schools for their children. For families who, in the past, have already stretched the family budget to purchase a desired residence, it can be challenging to develop a plan that will accommodate additional new expenses.
In addition, money and financial decisions are not always easy to discuss. Most partners come into a relationship with different philosophies about money and debt that developed from experience in their own families; personal history; and biases and philosophies about money. Separation and divorce often highlights these differences as each partner begins to develop a sense of independence and realize that their goals for the results of this process can, and will likely be, different.
It is clear that an individual’s financial plan, both month-to-month and long-term should be practical, sound and smart. Monthly budgets and financial plans that cause one or both parties to have on-going deficits in spending, where expenses exceed income; that result in new debt or the failure to pay down old debt; or that require the unplanned use of assets may lead to financial hardship and eventually difficult feelings about the divorce and their former partner or spouse.
For those with high dollar net worth, planning is equally important. Choices and decisions need to consider ways to minimize tax consequences and strategies to maximize the growth and earnings from the property received in the division of property. When a small business is part of the division of property, it is important to explore innovative options that offer a fair division of property for both parties without handicapping the future of business. This requires creative problem solving accompanied by the ability to consider potential outcomes which can be effectively communicated to clients.
We frequently use financial planning tools to help clients consider their decisions in the context of the several years following the separation and divorce. We coordinate our efforts with tax advisers and financial planners when we are trying to help the client work through complex financial issues and decisions. We also bring other professionals into mediation, when necessary, to ensure that both parties have the information needed and the opportunity to develop creative solutions for the situation.
We believe the developing goals and a financial plan for the future is essential to ensure that our clients make sound decisions that fit within their plan so that they can have a healthy future and, when there are children, maintain a good co-parenting relationship.
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