How to Make Ends Meet During and After a Divorce; How a Financial Neutral Professional Can Help

One of the first questions that either or both people going through a divorce ask is:  “How will I make ends meet, now that we will need to have separate residences?”  This is where a Financial Neutral Professional can provide immediate help.  In addition to assisting the parties in reaching a mutually agreed-upon settlement of marital property, as well as alimony and/or child support if either one applies, it is essential to determine how each party can survive the financial needs of living apart.  This can be helped by preparing a detailed budget/cash flow analysis that will apply immediately during the initial separation, answering questions such as “how much temporary alimony might I need”, “who pays what for the children?” and “who lives where and for how long”?

In deciding how long one party can afford to stay in the marital home, if that is desired, there are both near-term and longer-term choices to make.  For example, one near–term option for each party’s living situation may be to agree on temporary spousal support of a finite amount and duration until an agreed-upon time frame (e.g., within 6 months) that one or both parties find a permanent alternative residence.  

Longer-term questions of how to make ends meet involve a more comprehensive but still impartial financial analysis, especially to help resolve what to do about the marital home?  Choices to be analyzed might include (a) Put marital home on the market, sell and split the net proceeds; (b) One party buys out the other party and stays; and (c) One party stays but with part of divorce agreement stating that the home shall be sold at a future date certain, keeping both names on the deed to maximize the capital gains tax upon future sale.

Having to choose among such options can benefit greatly from the assistance of a Financial Neutral Professional who is a key part of the Collaborative Divorce Team.  After obtaining all relevant financial documentation, the Financial Neutral Professional can advise the couple as to how best to achieve each of their financial goals.  This includes helping them to understand their overall finances, the tax impacts of their choices, and their longer-term financial situations, especially how two key measures of financial well-being might look 1, 3 and 5 years into the future:  (a) their after-tax incomes less expenses and (b) their net worths (i.e., assets minus liabilities). Doing so should help both parties achieve the confidence needed to move forward with their post-divorce, independent lives.  

By Joseph I. Rosenberg, MBA, MA, CFA, CDFA

2017-02-13T17:00:11+00:00 February 13th, 2017|