Lately, a number of potential clients have come in to explore getting a divorce. Some were employed outside the home; some not. Some had high income wage-earning spouses. Some had well-paying job themselves. The common thread was that they had not considered what life-style changes getting a divorce entails.
They had other factors in common.
- They had little or no savings, outside of retirement. Some did not know if they had savings. In other words, they believed that they consumed most of what the family members earned.
- They lived in larger, nice homes that cost them a significant amount of the family income to maintain.
- Those who did not work outside the home, expected their spouse to continue to provide support for them and the children.
- The wage earner spouses who had stay-at-home spouses had not considered how the stay-at-home spouse would support herself and the children.
- They had not considered that they would be losing benefits, principally health insurance, if their spouse's employer was providing health insurance. They had not considered the cost of purchasing health insurance through COBRA or under the ACA.
- A number of them were considering divorce because either their spouse wanted to divorce them or their spouse was having an affair.
- Many have credit card debt.
Many of these potential clients were focusing on the emotions of the divorce. While dealing with the emotions effectively is important, we can't lose sight of the financial considerations. Since these folks consumed most of what their family earned, how were they going to afford to live in two households (which will be more expensive) and pay for the professional help that a divorce requires? All these folks needed assistance from not just lawyers, but also financial professionals who could help them prepare for such challenges as:
- Sharing financial information and determining the financial health of the family. This may include the party who has controlled the family finances sharing the information with the other.
- Job changes. The unemployed spouses needs to find a source of income with benefits. This might include meeting with a vocational expert who could help them explore job opportunities, retraining and preparing to return to the workplace.
- Child care and managing the household. The working spouses each needed to consider balancing professional life with personal demands of helping to provide more care for the children and their home. Once the spouses are separated, each would be caring for their respective home.
- Budgeting. They need to look at their potential costs in the future. A financial advisor (sometimes available through your credit union for free) can help with this. Your lawyer can refer you to a CPA who can help with this.
- Paying the professionals. When there are no savings, a portion of income needs to be set aside for this. Some couples receive help from family and friends, particularly if there is abuse and one spouse cannot defer leaving. Some couples will go into debt to finance the divorce and hope to repay the debt from the proceeds of selling the house or taking money from the retirement account. Your lawyer and financial professional can help with realistic planning.
- Selling the family home and finding new housing for the parents and the children. The couple needs to select a realtor, agree on repairs or catching up on deferred maintenance that the home needs to make it "saleable." The realtor will advise the couple of what has to be done to increase the chances of selling the house at a good price. Money needs to be found to pay for the repairs. Both parties need to be committed to selling the home as quickly as possible.
If one party can afford to keep the family home, the home will have to be appraised. The spouse who buys the other out needs to secure refinancing of the marital home and determine how to pay the spouse who moves, their share of the equity.
The moving spouse needs to have money to rent or buy another home.
There are many financial considerations that the parties need to work through to prepare to complete a divorce. Sometimes this means delaying the completion of the divorce until
- debts have been paid off or paid down
- one spouse has completed his/her education or retraining and has found employment that will help support that spouse
- repairs on the home have been completed and paid
- each spouse has adjusted to a scaled down life style
- the couple has saved to finance this major life transition.
None of this will be easy. However, both spouses participated in this marriage and both spouses must be willing to take the necessary steps to complete this divorce so that each partner can be alright after this divorce.