Marital divorce is by definition an adversarial process, but from a financial standpoint it works out better for both parties if it’s also a cooperative one, says Susan Miller.
Miller, an advisor with Wellesley, Mass.-based Aurora Financial Advisors, specializes in divorce planning. A financial planner who’s also a trained mediator, she specializes in handling financial disputes between divorcing couples and helps each partner come away with an equitable portion of the combined income and assets.
“In Massachusetts, when you get divorced, assets are just about cut in half, which significantly changes the risk profile,” Miller explains. A large chunk of the emotional toll of a divorce is related to finances, cutting expenses and changing lifestyles, especially when one of the partners is a stay-at-home spouse. “People have a tough time ratcheting down their lifestyle. It may require selling the family home and splitting proceeds and each partner then buying a smaller home,” Miller says.
In fact, one of the biggest issues is house vs. IRA. Says Miller: “I like to divide the IRA equally and then do something about getting both partners some equity in the house or non-retirement assets. That asset allocation is probably more important than anything.”
The most important way to expand and preserve the marital pie, Miller notes, is for the couple to work collaboratively and respectfully rather than in an adversarial manner. And she believes that financial advisors should be involved early on in their clients’ divorce processes. “I would recommend during mediation, when the big decisions are being made, that clients involve their financial advisor early in a divorce process. Clients shouldn’t let it get to the point where everything is just about divided and they’re calling you in to do a look-see.”
However, Miller cautions, this doesn’t hold in reverse. While planners should be involved in the mediation, mediators should stay at arms-length from the financial planning process. “If you’re not a financial planner,” she observes, “you can do more harm than good.”
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