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What You Need to Know About Divorce and Money
2 | Opal Wealth Advisors
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.
What You Need to Know About Divorce and Money | 3
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
4 | Opal Wealth Advisors
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.
What You Need to Know About Divorce and Money | 5
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
6 | Opal Wealth Advisors
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
What You Need to Know About Divorce and Money | 7
8 | Opal Wealth Advisors
• 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
What You Need to Know About Divorce and Money | 9
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
10 | Opal Wealth Advisorsto 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
What You Need to Know About Divorce and Money | 11PREPARING 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
12 | Opal Wealth Advisorsfully 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 | 13an 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
14 | Opal Wealth AdvisorsWhat 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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