How To Ensure Divorce Won’t Wipe You Out Financially
As More Older Couples Call It Quits, 3 Experts Share Tips for Protecting Yourself.
Along with all of its other unfortunate consequences, divorce can be so financially devastating for both spouses, sometimes neither ever recovers.
This poses a special problem for people aged 50 and older, one of the fastest-growing demographics of new divorcees. Today, one in four divorces is an older couple; that’s double the rate of 1980 numbers, according to studies published this summer.
“After 10, 20 or 30 years of marriage, divorce is complicated by the varied assets couples have acquired,” says wealth management advisor Haitham “Hutch” Ashoo, CEO of Pillar Wealth Management, (www.pillarwm.com). “If you own a business, stock options, commercial real estate, private company stock, or have a deferred compensation package, putting a value on them can be a nightmare.”
The best protection, of course, is having signed a prenuptial agreement before saying, “I do,” Ashoo and attorney John Hartog of Hartog & Baer Trust and Estate Law, (www.hartogbaer.com), agree.
“If you’ve already divorced and you’re thinking about remarrying, the smartest thing you can do is enter into a prenuptial contract that lays out how you’ll divide your property in the event of divorce,” Hartog says.
Such conversations can be difficult, so people avoid them, notes CPA Jim Kohles, chairman of RINA accountancy corporation, (www.rina.com). But dealing with tough issues while the relationship is healthy may actually help ensure you never get divorced.
“Talking about the hard things helps couples build trust,” he says. “Then, when they face a serious problem, they’re better equipped to resolve it.”
The three experts offer these tips for ensuring divorce does not financially destroy you, your spouse, or your family.
• This is not a do-it-yourself project. “My partner, Chris Snyder, and I invest much energy into getting to know top minds in the different fields because no two ultra-high net worth situations are exactly the same and one top-notch divorce attorney is not necessarily the best fit for all of our clients,” says wealth manager Ashoo. “We have witnessed much pain, anger, grief and downright nastiness through many of our clients’ marriage dissolutions.”
It is not too late to try to protect your family and wealth through a postnuptial agreement, he says. This contract is signed by both parties and accompanied by a full disclosure of all assets, income and debt of both parties, free from fraud and duress and entered into freely.
“Most importantly,” Ashoo says, “both parties must have been given ample opportunity to consider the contents and obtain legal advice before signing. And both parties need legal representation during the process.”
• If you’re older and entering a second or third marriage, consider estate planning. Couples marrying later in life often have obligations, particularly children, from prior relationships. Estate planning to take care of the children and the new spouse can prevent problems in the case of death or divorce, advises attorney Hartog.
“So often with ill-conceived estate plans, the probate becomes, in essence, a post-death divorce. All of the emotional elements that happen in a divorce get deferred to after your death,” he says. “The kids are fighting with the widow about who owns what and who’s entitled to how much. It’s even worse if both spouses die and leave adult children with no emotional connection.”
• Have the “what if” conversation now. What if one of us should suddenly die? What if something should happen to one of the children? What if one of us were to become disabled?
“Any of these situations can lead to divorce,” says CPA Kohles. “So while you’re talking about it, talk about ‘What if we were to divorce?’ ”
Divorce can be a major tax problem, he says. Support payments, property settlements, and retirement accounts can all affect your tax burden. When you discuss division of assets, consider the tax implications.
“Have the conversation before the bad thing happens, and set up trusts to take care of the parties you wish to take care. If you don’t want a post-nup, at least write down a general agreement that you both sign. That gives you a base from which to work if trouble occurs.
“A great way to have a disagreement,” he says, “is to not have an agreement.”
About Haitham “Hutch” Ashoo, John Hartog & Jim Kohles
Haitham “Hutch” Ashoo is the CEO of Pillar Wealth Management, LLC, in Walnut Creek, Calif., specializing in client-centered wealth management. John Hartog is a partner at Hartog & Baer Trust and Estate Law in Orinda, Calif. He is a certified specialist in estate planning, trust and probate law, and taxation law. Jim Kohles is chairman of the board of RINA accountancy corporation of Walnut Creek, Calif. He is a certified public accountant specializing in business consulting, succession and retirement planning, and insurance. All three advise ultra affluent families.