Timely Financial Plan Softens Blow of Divorce
In 23 years of marriage, Suzanne Bryson cooked dinners, planted flowers, remodeled rooms, repaired sprinklers, attended school meetings and made sure the furnace got fixed.
She rarely thought about money. Her husband worked and took care of the finances. ``My job was to be a good corporate wife,″ says Ms. Bryson, a mother of two college-age children.
When the couple separated a little more than two years ago, Ms. Bryson faced more than the pain of a broken marriage. She was filled with fear and uncertainty over how she would get by.
``I didn’t know what investments we had. ... I didn’t know what the electric bill or gas bill was. ... I had no idea where the money was going to come from,″ she says.
Ms. Bryson, who is 47 years old and lives in a Denver suburb, got help. She sat down with a financial planner and figured out her long-term needs before agreeing to a settlement. Ms. Bryson, who now works in an art gallery, believes that planning helped her get a better deal.
Financial planners and accountants say they see many women like Ms. Bryson _ after it’s too late to be of real help. Many women ``come to me with their divorce settlement, and I feel like saying, `Why didn’t you come to me before this was finalized,‴ says Peggy Ruhlin, a financial planner in Columbus, Ohio.
Predivorce financial planning probably makes sense for just about anybody. While a good attorney will know about many of the tax and other financial aspects of a settlement, lawyers often suggest that clients sit down with a financial pro to map out their long-term needs.
``I’ll say to someone, `Do you really think this is going to make it 10 years from now?′ But I’m not going to sit down and plan their future with them,″ says Susan Reach Winters, a divorce lawyer in Short Hills, N.J.
Couples who have done such planning often take less time to reach a settlement, thereby cutting down on legal fees. ``Insecurity is probably the biggest roadblock to divorce,″ says Evan Bell, a CPA in New York City whose clients have included Ivana Trump and the designer Carolyne Roehm, former wife of takeover king Henry Kravis.
But predivorce financial advice can be especially important for homemakers confronting a midlife divorce without a coterie of attorneys, accountants, planners and brokers from years in the business world.
These women _ often people in their 40s, 50s and 60s who left the work force to raise families and relied on their husbands to be breadwinners _ frequently have a weak grasp of their financial situation and can end up with the short end of a settlement, divorce specialists say. Men who stay home and leave financial matters to their wives are similarly vulnerable.
Here are some tips that can help ``traditional″ wives _ and others who feel lost in a financial maze _ even the odds:
_ Think Twice About the House: Perhaps the most common mistake women make is insisting they get the house. Many husbands are only too happy to give it up while hanging onto some other valuable asset such as their pension plans.
``The house is familiar, it’s security,″ Ms. Ruhlin says. But even if the mortgage has been paid off, a house can generate thousands of dollars in property-tax bills and maintenance costs, and it generates zero income. And if you end up having to sell and move to a less-expensive home, you can be hit with a whopping capital-gains tax.
Many financial planners recommend spouses agree to sell the house as part of the settlement. They can share the proceeds and the tax liability. Folks age 55 and older will have additional tax issues and should consult their accountant or planner.
_ Beware of Second-Rate Investments: Suppose your estranged spouse offers you a 50 percent, or greater share, of the investment portfolio. Sounds fair, right?
Not necessarily. That’s because, to paraphrase George Orwell, some investments are more equal than others. ``Often, men use settlements to dump assets they don’t want,″ says Janet Briaud, a financial planner in Bryan, Texas.
Topping the list of investments to avoid: limited partnerships. They’re difficult to value accurately, hard to sell, and often saddled with tax liabilities. Many are nearly worthless.
Real estate is also tricky. While rental property can produce valuable income, it may be subject to stiff taxes in the event you need to sell.
Before accepting real estate as part of any settlement, get an outside appraisal and have your CPA or financial planner check out tax issues. Also, ask yourself if you’re prepared to be a landlord.
In general, the best investments are the most liquid: stocks, bonds and mutual funds. And, of course, ``cash is king,″ says Kaycee Krysty, a CPA and financial planner in Seattle.
Whatever the settlement, you’ll probably need to reshape your portfolio to make sure it’s properly diversified. Diahann Lassus, a CPA and financial planner in New Providence, N.J., says one client’s post-settlement portfolio consisted entirely of 1,000 shares of Bristol-Myers Squibb Co. stock.