Ask An Expert

Why do I need to meet with a financial advisor just because I am getting (or just got) divorced?

Joann North

Answered By

Steve Hartel, MBA, AIF®

Wealth Advisor / Financial Planner at Maia Wealth

steve@maiawealth.com

Question:

Why do I need to meet with a financial advisor just because I am getting (or just got) divorced?

Answer:

Many people are under the misguided impression that the judge in their divorce case is a financial expert and that when he/she divvies up the assets, the result is fair. Your combined assets were worth $1 Million, and you each walked away with assets worth $500K, so it’s all good, right?

A good financial plan pieces together many different assets that each perform a specific function, or behave a certain way, or are taxed in a particular fashion, or carry a certain amount of risk. Some of the assets are designed to balance out some of the other assets. The advisor chose Asset A because it tends to go in the opposite direction of Asset B, and together, they provide a smoother ride. Asset C was used inside a particular account type because it provided tax benefits for the next 20 years. Asset D was a high-risk play, and Asset E provides a guaranteed rate of return with no risk. He has a larger life insurance policy that is the kind of policy that could be used for long-term care later in life, while her life insurance policy is smaller and doesn’t have that feature because she already has long-term care insurance.

When a judge draws a line through your financial plan so that your part and his part are worth whatever dollar figure the judge deems “fair,” you do not just end up with two smaller financial plans. Usually, you end up with two BROKEN financial plans!

Here’s my advice. If you are considering divorce, meet with a financial advisor now so that you understand every piece of the current plan, as well as what sort of proposed divisions would be less broken. If your divorce has already happened, that doesn’t mean you are forever stuck with a broken plan. It can be fixed, but it may take some time. The sooner you meet with an advisor, the sooner that advisor can craft a plan of action to get you back on track and repair any damage done by the judge.

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