The Wealth Management Do's’ and Don’ts of Divorce

Divorce, even if it is the most amicable divorce in the world, is still a trying time fraught with new uncharted territory and a major adjustment for all involved. It’s stressful for all involved, and when stress is high, details can be forgotten or left out altogether.
To ensure that nothing is left out when your clients are facing a divorce, be sure to use the following ‘dos’ and ‘don’ts’ as a guideline to set your client upon the financial straight path before their divorce is even final.
Do Gather Financial Documents
All clients facing a divorce need to make certain that they have an accurate, comprehensive picture of their entire financial outlook. Make sure that clients are mindful in gathering tax returns, income statements (from all streams), any bank or investment account statements (all accounts—both individual and joint), and insurance.
Don’t Be Too Proud to Pay or Collect Alimony
While no one necessarily wants to pay alimony to an ex, this institution offers financial assistance to spouses that were financially supported during the marriage, which could be especially crucial if one partner left the workforce to put the focus on the family for an extended period.
 
Depending on state laws, spousal support can be distributed in several ways—a lump sum, regular payments, or in some other arrangement— for example a former spouse cutting a check to the loan company to pay a client’s mortgage.
If a client has to pay spousal support, after the divorce is final, make sure to explain to them that alimony is tax deductible as long as they file a separate tax return using a 1040 form.
It’s also important to stress to clients that they shouldn’t be too proud to collect spousal support as well. It’s becoming more and more common to see women making more than their spouse or even to see men assuming the role of stay-at-home parent. If this is the case, the ex-husband could be eligible for spousal support. In fact, a recent study saw a 56% increase in mothers paying child support and a 47% increase in women paying alimony as well.
Do Change Your Client’s Beneficiaries
This is a perfect time to review estate planning documents, retirement planning, insurance policies, stock options, investment accounts, and IRAs.
Go through all documents as soon as legally possible and change beneficiaries, trustees, etc. on crucial documents. If you need assistance, your client’s attorney will know when you can legally make such changes to your client’s documents.
Don’t Make Big Financial Decisions Right Away.
Divorce should be treated as a death. It is so life-altering that it is ok to be emotional. Clients need to grieve—that is natural. Stress to clients that they should treat this big event in their lives with a certain amount of gravity—advise them to hold off on making major financial decisions for six to twelve months following their divorce. They should probably work on adjusting to the changes happening in their life before they switch jobs or move to a new city for example.