After the divorce: Thinking long term to keep finances afloat
Along the wall of Elizabeth Felt Wakeman’s office are boxes and boxes filled with paperwork.
The divorce case that filled all those boxes – plus another nine file cabinets’ worth – isn’t typical, said Wakeman, a family law attorney with Zukowski, Rogers, Flood & McArdle in Crystal Lake.
“There is nothing particularly typical in a divorce because there is such a wide range of the assets and liabilities that people have and also the range of emotions,” she said. “And the emotions really do drive the finances, unfortunately.”
The people who walk into her office – and into the offices of the other experts the Northwest Herald spoke with – often are unprepared for the stark financial picture that can be the result of one household becoming two.
And with the housing market limping along and the unemployment number still high, the situation has gotten only worse for a lot of couples.
For a lot of middle-class families, their largest asset was their home, said Michael Stetler, a family law attorney with Gitlin, Busche & Stetler in Woodstock. When home values plummeted, it made the balance sheet attorneys use to divide assets look pretty bleak.
“Sometimes it made cases easier and less contentious,” Stetler said. “Other times, people would fight harder for the little that was there.”
Some are finding they just can’t afford divorce, and so they’re staying together, at least temporarily, said Joe Genarella, a certified divorce financial analyst with Dorion-Gray Retirement Planning.
It’s a good solution if the couple still are on good speaking terms, he said, although he recommends they set out guidelines.
There are ways around the housing issue, although none of them are ideal, said Stetler, who has a background in accounting.
For one, the couple can still get divorced but put off selling the home until the market improves, letting one partner remain in the house.
The concern there, Stetler said, is that divorced couples typically have trouble owning property together. Plus, if the partner who retains possession refuses to pay or take care of the property, the only recourse is to go to court.
The couple also could decide to sell the house for less than what they owe, also called a short sale.
The third option is bankruptcy, which really simplifies the process, Stetler said, or the court could decide not to assign the debt to either party, which means they retain the option of filing for bankruptcy in the future.
While attorneys handle the divorce process and dividing up the assets, financial planners look at the long term, said Gregg Vann, a financial adviser with James T. Borello & Co. in East Dundee.
His initial advice for clients is to create a separate financial identity as quickly as possible, he said.
If they’re going to change their name, change their name everywhere, including on their Social Security card, their bank accounts and insurance policies. Changes need to be made to who the beneficiaries are on accounts, and they need to start checking their credit reports regularly to make sure nothing is missed.
“They have to not only literally but metaphorically divorce themselves from the previous relationship that they were in,” Vann said. “They have to start anew, which is a difficult situation.”
Then the person has to reevaluate his or her lifestyle, Genarella said. Certified divorce financial analysts bridge the gap between the immediate divorce and the long term, he said.
This can be emotionally draining for the person who previously left all the financial planning to the spouse, he said, but he added that it’s very important to take control and find out everything possible about the financial situation.
They both also need to reevaluate their retirement planning, something they’re probably not thinking about as they wade through all the changes that follow a divorce, he said.
“They simply don’t have it in their frontal cortex,” Vann said. “They’re thinking about, ‘How do I pay these bills?’ ”