We all hear that in bad economies, divorce filings traditionally decrease.   There are many reasons for this, many of which are a subject for another day. Yet a prevalent concern that many of my potential clients express is the fear of the next step financially. Starting over is difficult and indeed overwhelming in the most amicable divorce where the parties both have substantial income. When the money is tight, is adds an additional layer of stress.  Some people mistakenly believe that they simply cannot afford to divorce their spouse.

One of my first questions to a new client is to find out if they have an accountant and financial planner of their own that they trust. If they do not, having them find one is near the top of my “to do” list for that client.   This is because, in most cases, there will be an equitable distribution of assets that have to be invested, whether it be a new home, a new IRA, or a new investment account. My client has to plan for his or her future early on and this may mean very different planning that occurred during the marriage. Even when there is a distribution of debt, there must be consideration of how to best pay that debT. Is a home equity loan appropriate? Should the debt be paid from assets that may not have as much capital gains given the current economic state? What are the tax consequences? These are all issues that need to be discussed with the client and financial specialists.

 

Another concern for many clients is purchasing a new home. For some, it may be the first time they are purchasing a home. Clients are concerned about obtaining a mortgage in these difficult economic times. It seems as if forces are colliding against some clients. For instance, we have all heard that banks are only lending to people with excellent credit scores. Yet during a divorce, many people experience financial stress and their credit rating suffers, often because of the other spouse. So what to do? First, many people do not realize that there are banks that are lending and there are mortgage brokers who cater to people who find themselves in a divorce. Also, rates are down and there are incentives for first time homebuyers. Clients already have most of their financial information ready as a result of the divorce. There are people and banks out there. It is just a bit tougher to find them in these times.

 

At the end of the day, my client has to make the decision that is best for his or her situation.  But I have to make sure that the client has to tools to make the right decision. 

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