Part I in a conversation with Johnson Financial Group advisor Kelly Mould
Over the last 20 years, we’ve seen a steady decline in the divorce rate in the U.S.—with the exception of couples over 50 years old. For them, rates have doubled; for couples over 65, rates have tripled.
At any age, divorce causes emotional and financial upheaval. For older couples, the challenges may be even greater. In this discussion, Johnson Financial Group advisor Kelly Mould—who is also an attorney who specialized in family law while in private practice—outlines those challenges and how a financial advisor can help.
What’s your personal experience with the “gray divorce” topic?
Kelly: When I was in private practice, I handled quite a few “gray divorces". In general these splits were many years in the making and the decision to move forward was not made lightly. I tended to have more women than men in this age group file for divorce, and often these women had waited for a milestone—such as the last child finishing college—to actually file a petition for divorce.
Most of the cases I saw were middle and upper-income families. I saw fewer divorces among couples I’d characterize as especially high-net-worth. Some research suggests high-net-worth couples are more likely to stay together; financial security seems to act as an insulator to divorce to some extent, with the caveat being factors that threaten that security—such as gambling and other addictions which lead toward divorce even when assets are abundant. Whatever the reason, the emotional and financial toll was often significant.
How would you characterize the reasons for divorce, in your experience in private practice?
Kelly: Finances, addictions and infidelity are among the most common reasons; however, with gray divorces there are often different triggering factors.
One of these is “empty nest syndrome,” in which the departure of children creates a chasm too wide to bridge. Something similar can happen with the onset of retirement.
Perhaps the toughest reason I saw for individuals pursuing divorce was sickness or other disability. It’s harsh, but there are times when it’s simply too difficult for the spouse to be a full-time caregiver, and as a result, that spouse finds it impossible to carry on with the marriage.
What have you observed about the financial impact of gray divorce?
Kelly: The financial impacts can be incredibly complex. There are more likely to be retirement assets, investments, business interests, deferred income, stock, vacation property, a family home and more.
Often one partner is well aware of the assets and liabilities of a family while the other is less informed. Fortunately, I’ve generally found older couples to be more mature throughout the divorce process. That is, they don’t tend to engage in overt drama. Usually in gray divorce, both people recognize there is less time to recoup what will be lost in a divorce settlement so coming to an agreement without extensive fights and trial costs is in both parties’ best interest.
What’s your perspective now, as a financial advisor rather than an attorney in private practice?
Kelly: It can be extremely beneficial to enlist the services of a financial professional, particularly for a partner that was not as involved with the family finances. A financial professional can help explain what the documents are that make up a financial disclosure statement and can work with the individual, their attorney and accountant to analyze tax implications, explore potential asset and debt divisions, model income and assets, and create a financial plan for the post-divorce period.
There are Certified Divorce Financial Analysts, Certified Financial Planners and Financial Advisors available at most institutions with the experience to assist the client and their the legal team with this work. In general, it’s practical for each person in a divorcing couple to have his or her own dedicated financial professional to support the process.
At what point does the financial advisor become involved in the overall process?
Kelly: Typically, the person in the couple with whom we work most closely will approach us, sometimes well ahead of even a divorce attorney.
At this early stage, the client wants to review their financial plan, and they start to consider what their financial picture could look like post-divorce. It’s not as easy as just assuming the individual will get half of everything. In a divorce proceeding, couples can come to an agreement on debt and asset division and can present that proposal to the courts; the court needs to approve the agreement before it is final. If a couple can’t come to agreement, a couple may engage in mediation; if that doesn’t work, then a divorce trial ensues on the issue and the court determines the division of debts and assets.
Do you work closely with attorneys?
Kelly: Yes. It’s important particularly in these types of divorces to have a team that can make sure all bases are covered. Having your attorney, financial advisor and accountant on the same page can be critical. They also can be helpful in making sure nothing is missed such as post-divorce estate planning. In this do-it-yourself age, we sometimes hear that clients want to handle the divorce process themselves, without the expertise of an attorney. That is something I would not recommend. It is important that each party feels that their best interests are being looked after. Navigating the court system is not easy, and understanding your rights is important. The expertise of a trained attorney can help parties avoid the many pitfalls out there for the pro-se litigant. Hiring attorneys does not have to mean the situation becomes contentious - most, are very good at negotiating and helping parties come to a reasonable agreement. Having it done right so both parties feel they were fairly represented can make the process go more smoothly and cost efficiently. Financial Advisors often work with many of the local attorneys and can provide clients with names and numbers for divorce lawyers if the client is unfamiliar with attorneys who do this type of work.
In the next installment of this conversation with Kelly Mould, she’ll cover some of the specific financial challenges that couples divorcing later in life may face.