Dealing with clients during a marriage break-up can be emotional and challenging, especially if you have a longstanding relationship with both spouses.
But as the couple’s financial advisor, you have to remain objective, unbiased and impartial when giving advice to them, says Heather Holjevac, certified divorce financial analyst and senior wealth advisor with TriDelta Financial in Oakville, Ont.
Consequently, it is always advisable to meet with both spouses when discussing their finances — so you are not perceived as favoring one over the other.
While you may know both spouses, dealing with a break-up can be complicated. If the couple has children, the kids’ welfare should be the first consideration of the parents and of the courts. Note that child support is not negotiable.
While some separations can be cordial, Holjevac says, emotions can run high. If a separation is emotionally charged, it might be prudent for you to refer one or both spouses to other advisors to allow them to work through their financial affairs independently so that you are not caught in the middle.
If you do continue to work with the couple, you must take an arm’s-length stance, and stick to the financial aspects of the break-up, Holjevac says. You cannot be perceived to be giving legal advice. In many instances, you might still end up dealing with both spouses, even though they are separated. Then, you will be meeting them as individuals.
Here are some considerations for helping your clients deal with their finances during a break-up:
> List all assets
Take stock of all assets that have been pooled during marriage, Holjevac says. List separately those assets that were brought into the marriage — that is, assets that were owned by the spouses individually before marriage. In many cases, assets brought into the marriage are not split between spouses.
> Compile expenses and debt
List all joint and individual debts and expenses associated with the couple during marriage, such as mortgages and lines of credit.
> Determine how the assets will be split
The division of assets can become a contentious issue. “Sometimes it doesn’t make sense to split everything 50/50,” Holjevac says.
Sometimes, the spouses will have to negotiate to determine a fair division of certain assets or to determine tradeoffs of equivalent value. For example, one spouse might be willing to give up his or her retirement assets in lieu of their share of the family home. In some cases, spouses might become emotionally attached to certain assets, such as family heirlooms.
When there can be no agreement on the distribution of certain items, it might become necessary to sell them and then split the proceeds.
> Create new budgets and plans
Once you have determined the new income and expenses of the spouses, you should create a new budget for them. You have to take into consideration that the separated couple will live in their own homes and have separate expenses.
Once the couple has been separated, you should now create new financial plans for them, given their new circumstances.
> Other loose ends
You can also assist clients in closing joint bank accounts, updating insurance policies and making changes to other documents that were executed as a couple.
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