Divorced, Not Derailed: Your Roadmap to Economic Freedom™

Being prepared

Divorce is widely recognized as one of life’s most stressful events. However, like any significant experience, it can be managed more smoothly and successfully with proper preparation. While it might seem unnecessary to consult with a financial advisor until after you’ve dealt with the legal aspects of divorce or gained financial independence, pre-divorce financial support can be crucial in helping you achieve your desired financial goals and outcomes — while also reducing your workload, worry, and potential risks.

Having a comprehensive strategy

At any stage in the divorce process, Mercer Advisors can collaborate with you to create your personal financial strategy and put it into action. We offer a specific approach and process that involves a unified team of specialists in these core solutions to help ensure that every aspect of your financial life is attended to:

• Financial planning
• Investment management
• Tax planning and preparation
• Estate planning
• Insurance

Getting support from experienced advocates

With our approach, you get a hand-picked wealth advisor who is in a distinct position to function as the “field captain” for your other professional contacts. This may include:

• Collaborating closely with an attorney so that your financial interests are represented during asset division negotiations
• Coordinating with a tax advisor to effectively manage the transition from filing jointly as a married couple to filing a single return
• Meeting with an insurance representative to discuss the continuation or adaptation of appropriate coverage
• Working with a business valuation consultant to protect your interests when a family business is being sold or divided

Having an advisor helm multiple areas involved in the process can relieve your stress, allowing you to focus on matters that no one else can manage such as relationships with children or other family members, self-care, and similar concerns.

Empowering yourself

 As you go through this guide, you’ll get a broader view of the complex financial considerations needed for dealing with divorce. You don’t have to make decisions on your own. Your power lies in choosing to get help, so you won’t get derailed from achieving your goals.

The roadmap to achieving Economic Freedom through divorce begins before the legal proceedings. Preparation is key in laying the groundwork for reaching desired outcomes.

Assembling your team of advocates

• Attorney: Your attorney’s focus is on getting you legally divorced. Rely on them for advice that will help protect you and any minor children, such as on appropriate laws, legal terms, documents, and filings. Keep in mind that their expertise is not in giving financial advice. Mercer Advisors can partner with them to help you achieve financial outcomes that are right for you.
• Financial advisor: An advisor can be your financial champion and help both you and your attorney understand the short- and long-term financial impacts of potential legal settlements. In addition to getting an objective point of view on your financial matters, you’ll receive guidance on creating a financial plan that includes:
  • Organizing your part of the marital finances to get a clear view of your current standing
  • Assessing your short-term income needs
  • Modeling potential financial outcomes after the divorce with variables that affect income such as inflation and investment return rate
  • Outlining tax implications of proposed financial decisions
  • Identifying long-term goals such as retirement, children’s education, and legacy wishes
  • Creating a plan that can help position you for financial security in both the short- and long-term
  • Collaborating with other professionals who specialize in taxes, estate planning, insurance, and more, to help ensure your full financial picture is integrated

Getting familiar with your full marital financial picture

Understanding how your assets are allocated and the laws of your state are crucial for determining asset division post-divorce.

• Gathering information on your shared assets as well as shared liabilities
• Determining which accounts are in your spouse’s name only and not yours
• Considering your state’s laws regarding divorce and, if applicable, a pre-nuptial agreement

Understanding costs involved in the divorce process

Beyond the basic financial outcomes of divorce, such as transitioning from a two-income to a one-income household and negotiating asset division, there may be unexpected financial challenges in the divorce process. Researching your options can help you prepare with adequate financial resources.

• Attorney and legal fees
• Advisory fees
• Tax implications – both in the near term and well into the future

Staying on track with a plan and adjusting when needed will help you stay in control of your financial future. It’s important to make educated decisions and have a smart strategy.

Anticipating financial needs for maintaining your lifestyle

• Expenses: Determining which expenses are necessary or non-negotiable, separate from what’s nice to have.
• Child support and/or alimony: Your attorney is important for protecting your legal rights in this area especially if, for example, a breadwinning spouse is trying to take advantage. Your financial advisor can provide calculations to help you advocate for the amount you need to support your family’s lifestyle.

Considering the tax implications of decisions

Every asset should be carefully analyzed for current and future tax ramifications. These types of financial details could easily get lost in the multitude of actions being taken to arrive at a settlement. At a glance, asset division may seem equitable. However, when you consider how the assets could be impacted by federal and state taxes, as well as going from joint to single tax filings, the split may shift in one person’s favor.

For instance, a pre-tax retirement account will not have the same value when considering post-tax distributions. In addition, the post-tax income could have a high marginal tax rate that affects future value. Similarly, we would look at current and future valuations of assets such as real estate or business equity. Our analysis and advice could potentially save a client hundreds of thousands of economic value in a split. At the same time, it could save money on an attorney’s fees by providing them with the numbers they need for negotiation.

Setting aside emotions to avoid making unfavorable decisions

You may have emotional or sentimental ties to particular assets. For instance, you may feel you need to stay in the marital home because the kids grew up there. Anticipate that you could have these types of attachments and identify them without making any quick decisions. A financial advisor can help you analyze what items you should or shouldn’t keep for your long-term financial well-being.

Lean on your team of professionals to function as thought and strategy partners for considering practical “what if” scenarios through financial modeling, investment programs, tax strategies, and more. Making informed decisions with objective views can curtail potential long-term financial damage from emotion-based choices.

Once you’ve completed the legal proceedings, there may be more adjustments or decisions to make. Don’t overlook important considerations for maintaining your financial well-being.

Preparing for short-term or day-to-day income

• Will any alimony or child support you’re receiving be enough to support your lifestyle?
• Will you need to go back to work?
• If you retained the marital home, have you anticipated costs of upkeep?

This is a good time to consult with your financial advisor. As part of the financial planning process, we can create a document that illustrates detailed cash flow expectations to help you feel confident you can be financially successful.

Modifying your account information to maintain privacy

• Beneficiary designations: The beneficiaries that are named on designation forms such as retirement accounts, life insurance policies, and pay-on-death accounts will receive the assets. Therefore, if you keep your former spouse or their family members named on these forms, they may be entitled to receive these assets, even after a finalized divorce.
• Digital assets: Remember to update digital accounts you may share with your former spouse, or that they could access, such as user IDs and passwords if you want to have privacy. You might also need to update legacy contacts added to accounts or make your wishes known in your will or living trust for who can manage your accounts after you pass. If you don’t want your former spouse to view your social media accounts, consider adjusting your privacy settings as well.

Planning for long-term health and wealth

• Health insurance: If you were on your spouse’s plan and need to find your own health care plan for covering expenses, you’ll likely either need to secure it through work or the marketplace.

• Estate planning: If you made an estate plan as a couple, be sure to update it. Following a divorce it’s important for each person to have their own plan that includes essential documents, such as powers of attorney. If you didn’t have an estate plan before, this is a good time to create one.
• Long-term care insurance: If you don’t have a long-term care policy for yourself, consider whether you might need one. It can provide benefits for expenses associated with care if you can no longer independently perform routine activities such as getting out of bed, dressing, bathing, eating, and using the restroom. This care typically falls outside the parameters of standard health insurance coverage.

While all of this information provides general guidance, it doesn’t capture every financial matter you need to consider for going the divorce process. However, it does demonstrate how a financial advisor who specializes in helping guide you through decisions can advocate for your financial future and relieve the burden of stress related to your divorce. It’s important to keep from getting derailed on your road to Economic Freedom.

When you choose to collaborate with us at Mercer Advisors, you get financial advice on your divorce proceedings as well as reassurance that your long-term financial health will be looked after from multiple angles.

• A unified in-house team: During divorce it’s important that all areas of your financial life are connected together and coordinated by a team of specialists. Having a unified approach is key to long-term success.
• A hand-picked advisor: An advisor can help give you the advantage for obtaining the outcome you desire. They are experienced advocates who are familiar with all the nuances of financial challenges before, during, and after divorce.
• An institutional-grade portfolio: A team of investing professionals can create a diversified and cost-effective strategy for helping you build wealth and protecting your financial independence and security for years to come. Especially when divorce can potentially cut your assets in half.
• An independent, national fiduciary: As an independent, SEC-registered investment advisor (RIA), we are obligated to always operate in your best interest and can be an objective third-party in your divorce. Because we are fee-based not commission-based, we are not focused on selling you services or products.