Researchers estimate that 41% of first marriages will end in divorce and 60% of second marriages will end up the same way - with both spouses on the outs.
While those numbers, somewhat surprisingly, are declining from divorce statistics, they still stand as pervasive, and can be a thorny problem for investment advisors helping clients get through a marital split.
While some advisors are more prepared than others to steer a client through the divorce minefields, there is a blueprint to follow for advisors looking for a safe path to a client's divorce proceedings.
More specifically, the blueprint entails getting answers to these five client divorce questions:
What are the tax implications of a divorce? - An often overlooked part of a divorce are the tax implications, says Scott Vance, an enrolled agent at Taxvanta. "Thus, so it's important that those questions are answered in the divorce," Vance says. He advises getting the following parental tax question covered. "Who is going to claim the child for exemptions, and the claim for deductions?" he adds. "One thing few divorce attorneys and individuals should think about is that alimony is deductible to the payer and includible as income to the payee. That might change the calculation for how those items are considered, especially for high-income folks."
Who pays for college? - College expenses are a common area of regret result from bad divorce settlements, says Joseph Orsolini, a certified financial planner with College Aid Planners, Inc. "Attorneys often leave the paying for college issue out of a divorce agreement or to be decided at a later date," Orsolini notes. "That really means the issue is litigated at a later date." Reconciling this after the fact unusually ends up costing more money than if taken up as part of the divorce settlement, he adds. "I've seen parents spend $10,000 arguing over a $2,000 tuition bill," he says. "It's also unfair to the kids, by putting them in the middle of a money argument. The best strategy is having the cost issues ironed out before finalizing the divorce."