As I write this post, Jeff Bezos’ (Founder and CEO of Amazon) divorce is front and center across most new outlets. While the average American divorce does not need to worry about splitting anywhere close to the $150 billion in assets such as Bezos, the same principles that I will outline below, could also be applied to the über-rich divorces - just a bit more complex.
During your married years, you both acquired assets (think real estate, retirement accounts, savings, etc.) and liabilities (mortgage, loans, etc.); they will now be divided during the divorce process. Hence, it should be a priority to list and determine current values of any marital assets, liabilities and current income via a financial affidavit.
Oftentimes, the most valuable assets that must be separated are the home, pensions and retirement accounts. In regard to the marital home, while there are many possible outcomes, the more common ones include selling the house right away, for one spouse to buy out the other party via a refinance or to keep holding it jointly until a predetermined life event occurs (e.g. children reach certain age or remarriage).
If you and/or your spouse is/are pension eligible (defined benefit plan), these too may need to be split. A good lawyer and Certified Divorce Financial Analyst (CDFA) professional can help ensure that your future financial needs are met, and your interests are represented.
You may have heard of a Qualified Domestic Relations Order (QDRO) which is a court order to the retirement plan administrator (think 401k) and contains the details on how the plan’s benefits are to be divided.
Why is it so important to establish a budget for each spouse? Even the most thorough expense tracker during the marriage will come to the realization that it is a whole new ball game after the divorce and expenses could be higher due to additional housing needs and different income.
A CDFA can be a valuable resource in this situation to assist with budget and cash-flow needs and can prepare multiple scenarios tailored around your financial goals and how each option may impact your financial future.
The bottom line is that there is no “one size fits all” solution and each case will have its nuances and challenges.
It is therefore vital to have a game plan in place. Your team of specialists will help outline your objectives and needs. They can help you develop realistic financial expectations to hopefully leave the past in the rear view mirror and allow you to begin living your best life possible.