Marital lockdown: Divorce, finances and COVID-19
Proper financial planning is vital during divorce
Families are living with tension and fear. Unfortunately, these tensions can heighten marital discord. How do your clients deal with divorce during COVID-19? This is where you come in.
Proper financial planning is vital. What obligations will exist during and after the divorce? Will alimony be paid or received? Running lifestyle and needs analyses for your client (or potential client) and their attorney is extremely beneficial.
Factor in the assets they are receiving and potential rates of return, as well as the spousal support (alimony) and child support they would need (or could afford to pay) based upon life expectancy. This practice provides great guidance and certainty for the future and allows your client to know what they can and cannot settle for.
Doing this exercise before or during the divorce case helps avoid potentially irreversible mistakes, while simultaneously building goodwill between you and the team (which may also ensure that the potential client ultimately retains you). Similarly, explore whether they should keep or sell their home: Consider taxes, repairs and the like, balanced against the high cost of renting. Address their portfolio, including tax consequences and now depreciated holdings. The same goes for business interests. A sound financial plan will help mitigate the “money stress” inherent in divorce.
Explore (or refer out) tax considerations, such as home office use or loss carryforwards, as well as government assistance plans such as the Paycheck Protection Program. Government assistance plans may also impact family law issues, such as whether the client can afford to continue paying alimony or child support, or whether the recipient has grounds to seek enforcement.
And of course, your team should include a qualified family law attorney who fits your client’s needs. Consider their experience and credentials. Are they board certified? Are they members of any professional organizations? Perhaps most importantly, are they accessible and responsive? For instance, at my law firm, a person always answers calls, emails are flowing and we meet with clients virtually via video services and telephone. Emotions are rampant, and accessibility is key.
Ensure clients can communicate with privacy (whether they’re at home or in a public parking lot). Also advise them to safeguard email and document security: Change passwords and confirm that such items do not appear on other cloud-based devices in the home, such as a family computer or even a child’s iPad. This includes photo-sharing applications and messaging services!
Give your client homework. They should copy important records (phone-scanning applications abound). Have them download account statements while they still have access, and inventory items of significant value, such as jewelry, artwork and collectibles. Include photos; cell phones can date-stamp.
Think about related issues. Prenuptial (before marriage) and postnuptial (during marriage) agreements govern the rights and responsibilities in the event of divorce. They can make divorce less contentious and financially draining. Likewise, not every case goes to court. Your client can use mediation (in person or online) to settle their entire case or just temporary issues like support, financial disclosures, children and living arrangements.
Your current and potential clients will appreciate the care and knowledge you provide during this process, while learning the full extent of the services you offer. The family lawyer, wealth manager and client are a critical team and can help provide a semblance of brightness during not-so-bright times.
[More: Client divorce splits advisers’ fiduciary duty of loyalty]
Brian Karpf a lawyer with Young Berman Karpf & Gonzalez in Fort Lauderdale, Fla.
Learn more about reprints and licensing for this article.
