Marital lockdown: Divorce, finances and COVID-19

Marital lockdown: Divorce, finances and COVID-19
Proper financial planning is vital during divorce
MAY 27, 2020

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.

Brian Karpf a lawyer with Young Berman Karpf & Gonzalez in Fort Lauderdale, Fla.

Latest News

The hidden currency risk in global investing: what advisors need to know
The hidden currency risk in global investing: what advisors need to know

For those seeking international exposure amid economic uncertainty, understanding the impact of the US dollar's strength over other currencies is more important than ever.

CFP Board warns of tax "tipping point" as TCJA expiration puts financial plans at risk
CFP Board warns of tax "tipping point" as TCJA expiration puts financial plans at risk

With nearly nine in 10 seeing danger to clients' retirement income and legacy plans, among others, CFP professionals are urging strategic planning pivots and tax perks for advice-seekers.

Fed Day focus fades as Trump keeps stock markets watching
Fed Day focus fades as Trump keeps stock markets watching

As policymakers convene for their latest two-day meeting, investors are shifting their attention from elevated interest rates to growth concerns and tariff worries.

IRS eases off on some audits with retrenchments giving way to AI
IRS eases off on some audits with retrenchments giving way to AI

While he hasn't laid out a clear plan, Treasury Secretary Scott Bessent has gone on record touting "the great AI revolution" in improving the agency's tax collections and customer service.

More than three-quarters of advisors to embrace fee models by 2026, Cerulli says
More than three-quarters of advisors to embrace fee models by 2026, Cerulli says

Momentum continues for fee-based compensation as BD advisors ditch commissions and alternative compensation schemes emerge to lure diverse clientele.

SPONSORED Beyond the all-in-one: Why specialization is key in wealth tech

In an industry of broad solutions, firms like intelliflo prove 'you just need tools that play well together'

SPONSORED Record growth: Interval funds emerge as key players in alternative investments

Blue Vault Alts Summit highlights the role of liquidity-focused funds in reshaping advisor strategies