Helping clients prepare for a gray divorce

Dear Gabby,

My clients just informed me that they are getting divorced. They are in their 60s and concerned about how this will affect their financial goals. They want to continue to work with me when the divorce is over. What can I do to help them through the process?

Ken, New York

Dear Ken,

Divorce is difficult to navigate at any age, but the financial impact can be far greater if the separation involves couples over age 50, commonly referred to as "gray divorce." Uncoupling at this age typically involves greater assets, complicated tax and estate planning issues, and an uncertain financial future for both parties and their family.

Working with clients through the divorce process requires understanding the issues they’re facing at their stage of life. To be helpful, you must focus on the financial needs of the parties while providing ethical advice and services that treat them both fairly. During this challenging process, which can last years, you can be there for them as a trusted advisor to help usher them into their new, financially secure post-divorce life through thoughtful and comprehensive financial planning.

DIVORCE FINANCIAL PLANNING CHECKLIST

The first step in helping your clients through their divorce is to aid them with organizing their legal and financial information and documents. Recommend that they build a binder or subscribe to an online digital file management service such as Dropbox to gather, manage, update, and share the following documents with their attorneys quickly and easily:

• marriage certificate
• prenuptial/postnuptial agreements
• federal and state tax returns for at least the last three years
• W-2s, 1099s, and recent pay stubs
• Social Security benefit statements (www.ssa.gov)
• real estate documents, such as mortgage, taxes, deeds, and appraisals, including those for rental property
• business, partnership, and corporate documents: tax returns, payroll information, and registrations, including LLCs, C corps, S corps, and partnership agreements
• intellectual property: patent and trademark registrations and royalties
• estate planning documents: trusts, wills including codicils, powers of attorney, advance health-care directives;
• financial statements (e.g., bank, brokerage, investment, digital assets, IRA, 401(k) and Roth accounts, health savings accounts, 529s, private equity
• credit cards: statements and annual summaries
• life, health, and long-term-care insurance policies
• insurance: homeowners, auto, personal liability insurance policies
• consumer loans: automobile, boat, student, and personal (family) loans
• credit reports from all three credit bureaus (Equifax, Experian, and TransUnion)
• annual personal online expenses: Amazon, Uber, Venmo, Zelle, PayPal, DoorDash, Instacart, etc.

Couples facing divorce are under a great deal of strain and need support. Gray divorce can significantly reduce a family’s wealth and risk the financial future of the next generation. With less time to rebuild their nest egg, weather volatile markets, or work longer, older couples are at financial risk and need expert advice. If you can see the global condition of your clients’ lives and serve them with integrity, you will be well positioned to continue to work with them individually post-divorce. If you’re not a divorce financial expert, hire a certified divorce financial analyst or CPA with an expertise in divorce.

Dear Gabby,

My client is a stay-at-home mom and has not worked since her kids were born. She and her ex-wife were married for 14 years. While her ex-wife contributed to Social Security for years, my client has not, and she’s now concerned about being able to retire. Is my client entitled to collect a benefit from Social Security?

Sara, North Carolina

Dear Sara,

Yes. Your client is entitled to receive either 100 percent of her Social Security benefit based on her record or 50 percent of her ex-wife’s Social Security benefit, whichever is higher, not both, if:

• her ex-wife is eligible to receive Social Security benefits
• the marriage lasted 10 years or longer
• they have been divorced for at least two continuous years
• your client is unmarried
• your client is age 62 or older
• your client’s benefit is less than her ex-wife’s

Your client can apply online at www.ssa.gov/apply. Among other documents, she will need her marriage certificate and final divorce decree to apply. Keep in mind that your client’s ex-wife will not receive a reduced benefit if your client files a claim based on her record – she will still get her full amount. Win-win!

Gabrielle Clemens is an expert on divorce financial planning and author of Marriage Is about Love, Divorce Is about Money.