Love and money: The challenges of separating the two when marriage breaks down

Divorce is rarely simple but when significant wealth is involved, things can become complicated and conflict can be bitter.  

Added into the mix for divorcing couples today is the economic environment which means separating partners may have challenging demands that increase the complexity of the split.

Sylvia Guinan, senior vice president – investment officer at The Guinan Financial Strategies Group of Wells Fargo Advisors, has shared with InvestmentNews her perspective on how financial professionals can guide clients through the process.

One of the most pressing issues comes from the housing market.

“High interest rates are making it more difficult for couples going through divorce to get into new homes equivalent to their existing lifestyles,” Guinan explains. “With rates being close to double, it is hard to maintain a similar price point for their housing, particularly when their net worth is being divided.”

Beyond real estate, hidden assets have also become a more common concern, Guinan notes.

“Due to their more complex nature, some spouses are choosing to hide net assets in their digital asset account. It is important to bring on experts to help find any assets that were being hidden in virtual wallets,” she says. “Bringing financial professionals such as forensic accountants to trace accounts and find hidden assets is one way to ensure all assets are accounted for.”

Guinan emphasizes that what was once difficult is now more feasible.

“Today, many large accounting firms have digital asset experts on their team,” she says. “It can be costly but a good return on investment if hidden assets are found. Even if new assets are not found, it is a good way to have confidence and move forward after a settlement.”

Some patterns are also emerging in when and why couples decide to split. Guinan highlighted the rising phenomenon of ‘gray divorce,’ which can spike at this time of year.  

“As kids go off to school, especially college, empty nesters who no longer have a connection, decide it is time to fly,” she says. “With empty nesters typically in their late 50s and early 60s, with the new life expectancy, they have much time left to rewrite their story with a fresh new beginning.”

And some rebalancing of wealth which means women often have higher incomes, has changed what was once a fairly common divorce narrative.

“With women bread earners now having similar salaries as their spouses, alimony is a wash and neither receives nor is obligated to pay it,” Guinan explains. “In the case of 50/50 child custody and similar income, often child support is waived as well. However, when there are big gaps in income both alimony and child support are still on the table. Increasingly, the women bread earner is becoming the spouse obligated to pay.”

Looking further upstream, Guinan believes that agreements made before or during marriage can set the tone.

“Prenups are a key tool to create clarity and bring expectations to the forefront,” she says. “It may be uncomfortable to discuss with your soon-to-be spouse but it sets the precedent for open communication about finances. Postnups are a good tool to use if there is uncertainty about the relationship between the married couple. It is often easier to negotiate a potential future separation than to negotiate the divorce settlement.”

For those already in the process, Guinan emphasized the importance of trusted professionals to restore confidence, along with the human role of advisors that extend beyond finances.

“Advisors can support clients by being good listeners and understanding clients’ fears and concerns. They create clarity by putting the client’s information into investment or wealth plans,” she says.