How advisors can help clients navigate a divorce during the holidays

Not every family gathers for the holidays. Sometimes divorce gets in the way.

And during those times, financial advisors often need to get involved to help their clients make smart decisions.

“The holidays are emotionally charged for all of us, but especially for those going through a divorce. The magic of the holidays is wrapped up in memories, and when these memories and reality clash, that’s when things get especially difficult,” said Adrianna Stasiuk, partner at Aaron Wealth Advisors.

Some of the common mistakes Stasiuk has seen clients make include rushing through the divorce process and accepting worse financial terms simply to have things settled by the end of the year. She’s also seen clients over-spend to try and win the affection of children with lavish gifts.

“This tends to backfire and can generally be detrimental to the client’s financial wellbeing and budget,” Stasiuk said.

In terms of managing holiday spending and divorce settlements, Stasiuk advises clients to keep the long-term goals of their financial plans in mind by prioritizing experiences over material gifts.

“The holidays, while very difficult for families navigating divorce, are a great opportunity for clients to create new memories with their children. By gifting experiences and creating new traditions, the family tends to be better off financially and can benefit relationships beyond the pocketbook,” Stasiuk said. 

In addition, year end tends to be a time of year where financial advisors discuss charitable giving and other tax strategies with clients. For those clients that can afford to give back, instead of purchasing material gifts for children, Stasiuk recommends they engage with their children through the establishment of a donor advised fund or charitable trust.

Jeremiah Winters, CEO of Founders Grove Wealth Partners, agrees that pushing for a year-end settlement simply to suit the calendar is a mistake for couples going through a divorce. He points out that often one spouse is “driving the divorce and pushing for a speed that the other is uncomfortable with or not ready for because emotionally they aren’t there and their lawyer or advisor is moving at a different pace.” 

 The biggest mistake clients make during a divorce is listening to the wrong voices and moving on bad advice because they want it to be over with, or because the other party is forcing a decision, Winters said. 

“A rash decision can lead to years of regret. Choose your team and the voices you listen to wisely, and don’t be afraid to make a change,” Winters said.

When it comes to supporting clients involved in a divorce during family-centered holidays, Winters said budgets need to be set, even when sleigh bells are jingling, which is often a good way to get clients focused again on the future. He also reminds clients that the first holiday will be different and provide an opportunity to create new traditions.

“It’s important that clients understand the financial boundaries, but like most things in life, it’s about defining priorities and the tradeoffs needed to make those higher priorities happen,” Winters said. 

Finally, Chuck Failla, CEO of Sovereign Financial Group, said the holidays tend to amplify everything and that can lead to financial mistakes during a divorce.

“Specifically, it is not uncommon for parents to use gift-giving as a way to assert leverage over children during a divorce. This is, of course, not a good idea in general and is definitely not a great financial move,” Failla said. “This behavior is often ramped up during the holidays. Not only can this create unhealthy emotional dynamics between all involved, but also, this behavior encourages materialism, a bad financial habit for the kids to learn especially during an already stressful time.”