Simple Divorce Advice

SUSAN AND DAVID CASE STUDY

David and Susan are 45 years old and have two children. They own a home worth $365,000 with $178,000 of equity. Their retirement plans have a total of $422,000 in value. David earns $90,000 per year and Susan earns $19,000 per year.

Initial offer: David proposes that Susan gets the house worth $365,000 ($177,500 equity) and $122,500 of David’s retirement account. David will get the remaining retirement account of $300,000 thus dividing the assets equally. David will pay $1,600/ month alimony for 6 years and $500/month in child support. Susan earns $19,000/year and David earns $90,000/year.

All assets are equally divided and this appears to be a fair settlement. However, a financial analysis creates the financial future:

NET WORTH FOR SUSAN & DAVID

So although the original property division was equal, it was not fair. Within 11 years, Susan’s assets are gone (including the house) while David’s net worth has increased. (Studies show that one year after divorce, the standard of living of women and children usually decreases by 27%. The man’s by contrast, usually rises 10%

FINAL RESOLUTION

NET WORTH FOR SUSAN & DAVID

More alimony for a longer period of time helps Susan while David is still able to increase his net worth. This is a more fair division of assets. This gives Susan extra time to receive additional training or education to jump start her career. Since alimony is tax deductible to David, he receives the tax benefit for a longer period of time.

GET A FAIR DIVORCE

If a spouse put their career on hold or left the career world to care for children, a 50/50 split may not be fair. Typically, once children are born, a couple will decide that the lower income earner should be the one to stay home with the children. This is usually the woman. This makes economic sense because the couple is investing in the career of the higher income earner assuming that this investment will pay off in the future.

After a divorce, the spouse who put their career on hold no longer benefits from the investment. The other spouse continues to receive this benefit. Career benefits include: Higher earning potential, health/dental/life insurance, vacation/sick pay, pension plans, stock options, continuing education and social security/unemployment benefits. The unemployed spouse should receive compensation for the career assets that their ex-spouse will continue to receive.

MYTHS EXPOSED

The sample case illustrates the value of financial planning as a means of more equitable divorce settlements. Most divorces are missing these types of financial insights. Studies have shown that the financial ramifications of divorce are the fourth most frequent reason cited for bankruptcy in this country. Don’t become a statistic.

Take the time to understand the numbers before you sign. Secure your future and your children’s future. Get a smart divorce.

By Sandy Arons

MBA, Certified Divorce Financial Analyst, Certified Financial Divorce Practitioner, Certified Financial Divorce Specialist, Financial Counselor & Mediator ARONS & ASSOCIATES DIVORCE PLANNING

www.getasmartdivorce.com

615-376-8204

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