Financial Planning Post-Divorce: A Case Study

Marriage doesn’t begin with thoughts of divorce. But it’s become an unfortunate reality for many of our clients. Not only does it disrupt the family unit, but it also wreaks havoc on financial goals and savings that may have taken decades to build. It’s a sad fact that women over the age of 50 who get divorced may experience a 45% decrease in standard of living. (1) The good news is, you don’t have to go through it alone. We can help you navigate the transitional challenges brought on by divorce. Below is an in-depth look at how we handle financial planning post-divorce.

The Client

In one particular case, our client was a woman in her mid to late 50s with two college-age children. She was married for 20+ years and had a net worth between $3 and $5 million.

The Goal

This client came to us after the settlement decree had been filed and the divorce was finalized. She was unsure how to proceed with transferring assets to her name and also needed guidance on how long her money would last. 

We sorted through paperwork to transfer assets, determined the client’s long-term financial goals, and assessed how variables like child support, alimony payments, and future Social Security benefits would impact her standard of living. Additionally, we made sure all of the proper beneficiaries were added to her accounts. 

The Outcome

In this case, we helped our client in the following ways:

  1. Transitioning assets. There was quite a bit of paperwork to fill out on behalf of this client. We split all of her ex-husband’s retirement accounts (one 401(k) plan and two IRAs) by opening a traditional IRA and a Roth IRA in her name. We also worked closely with our client and their attorney to ensure the court-certified legal documents were submitted in a timely fashion so that the release of funds would not count as taxable income to the client.
  2. Cash-flow concerns. We consolidated our client’s investment and retirement accounts into one custodial platform. This helped reduce the high costs associated with her dormant 401(k) plans. We also created an income plan that would allow her to withdraw $7,500 per month from her new accounts in order to cover her living expenses until she starts receiving Social Security at age 67. 
  3. Estate planning. Per the terms of the divorce settlement, this client was supposed to remain a beneficiary on her ex-husband’s life insurance policy. In verifying this information, it was discovered that there were no beneficiaries listed at all. If her ex-husband had passed, the death benefit would have gone to his estate and our client would have received nothing. We immediately worked with the insurance company and the former spouse to add her as a beneficiary.
  4. Home and mortgage. Our client was awarded the house as part of the divorce decree. She had pushed for this because she had two college-age children and wanted to maintain as much stability for them as possible. But after our assessment, it became clear that it didn’t make financial sense to own the home. With that in mind, we were able to refinance the house to increase her cash flow by approximately $500/month. Although it was difficult emotionally for her to let go of the house, the client also agreed to sell the home in four years after her daughter graduated college. Downsizing would reduce her cash needs by $2,000 per month! This would allow her money to last for an additional 7-10 years, which was more in line with her life expectancy of 92. 

How We Can Help You

This is just one example of the types of situations we are ready to handle at Calamita Wealth Management. If you are experiencing something similar and need help navigating the financial aspects of divorce, our specialized divorce team is here for you! Todd, Catherine, and Britton work hand-in-hand to make sure every client feels confident, empowered, and hopeful as they enter the next chapter of their lives following divorce. Schedule an introductory phone call using our online calendar or contact us at (704) 276-7325 or todd@calamitawealth.com.

About Todd

Todd Calamita is the founder and managing principal of Calamita Wealth Management, an independent, fee-only wealth management company located in Charlotte, NC, serving people locally and across the country, that focuses on providing wealth management solutions to affluent individuals over age 50 and their families. Todd has more than 20 years of experience in the financial services industry and is passionate about helping people have a better life by designing and implementing customized financial plans that bring clarity and confidence. Todd is a CERTIFIED FINANCIAL PLANNER™(CFP®) and CERTIFIED DIVORCE FINANCIAL ANALYST® (CDFA®) and holds a Bachelor of Business Administration from Ohio University and a Master of Business Administration from the Weatherhead School of Management at Case Western Reserve University. He has authored a book, Plan Smart: Conquering 10 Common Money Traps, as well as numerous articles on wide-ranging personal finance topics, from taxes to retirement accounts. He has also been featured in a Financial Boot Camp TV series as a volunteer showing people how to make smart decisions with their money. When he’s not working, you can find Todd spending time with his wife, Teresa, and their two sons, Colin and Cameron. He enjoys rock climbing, swimming, and traveling, and he has a black belt in Tang Soo Do, a Korean martial art. To learn more about Todd, connect with him on LinkedIn.

__________

(1) https://financesonline.com/divorce-statistics/