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January: Divorce Month

7 things to consider when you get the notice that your client is divorcing.

Justin A. Reckers and Robert A. Simon, 01/31/2013

News outlets across the country have been clamoring to interview lawyers and psychologists about "Divorce Month." It is said the number of new divorce filings increases dramatically in the month of January. The increase may be related to New Year resolutions, previous plans delayed in order to survive the holidays, or even good old-fashioned financial planning.

Although speculations can be made about the real cause, our goal is to help you understand the emotions and thought processes cycling through your client's mind when he or she comes to give you the bad news or seek your guidance.

7 Things to Consider

1. The financial negotiations of divorce will be the largest financial transaction most individuals will ever participate in. The financial decisions made by our clients during and immediately after a divorce process may be the most important ones they will ever make.

2. Couples make plans together during better times that may complicate matters later in the case of a divorce. Here are some examples from our practices of working with individuals and couples navigating the financial negotiations of divorce:

--Couples may have previously decided one of the parents should stay home to raise the kids at the expense of career development. The end results in divorce are child support, spousal support, and retraining to enter the workforce outside the home.

--Couples often make a joint decision not to purchase long-term care insurance because they plan to care for each other in the event they need it. When they divorce, the caregiver is lost.

--A couple may choose not to fund 529 accounts for college education because they can afford to pay the expenses from cash flow when they are both working. But divorce results in the creation of two separate households that must now support themselves, and most advisors will tell clients college is a low priority when saving for retirement may no longer even be possible.

Justin A. Reckers, CFP, CDFA, AIF is director of financial planning at Pacific Wealth Management www.pacwealth.com and managing director of Pacific Divorce Management, LLC www.pacdivorce.com, in San Diego.

Robert A. Simon, Ph.D. www.dr-simon.com is a forensic psychologist, trial consultant, expert witness, and alternative dispute resolution specialist based in Del Mar, Calif.

The author is a freelance contributor to MorningstarAdvisor.com. The views expressed in this article may or may not reflect the views of Morningstar.

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