As a Certified Divorce Financial Analyst, it’s not uncommon to connect with clients who have experienced long separations before moving forward with the divorce process. Often in these cases, the couple has made a conscious decision to simply live apart in separate households without progressing to divorce proceedings.
There are many divorce financial planning complications created by these long separations. Here are a few that come to mind.
How will we determine the date of separation for valuing assets and other considerations?
Many of the couples choosing to live separate lives do exactly that with the exception of their finances. We see cases where the couple owns two homes together and each lives in one of them. They may even continue to share income by having both parties deposit their earnings into joint accounts.
In some states, all earnings of an individual are the separate property of the party earning them. In the event the divorce does happen down the line, a decision must be made about separating out these post separation earnings. In the instance where only one party has earned income they may argue for a much earlier date of separation in order to claw back all of those post-separation earning as their separate property.
Of course, the non-working party would then seek the latest possible date of separation to combat the other’s claim. Date of separation is a legal issue with potentially major financial implications. We suggest you work with your attorney and your Divorce Financial Analyst at Cross Roads Divorce Advisors to determine the cost vs. benefit of making a claim on date of separation as the litigation can be costly and your position hard to prove.
Who has control over Community assets during the separation?
Whether it be a traditional stock and bond portfolio traditionally managed by one party, a real estate portfolio managed by a professional manager or a business started and owned by the Community, someone must maintain control and oversight of the assets or else risk their partial or complete loss due to lack of management. We usually see couples separate and simply maintain the status quo where whomever was responsible for certain financial decisions remained in that role during separation.
DO NOT FALL INTO THAT TRAP.
Abrogating your responsibility for financial decisions during marriage is a bad idea in our opinion and a full-scale sin in the middle of a separation. Yes, you may trust your spouse still but now you have no ability to see what they are doing, what kind of decisions are being made and where you might find concerns in those decisions because your financial partner now lives in another house.
The minute you separate you should discuss the separation with a Divorce Financial Analyst at Cross Roads Divorce Advisors so we can help you to set up workable ground rules for financial decision making and assist you in making those decisions through our sophisticated and experienced financial advice. We have seen jobs lost, investment accounts dissipated, credit card debt accumulated and many other financial calamities during these long separations and can help you avoid making the same mistakes.
This information is not intended to be a substitute for individualized legal advice. Please consult your legal advisor regarding your specific situation.
Lou Falvo is a Certified Divorce Financial Analyst® and CIMA® (Certified Investment Management Analyst) who assists clients by evaluating the tax and financial aspects of divorce. Lou is dedicated to reducing the burden of each client by thoroughly examining the financial elements of the client’s divorce, with a keen focus on what is in his or her best interests. Contact Lou to find out how he can assist you with your divorce proceedings at lfalvo@crossroadsdivorce.com or (585) 542-2382.