Not All Assets are Equal
It is common with separating couples for one spouse to want to keep the family home while the other wants to keep their pension.
I recently worked with a woman going through a divorce after 15 years of marriage.
She had worked part time for the duration of the marriage to enable her to have more time at home with their children. He had continued to grow his career in his corporate position that provided him with a defined benefit pension.
During the separation process, the wife wanted to keep the family home to ensure a stable environment for the children. The husband wanted to keep his pension.
Based on the net property statement (value of all the marital assets minus marital debts including taxes) this scenario saw the wife owing her husband an equalization payment.
When I sat down with her to review the outcome of this scenario she was shocked. She had no idea that she would have to pay him (an equalization payment) as she thought the value of the pension would outweigh the value of the house.
I also showed her what her financial life would look like in the short term and 25 years down the road, based on this scenario.
As it was, the husband would be in a good financial position as his pension assets would continue to grow and provide sufficient cash flow throughout retirement. On the other hand, she would be left with no pension in retirement and would have to sell the house and make major adjustments to her lifestyle
My analysis of the situation brought a major shift in the negotiations toward a divorce settlement.
I ran another scenario removing the equalization payment and reducing the duration for spousal support. We then looked at the possibility of selling the family home with both spouses downsizing their accommodations and splitting the net proceeds of the home and splitting the pension amount.
These various scenarios allowed her to feel confident in the negotiations knowing that she would be comfortable today and her future would be more secure.
In the end, the couple had received sound legal advice through their lawyer while we, as Certified Divorce Financial Analysts provided her with an equally valuable kind of support – neutral and unbiased analysis of her financial situation.
If you are thinking about getting divorced or are already in the process be sure to include a Certified Divorce Financial Analyst on your team, it could save you thousands of dollars!
Tesia Brooks CFP® CDFA™ successfully completed the course material for “The Financial Aspects of Divorce”, passed the examinations and was awarded the CDFA™ designation in the spring of 2010. She has a professional financial background that spans 37 years, graduating as a Certified General Accountant in 1991 and being awarded the Certified Financial Planner (CFP®) designation in 1998. Tesia has experienced divorce first hand giving her personal insight and compassion for those who are going through the experience of divorce.