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Top 10 Financial Considerations in Divorce: Through the Coronavirus and Beyond

4 May 2020 9:54 AM | Anonymous

By Sharon L. Klein, Family Wealth Strategist, Trusts & Estates Attorney

The dissolution of marriage is one of the most stressful and difficult experiences your clients may face. The COVID-19 pandemic has made the already challenging and uncertain journey of divorce more complicated for families and their advisors. With unpredictable court closings, hearing delays, the impact on employment and spousal support, and custody arrangements that involve child movement between households—now more than ever, trusted guidance and collaboration are key.

As your clients transition from one chapter of life to the next, what follows is our pick of the top 10 financial considerations to address with them.  For seamless and integrated advice, your client’s financial advisory team should work collaboratively with you and your client’s other advisors, and have the breadth and depth to provide a full spectrum of services.

Here Are 10 Important Financial Considerations in Divorce

1.       Have your clients established their own individual banking accounts for everyday financial needs and reviewed their new balance sheet?

Clients likely will need to open accounts in individual names and develop a list of revised assets and liabilities.

2.      Do your clients need financing that is customized for their unique situation?

Custom credit can provide your clients with a reliable source of funding for unforeseen expenses, real estate purchases, and business investments. They will need an experienced professional to evaluate their options and provide lending based on their assets—including specialty or illiquid holdings. Solutions to consider include:

  • Marketable securities-backed lines of credit, including restricted and concentrated stock, which may be a valuable option to consider for preserving an underlying portfolio, instead of selling at a time of crisis
  • Bridge financing to help with a significant purchase
  • Specialized asset-backed loans secured by partnership interests, fine art, yachts, and aircraft
  • Residential and investment real estate financing, including lines of credit
3.       Have your clients projected how their settlement will sustain their lifestyle?

An experienced financial advisory team should offer a comprehensive financial plan analyzing the changes in your clients’ cash flows from assets received, alimony, changes in expenses, and other cash flows expected after the dissolution of marriage. Having detailed financial projections may be particularly important given the pandemic’s dramatic impact on market volatility. By providing a comprehensive overview of the following factors, an advisor can help your clients balance their projected expenses while maintaining the lifestyle they seek:

• Cash flow planning for income and expenses

• Alimony/child support

• Asset sustainability study and portfolio risk analysis

• Tax situation review and appropriate planning

4.       Have your clients reviewed their estate planning documents to make necessary changes?

An experienced financial advisory team can help your clients review all their important estate planning documents and feel confident they are providing for their chosen heirs, updating beneficiary designations, and naming new designees for healthcare and power of attorney documents. With court closings and potentially long delays in finalizing divorce, the need to have documents updated to reflect your clients’ intent is increasingly important. Some documents can be changed while divorce is pending, others must wait until the divorce decree is issued. Documents to consider include:

• Will and trusts (usually can be changed while divorce is pending)

• Power of attorney and healthcare directive (usually can be changed while divorce is pending)

• Retirement accounts and plans (usually cannot be changed while divorce is pending)

• Jointly named real estate and financial accounts (usually cannot be changed while divorce is pending)

• Authorizations to access digital accounts, including financial accounts, email accounts, social media accounts, etc. (usually can be changed while divorce is pending)

5.      Do your clients have a fiduciary they can trust to oversee their trusts and assets?

When trusts are utilized to protect settlement payments, it is important to select a trustee who will be your clients’ fiduciary: A trustee whose first and foremost responsibility is to protect the best interests of your clients and their family.
6.        Is there a business valuation involved in your clients’ settlement agreement?

The preparation of a business valuation is a lengthy and expensive process. As you well know, valuation reports can be very lengthy and difficult for even seasoned professionals to understand. The coronavirus pandemic may have substantially impacted business values. For any business that has been appraised as part of the settlement process, you will want to confirm that your clients’ financial advisors can review the appraiser’s valuation report and provide insights that may answer questions such as:

• Is the appraiser a qualified professional with experience and valuation credentials?

• Is the appraiser’s financial analysis of the company thorough and explained?

• Are the methods used appropriate and the reasons for their selection discussed?

• Is the value conclusion reasonable, based on the factors presented in the report?

7.       Do your clients have the tools to set their short- and long-term investment strategies?

If your clients are receiving a settlement, particularly through times of crisis, they will want to be certain that their short- and long-term needs are met through the creation of a customized investment portfolio. It will be important to have a dedicated financial advisory team that can tailor a portfolio based on each client’s specific parameters, including liquidity and spending needs, time horizon, risk tolerance, cost sensitivity, tax efficiency and other factors.

8.       Do your clients need to update their insurance coverage?

The coronavirus pandemic, with its tragic attendant death toll, has focused people’s attention on mortality. Now more than ever, you will want to ensure that your clients’ settlement entitlements are secured with appropriate life insurance, or potentially probe the value as a marital asset. Insurance review is very important to be certain clients have the appropriate coverage, have named the correct beneficiaries, and that the premiums are being paid. Health, life, disability, property & casualty, and long-term care insurance should all be reviewed to identify what actions might be recommended, including revising policy ownership and beneficiary designations, and understanding who has responsibility for premium payments.

9.       Are your clients’ children’s college expenses covered?

An experienced advisory team can establish projections and analytics helpful to the settlement process by delineating the future costs of college based on the ages of the children and the potential colleges under consideration. This data can be coupled with merit-based aid scholarship strategies and other financial aid analytics. Often, trusts can be designed and created specifically (or in concert with other goals) to fund education.

10.   Are your clients aware of the charitable techniques available to them?

A financial advisor should review any existing private foundations and charitable trusts to be certain they are still in line with your clients’ goals and wishes. The advisor should also review potential charitable techniques that could be utilized to support philanthropy and minimize taxes in the settlement process.


Wilmington Trust’s core objective, dating back over a century, is to serve families. We can help parse through complexity and manage, grow and protect wealth. In offering a broad spectrum of wealth advisory services, delivered through a dedicated team, our guiding philosophy is clear: It is our clients’ best interests that drives us. We can help you navigate the challenges you face today and prepare you for a new beginning, and a successful future.

To learn more:

Sharon L. Klein is president of Family Wealth, Eastern U.S. Region, for Wilmington Trust. She is responsible for coordinating the delivery of all Wealth Management services by teams of professionals, including planning, trust, investment management, family governance and education, family office, and private banking services, to high-net-worth clients in the Eastern United States. Sharon also heads Wilmington Trust’s National Matrimonial Advisory Solutions Group, a team of Wilmington’s professionals from across disciplines who collaborate with family law practitioners in offering a comprehensive set of services for those considering or maneuvering through divorce.

Beginning her career as a trusts & estates attorney, Sharon has over 25 years’ experience in the wealth advisory arena and is a nationally recognized speaker and author. She is a Fellow of the American College of Trust and Estate Counsel. She chairs the Domestic Relations Committee of Trusts & Estates magazine, where she sits on the Board, and is a member of the New York City Bar Association’s Matrimonial Committee.

This article is for general information only and is not intended as an offer or solicitation for the sale of any financial product, service or other professional advice.  Wilmington Trust does not provide tax, legal or accounting advice. Professional advice always requires consideration of individual circumstances. Wilmington Trust is a registered service mark used in connection with various fiduciary and non-fiduciary services offered by certain subsidiaries of M&T Bank Corporation. Wilmington Trust traces it roots to the founding of Wilmington Trust Company in 1903.

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