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Settling Your Divorce: How do you know if you are getting a good deal?

March 4 2015

 

By Cary B. Stamp CFP®, CDFA™

Most divorce cases in Florida are settled long before they are even scheduled for trial. Mediation sessions and attorney negotiations usually lead to a reasonable outcome in most cases. Unfortunately, it is very hard to measure “results” in a divorce case because cases with similar facts could result in a wide range of settlements. Many factors come into play, such as income, assets and the employability of a non-working spouse.

As financial advisors in these cases, we are often confronted with anecdotal comments from our clients, like “my neighbor got $9,000 per month in alimony and my husband makes more than her husband.”  The lack of complete information in these types of situations makes it difficult to compare two cases. One case may be a high-income/little assets case and the other might be a high asset/low income case. In situations where there is more income than assets, alimony awards are usually higher.  In other words, you may not get the same award as your neighbor, even if your husband earns more income.

Property settlements are generally not the issue that presents the most contention. Division of marital property is fairly straightforward in Florida—it is almost always divided equally between the parties.  There are cases where compromises are made and a larger settlement is offered to one party so the other party is not required to pay spousal support (alimony). Also, compromises might be reached if one party wants to retain the marital home or a business. These situations often call for creativity—there is no “one size fits all” solution.

In Florida divorce cases, the greatest contention almost always revolves around alimony payments. In Florida, the length of marriage generally determines the length of alimony payments and marriages over 17 years presumably result in “lifetime” alimony payments. The party paying alimony is generally released from their obligation upon the former spouse’s remarriage or co-habitation. Also, alimony ends when either party dies.

The challenge is determining the right amount and the length of the payments. Alimony comes in several forms in Florida. It can be a lifetime award, a rehabilitative award or designed to “bridge the gap” until the receiving party finds employment.   It is a common misconception that the spouse receiving alimony is entitled to the “same standard of living” as they had during the marriage. Most divorces do not result in a situation where there is sufficient income for both parties to maintain the marital standard of living.

How do you know if you are getting a good deal?  A good accountant or financial advisor should review your settlement before you sign. Attorneys are excellent negotiators but their expertise does not always encompass comprehensive financial planning. A Certified Divorce Financial Analyst can help determine what you will need for living expenses, the investments available to generate income and how to fund your retirement and other goals.  Adding a CDFA or CFP to your team will assist in one of the biggest transactions of your life—make sure you get the answers before the case is settled.