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Jul 4, 2011

Does divorce mean you’ll be singing the Bag Lady Blues?

Divorce Survival

According to the US Department of Human Services, 75% of the elderly poor in the US are women.  An overwhelming majority of them are divorced or widowed.  They all have one thing in common and that is keen sensitivity to planning their financial future.  Divorcees are scared of potential financial disaster.  No wonder.  Studies have shown that divorce women without
significant assets may consume their assets in less than five years.  Thu, it comes as no surprise that the main objective of women is not be a bag lady.

To avoid this scenario, it is imperative to implement prudent strategies early in the divorce proceedings.  What comes out of a divorce could make or break a woman’s financial futures.  Why are women so vulnerable? Studies have demonstrated that women tend to be more emotional than men.  Unfortunately and all too often, improper financial decisions may be made during divorce proceedings which could have long-lasting negative ramifications.  Having an independent financial advocate canhelp avoid major mistakes.  Proper professional help can have long-lasting positive effects.

Entering a divorce, a woman must come up to speed very rapidly on the family’s total financial picture in order to be on level ground with her soon-to-be ex-spouse, who typically has handled finances for years. Women tend to be attached to the house more than men. Many times, this illiquid
asset is not appropriate for the present circumstance and future strategies. A house demands substantial cash for routine maintenance and may require capital expenditures (both anticipated and unanticipated). A house might not appreciate as expected plus could have embedded capital gain tax liability potential. An advisor can properly identify potential problems and provide recommended solutions. In addition, an advisor can help identify the cost basis, uncover hidden liabilities, and project future tax consequences. Often overlooked, this mistake could cost thousands of dollars.


Going into a divorce, the issue of dividing the property is important. A financial advisor can assist with the process in identifying “strong” versus “weak” assets. Helping to choose the proper stock, mutual fund, or other asset can be valuable; especially for those who may not have the time
or inclination to be educated investors.  How to handle pension and retirement assets is another consideration. A detailed analysis of present and future valuations is essential for properly dividing finances. This helps procure the most benefit for a woman. Just dividing total assets in half is not necessarily the proper way to proceed and may result in the detriment of the woman in the long run. Including a Certified Financial Planner early in the partnership between the client and lawyer can strengthen the team and help prevent women from singing the bag lady blues.

Content contributed by Robert A. Mecca & Associates LLC