October 1, 2015
As financial planners, we are hard-wired to ask lots of questions about the financial issues involved in a divorce case. Our focus is on gathering the financial information, organizing it, and then using it to help one or both parties make the decisions necessary to divide assets, calculate alimony and child support and answer other questions.
In some cases there are non-financial issues that can have a financial effect on the post-divorce picture. They may not always be addressed, and yet may impact a party’s future significantly. It would be wise to go over these potential situations with your client.
A common non-financial issue today is grown children who have moved back home, often called “boomerang kids.” According to a Pew Research study since 2010 the percentage of 18-34 year olds who live with their parents has risen from 24 percent to 26 percent. Before the Great Recession, in 2007, that figure was 22 percent. Having children move in with one spouse can be a financial burden. Most parents don’t charge their children rent or ask them to pay for their full share of food, utilities, gas and other expenses. Thus the parents are supporting not only their own lifestyle, but to an extent that of their child. In a divorce if the grown child remains in the home of one spouse most likely that spouse will be fully responsible for any expenses they choose to cover for the adult child. There is no requirement to pay child support to offset those costs, and it is possible these extra costs will affect the parent’s financial picture. Although your job, and mine, is not to counsel the couple on whether or not they should support their grown children, it may be helpful to show them the impact of the extra expenses.
In addition when there are boomerang kids a discussion should focus on whether, or how, to share the cost. Unlike younger children there is no parenting plan that outlines where the child will live. If both parents agree that the adult child should be living at home and the child chooses to live with Mom, does that mean Mom has to foot all the cost? Should Dad share in that too? It can’t be obligated in the decree but a discussion to clarify the intentions is helpful.
On the other end of the family spectrum are the elderly parents of one or both of the divorcing spouses, who may need assistance. Help may be needed in a financial way if the older parents don’t have enough income and savings to support themselves in retirement. It may also entail physical help, such as help with meal preparation, running errands, bill paying, etc. Whether the parents need financial or physical help, it can affect the financial picture of the divorcing couple. One impact is the ability of a divorcing spouse to work if they are caring for a parent. It may also reduce the ability of the caregiver spouse to save for their own retirement because of reduced work hours or an obligation to help the parent financially.
Health issues may also be an important concern for your divorcing couple. A spouse who is in poor health may not be able to work full time, or may have high medical costs. There could be potential medical costs down the road; for example a spouse who is diagnosed with Parkinson’s Disease, MS, or other conditions that may worsen over time. How these potential costs should be incorporated into the divorce settlement is an important question. (On a side note, studies have shown that healthy people spend more on health care in retirement than unhealthy people, because they live longer. Either way health care costs are an important issue.)
These are some of the non-financial areas that can affect a divorce in a financial way. A Certified Divorce Financial Analyst can help you quantify these issues and incorporate them into a plan that helps your client to have a successful future.
