People going through a Divorce Over 50 have a wide variety of issues to deal with, but among the most important, and trickiest, is their finances.
To get some help on that subject, I sat down with Steven Pompan, a Senior Vice President and Financial Advisor with Morgan Stanley. Full disclosure, Steve’s a long-time friend, and handles my investments. He’s also been Divorced Over 50, and has made tremendous progress in finding his brighter future. Steve specializes in working with people in our demographic, and I’m confident you’ll find value in the interview that follows:
Divorced Over 50: First off, your philosophy regarding relationships sounds very similar to what we say here at Divorced Over 50.
Steve Pompan: Yes. Ideally, everybody should have a happy marriage. We all went into our marriages thinking they would be successful. However, things happen in life and directions change. Everyone deserves happiness. The Divorced Over 50 (DO50) network for both personal and business has helped my progress in adjusting to a new life.
DO50: A lot of people know they want to get divorced long before they actually do it. For anyone who’s planning on it, or sees it coming, what financial steps should they take to prepare?
SP: The most important thing you can do is put your financial house in order. You want to have as much knowledge about your finances, and your spouse’s, as you can. You want to identify all the income that’s being received by the two of you from all sources. You want to identify the assets that are in your name, and your spouse’s, and assets held jointly. This includes bank accounts, brokerage accounts, 401K’s, IRA’s, and pension plans. You want to know when they were acquired, too, because that can make a difference in how they’re divided.
Next, identify your liabilities. Learn about your spouse’s credit card debt, if they’ve taken on debt without you knowing, and joint debt including mortgages.
Additionally, you want to know your insurance coverages including medical, dental, property, life insurance and auto.
DO50: In a lot of marriages, one spouse handles the finances, while the other one knows very little of the details. How can that “non-financial” spouse dig up all this information?
SP: The first thing to do is pay attention to your mail. Watch for statements from banks, insurance companies, and credit cards. You may want to make your own copies.
DO50: What if, as is so common now, people just get statements via email?
SP: Right. You may not have online access to brokerage accounts if your spouse has control. However, if your account is a trust or joint account, your name is on the account and you are entitled to information.
DO50: But if no statements are coming in the mail, how does he or she even know who to call?
SP: You can find that through the other great source of useful information, the tax returns. Tax returns show where the accounts are held, and then you can track down the broker or advisor.
DO50: Anything else, particularly for the non-financial spouse?
SP: It’s best to open separate accounts and start to build credit. Having your own accounts including credit cards could be important in case of an emergency and the need to access funds.
DO50: Okay, you’ve gathered all the information, shared it with your attorney, and now you’re in the midst of the legal stuff. What are some of the key issues at this point?
SP: A lot of the financial settlement is formulaic. Different states have different laws, so I can’t speak for every situation. But if it’s a community property state like California, each spouse is entitled to half of the joint assets.
For both alimony and child support, there’s a formula for allocating income. Family lawyers and mediators can help here.
DO50: Talk about the tax implications of paying and receiving support.
SP: In general terms, alimony is a write-off for the person paying, and it’s taxable to the person who receives it. It’s best to speak with a tax specialist.
Here’s something that came up in my situation. I was paying my “soon-to-be-ex” monthly income and making the house payments but wasn’t getting a write off while we were separated. It wasn’t until we were divorced that those payments became “alimony,” and I could write them off.
DO50: Your point being, try to move things along legally?
SP: Yes. Another thing about alimony and child support: the person receiving it should have a guarantee in case the person paying passes away or is disabled. Make sure you are protected as beneficiary on a life insurance policy and disability policy.
DO50: And if there’s no life insurance?
SP: Well, they really should get insurance. This isn’t always easy at our age, depending on health. It’s definitely something to discuss and make part of the final settlement. In my case, I took out a term policy for 10 years insuring alimony payments.
DO50: Social Security isn’t that far off for many of us. That needs to be part of the discussion, too, right?
SP: Yes. The Social Security benefit often gets overlooked, even by lawyers and accountants. Take a deep dive into the Social Security website (https://www.ssa.gov) to see both yours and your spouse’s benefits. Someone who’s not making as much as their spouse may be entitled to a higher benefit based on the spouse’s earnings. The social security benefit is a valuable benefit lasting your lifetime.
DO50: Okay, the divorce is final, the assets have been sorted out, support is set. What’s your approach when someone comes to you and says, “Steve, I need help”?
SP: I tell my clients we like to work on their prosperity, but also want to help them live a longer, healthier life.
I played college tennis at Cal and continue to play league tennis. Tennis, like biking and golf, is a life-long sport. In fact, my parents and many of our clients are over 70, healthy and playing tennis. Also, I enjoy yoga and the yoga community. Yoga works for all levels of flexibility and health. Recommending both tennis and yoga for a longer healthier life is natural.
On the prosperity side, we look at clients like they’re the CEO of their lives, managing every aspect of it. We operate as the Chief Financial Officer advising on financial issues. There is a lot at stake and this is why we are trusted partners for our retired and working professional clients; lawyers, doctors, company owners, real estate investors.
The investment strategy is tailored to the client, their lifestyles, and is low cost. We help clients strategically invest their 401K’s, IRA’s, and investment accounts. Our style is conservative, long term and we are an accessible partner. We answer the question, “will we be ok?”
There’s no charge for meeting with me either in person or by phone call. Once you are a client, we will provide your long term financial road map so you can live a prosperous long life.
And, every client also learns the Warrior 2 position, which will increase their strength, stamina and balance.
DO50: Thank you for this helpful information.
Steve Pompan can work with clients across the country, and offers a free, no-obligation consultation. He can be reached at 310-443-0557, or firstname.lastname@example.org