By Karin Rives
The News & Observer, Raleigh, N.C.
It has been 13 years since Linda High got divorced, but she feels the fallout from that decision to this day.
Laid off a year ago, High is seeking help from the courts to increase the child support payments from her ex-husband. The payments they agreed on were never adjusted for inflation, which means High continues to collect $210 a month for her 17-year-old daughter, a high school junior.
Because her former husband has out-of-state health insurance, High has to pay doctors up front and forward bills to him. Now that she's out of work and nearing the end of her unemployment benefits, she worries she won't be able to afford health care for her daughter and 19-year-old son.
"I could have carried the insurance and had him pay more in child support instead," the 40-year-old Raleigh woman said. "But when you're in the middle of divorce proceedings, you don't realize the long-term implications of the decisions you make."
Millions of men and women emerge from the turmoil of divorce to a different kind of nightmare: financial struggles and sometimes destitution. By then, it's often too late to correct mistakes that were made during emotionally charged and sometimes bitter settlement negotiations.
Even though such deals can be renegotiated, it's often too costly for people who try to adjust to a dramatically reduced income.
Nine percent of recently divorced men and 21 percent of recently divorced women live below the poverty line, and about 50 percent of all first-time marriages end in divorce, according to the Census Bureau.
Like many in her situation, High never had access to people who could have helped her see some of the weaknesses in the agreement she signed 13 years ago. Financial consultants and divorce attorneys say that is a growing problem as asset portfolios and properties become more complex and difficult to sort out.
Linda Patchett, a financial planner in Chapel Hill, N.C., encountered so many clients who were in financial straits after a divorce that she decided to add a new job title to her name: certified divorce planner.
A relatively new field, there are only a handful of such professionals in North Carolina. Their specialty is to help people divide their property in ways that don't leave one or both parties destitute. Most of Patchett's clients have been women, who traditionally are the biggest losers in divorce, because they tend to earn less and get custody of the children.
"I saw people post-divorce who said, 'I thought I signed a fair and equitable agreement, so why don't I have any money?'" Patchett said. "So I thought, there's got to be a better way to plan for the financial impact of divorce and get people to start thinking about these things early in the process."
She charges $150 an hour for her work, with a final bill often reaching $2,500 or more. But Patchett said her clients usually recoup that, and more, by planning their divorce more carefully.
"For many people, this is the biggest financial decision they'll make in their lives," she said.
Many of her clients are well-to-do university professors or doctors or the spouses of such who have to split up not just the home, cars and furniture, but also extensive retirement benefits, pension plans, stock options, life-insurance policies and other financial assets that both spouses are entitled to.
And that's not an easy task, especially if one spouse -- usually the woman -- has been a stay-at-home parent. In that case, a key issue will be how to compensate her fairly for lost income, Social Security, retirement and other wealth that she sacrificed to raise children and run the household.
Often, such spouses are surprised to hear what they can lay claim to, and what a difference a carefully crafted divorce settlement can make down the line.
"I wish more people would come to me early on," said Lisa Angel, a Raleigh, N.C., divorce attorney. "Then they would understand that the cost of divorce can be very high and that maybe they should invest more time in their marriage."
Most people, she said, are worse off financially after a divorce and often take years to recover. Many who split up later in life never do recover.
For Mike Guastini, however, divorce seemed the only viable option after his marriage deteriorated a few years ago. That is, until he had to leave the 3,500-square-foot home he had shared with his wife and twins in Chapel Hill and start paying her a big chunk of his income.
Under North Carolina law, spouses have to stay separated for a year before they can file for divorce. Guastini was ordered by a judge to pay his wife, who wasn't working at the time, $4,700 a month during that year.
When the time came for arbitration, "My big fear was that I was going to get really slaughtered on alimony," said the 53-year-old independent business consultant for manufacturers and car dealerships.
So he hired a new attorney, who helped him get what he considers to be a much more equitable deal. His former wife, who now works, got the home and everything in it. In return, the alimony was reduced to $329 a month and limited to three years. He also pays $1,191 plus health insurance every month for his children, who are 12.
Guastini depleted a large portion of his retirement savings by spending $39,000 in attorney fees. But he considers himself lucky under the circumstances.
"I'm worse off, but I'm not bad off," he said. "The way I see it, I got to keep the future, which is the income I generate."
Topics to Consider
Linda Patchett said the financial choices made during a divorce will be the biggest decisions many people ever make. She counsels her clients to consider the various financial assets that can be on the table in a divorce:
- Home
- Health insurance
- Rental properties
- A spouse's business
- Retirement benefits
- Pension plans
- Social Security
- Savings and stock market investments
Another item is what Patchett calls career assets. That could be a time while one spouse earned a degree while the other spouse worked to support the education. In a divorce, the spouse who worked could claim compensation for that period.
The challenge is to divide what the couple owns with long-term implications in mind, Patchett said. For example, the person who is responsible for child support payments should carry life insurance, she said, so that if something happens to him or her, the children continue to get what they need.
"But if you have custody of the children," she added, "you want to be the beneficiary and owner of the policy to make sure payments don't lapse."
Also keep in mind credit cards, mortgages and credit purchases you made jointly with your spouse and awarded to him or her in the divorce. Unless you make sure your name is no longer on the dotted line of such debts, you can be held liable if payments aren't made.
Resources to Help With Divorce
- Institute of Certified Divorce Planners. Phone: (800) 875-1760. www.institutecdp.com.
- Divorce Magazine. Information about separation and divorce. www.divorcemag.com.
- "Divorce & Money: How To Make the Best Financial Decisions During Divorce," by Violet Woodhouse and Dale Fethering. Available online at www.nolo.com.
© 2003, The News & Observer, Raleigh, N.C. Distributed by Knight Ridder/Tribune Business News.
