Although divorce is an event that no one wants to plan for, it can happen to anyone. You’ve probably seen the statistics: by some measures, nearly half of all marriages in the U.S. now end in divorce. What’s more, the number of couples age 50 and over who are calling it quits has doubled since 1990.

Those in the midst of divorce may feel overwhelmed by the onslaught of changes and decisions confronting them — all at a time when they may not have the emotional capacity to think clearly about the future. Those lacking an investment background often feel particularly uncertain about their financial footing. For some, this may be the first time they are in charge of a large amount of assets, making it all the more intimidating to find themselves wholly responsible for securing their financial futures. They may feel especially defenseless in this area, because admitting their lack of knowledge can put them in a vulnerable position before they’ve had a chance to develop a strong, trust-based relationship with their financial advisor.

The best resource overwhelmed clients have is their financial advisor, who can help them navigate through tumultuous times and take control of their finances. Advisors partnering with such clients can help break the process down to a series of manageable steps. At each stage, the goal is to empower clients into make decisions that help support a secure financial future.

For advisors it may be prudent to suggest to clients in the midst of divorce that they take the following steps:

Step 1
Assemble the best team.

One of the first actions is making sure the right professional advisement team is in place. Different clients have varying needs, but this team usually consists of a trust and estate lawyer, a certified public accountant, an insurance agent and an experienced investment professional.

In terms of investment advice, it’s important that clients tap into your robust planning resources and extensive experience in handling significant life events, such as divorce, well before formal proceedings have begun. It is essential for clients to have their financial plan analyzed to know the amount of assets needed to maintain their lifestyle. This also helps to prioritize what a client’s attorney should try to negotiate in the settlement. Having a client’s financial plan examined before divorce papers are filed may make this process easier.

Step 2
Take inventory of all assets.

Before planning for what’s ahead, clients must know where they stand. To accomplish this, it is crucial to work with an attorney to take inventory of all assets, differentiating between separate and marital property. Some assets are more desirable than others because of liquidity or potential tax advantages. Advisors, working with legal counsel, will be able to compile a detailed explanation of the options. Then, as the financial advisor, you are able to run an analysis of which assets may be best suited to each client’s unique situation and financial objectives.

Step 3
Understand your cash flow needs.

One of the most important things for clients to do with their financial advisor is get an understanding of their spending requirements. Taking a closer look at fixed and discretionary spending will give a client and the financial advisor an idea of how much they need to maintain their desired lifestyle. An accurate number is a crucial component of any desired divorce settlement. One recommendation is that spending should not exceed 3% to 4% of a client’s portfolio on an annual basis. However, such recommendations may vary, depending on a variety of individual factors.

A client’s financial goals and objectives are a critical factor in determining their desired spending level. For example, some clients may wish to be able to support certain charities or help their grandchildren pay for college. These goals can be factored into an individualized analysis.

After this analysis has been done, it’s possible to start crafting a budget. This entails an understanding of where income will be coming from and whether it is social security, spousal support, pensions, earned compensation or from any other special sources. The timing of the divorce also factors in because a person’s age and the length of the marriage sometimes determine what an ex-spouse is entitled to receive as part of the settlement.

Step 4
Develop an overall wealth strategy.
In formulating a financial plan, an advisor will begin by looking at a range of potential outcomes, given each client’s unique situation. This can be accomplished by performing an in-depth assessment that addresses a number of key questions and tests potential investment scenario outcomes to help clients determine the likelihood of reaching their goals. The analysis gives a view of how assets may grow over time across a variety of economic cycles. It also provides a roadmap for making sure a client is on track to achieve cash flow requirements and other financial objectives. Again, this type of analysis is best completed before the divorce is settled because it can help identify what should be requested in the settlement.

The analysis can be used to fine-tune an appropriate asset allocation designed to meet a client’s goals and objectives, given individual time horizon and risk tolerance.

Step 5
Update important documents.

In addition to the investment plan, key records may need updating due to a divorce. For example, certain passwords and personal identification numbers may need to be reset. If a client is moving out of a shared home, they should remove their name from all utility bills and other service contracts associated with the residence, or with other assets that are no longer in their possession. A client should consider refinancing mortgages and placing them under one party’s name with the lender. Also, clients should establish credit in their own name and check with their attorney about how to deal with shared accounts. It’s critical that a client works with a trust and estate attorney to assess what changes should be made to a will, power of attorney and beneficiary designations, and to ensure that these are implemented in accordance with the client’s wishes.

Having the right financial plan can help clients envision future opportunities.

The emotional vulnerability resulting from divorce is difficult enough without the added fears of financial insecurity. Clients may find the process of developing a customized plan with a financial advisor to be an empowering experience. It often helps them envision opportunities they didn’t know were possible and gives them the security of knowing that they have a solid framework in place to meet their long-term needs. This process of examining and prioritizing life and financial goals may also help them regain a sense of control and provide a road map as they embark on the next chapter of their lives.