For parents, getting divorced is not only extremely complicated emotionally, but also financially.
The financial implications of any divorce are very significant, but especially for couples who have children, says Jennifer Hartman, a principal at Greenleaf Financial Group LLC in Los Angeles.
In dividing up marital assets, she says many women often make a major mistake by opting to take the house in order to keep a sense of normalcy for their kids and in return, giving their husband the couple’s retirement funds.
“But what are you stuck with? A house that doesn’t appreciate as fast and has lots of expenses with it,” Hartman says. “It’s not really a good deal at all for the woman. And sometimes, unfortunately, lawyers are not always skilled in financial decisions.”
To avoid such pitfalls, Hartman recommends couples go to a financial planner who can analyze the whole situation—from asset valuations to tax implications—and provide perspective on what their assets are and how to best divide them.
“Paying someone to give you advice on that can be a real money-saver in the long run,” Hartman says.
Of course, one of the main financial issues when parents divorce is child support. Many states have specific formulas based on the non-custodial spouse’s income, which makes that calculation fairly cut and dry, say attorneys.
For example, in South Carolina, there is a specific chart that determines child support based on income, says Thomas M. Bultman, a partner at The Bryan Law Firm in Sumter, South Carolina. It also takes into account other costs such as health insurance and child care, he says.
As part of child support arrangements, Bultman recommends that the paying parent be required to have life insurance sufficient to cover future child support payments if he or she died. Bultman says a family court judge can compel the paying parent to get such coverage.
However, there are other financial issues that are often decided between couples as part of their own agreement without involving the courts. For example, many parents work out an agreement on future education expenses.
“You have to be very specific with each other about what education means,” Hartman says. “Does it mean a state school, a private school, a bachelor’s degree, or a master’s degree?”
Different states have different laws about whether parents can be compelled to help pay for a child’s higher education. In South Carolina, the age of emancipation from one’s parents is eighteen, so that is when child support ends, Bultman says.
As a result, an area of law has developed around how divorced parents should pay for college. In deciding such cases, the state’s family courts look at very specific criteria, including whether the child demonstrates the ability to do well in college and whether the child could find other means of paying for college, Bultman says.
Other costs to consider include travel expenses incurred visiting the non-custodial spouse. Bultman recently had a case where the father was being transferred to work overseas and the cost of travel was going to be very expensive. In addition to the infrequent visits, they set up a video phone over the computer so the father could talk to and see his child more often.
When all the financial decisions are made and the ink is dry on the divorce papers, there are most likely still going to be some financial disagreements between parents. And this means parents have to protect their children from these stressful situations.
Whether you have millions in the bank or hardly any money at all, it’s essential to make sure that children don’t get caught in the middle of their divorced parents arguing about finances, says Ellen Marmon, a relationship specialist at Connections Counseling & Development Center in Atlanta.
Secondly, it’s essential that kids don’t hear their parents bad-mouthing one another over financial differences, Marmon says.
“They have a very deep understanding that they are part of their parents so if your kid even overhears you talking on the phone complaining about how Dad didn’t send the check this month, they may start thinking ‘If Dad is bad, then I am bad, too,’” Marmon says.
Many divorced parents encounter the classic problem where one parent lavishes gifts on the children. Marmon says this situation doesn’t have to be a huge problem as long as you know how to handle it.
“The kids can enjoy both sides of it,” Marmon says. “The benefit of having a lot of money is you get to do some neat things with the kids, but if you don’t have a lot of money, then you can teach them to enjoy the simple things, so there is a gift in both of those situations.”
She says it is important to talk to kids about the circumstances and explain that people do things differently without being derogatory to the other parent.
“You can tell them that ‘Yes, those things are really nice and it’s fine that your mom or dad is buying you that stuff, but that’s not all that life is about and we are going to focus on other things,’” she advises.
However, Marmon acknowledges that it’s not easy to be the parent with less money.
“Most of the time it’s the woman who doesn’t have a lot of money and the man is being ‘Disney dad,’” she says. “The parent with less money can start to feel insecure.”
But it’s important to remember that no matter how little money you have, you can always give your children the biggest gift of all—time.
“Kids are really much more interested in having their parents’ time and attention and having that connection with them, rather than having more stuff,” says Marmon, who is the mother of two boys.