Divorce is a tedious process and requires both parties to reach a vital agreement. In another insightful episode, Sandra Napoli-D’Arco is joined by Beermann Divorce and Family Law Partner Beth McCormack and Wealth Manager and Leader of the National Divorce Group at Balasa Dinverno Foltz LLC Heather Locus to talk about wealth management and divorce – all the complexities families or couples go through during divorce. Beth and Heather speak about how, when, and whether you need to bring in a professional to guide you through the process. Getting both parties organized by streamlining their finances and giving them the right fit lawyers make the process less stressful. Learn more from Beth and Heather as they educate us further on the difference between a therapist and a coach, and so much more.
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Wealth Management And Divorce
Our CMO, Sandra Napoli-D’Arco, asks questions that get the attorneys talking about everything they know and have experienced throughout their years of being divorce lawyers.
I’m here with Heather Locus, Wealth Manager and Leader of the National Divorce Group at BDF and Beth McCormack, Divorce and Family Law Partner here at Beermann. We’re going to be speaking about whether or not your divorce is a negotiated divorce or a litigated one. There may be a time when you need to bring in a professional. Other professionals are other than the ones you’re working with. Beth and Heather will speak about how, when and whether you need to bring in a professional. Heather, would you like to tell us a little bit about yourself before we get started?
Heather: Our wealth management firm manages about four billion of assets for individuals and families nationwide. As a leader of our divorce practice group, we help to divorce men and women with three key areas. First is finding the right fit attorney and other professionals. Second when they get further along in the case, we have a settle smart analysis which helps them decide what their attorney’s recommendation, whether they should settle that or continuing negotiations and to have confidence in that. Ongoing, were the professionals within post-divorce to implement their marital settlement agreement and everything they’ve worked so hard with their attorney to get.
Beth: I’m Beth McCormack, Divorce and Family Law Partner here at Beermann. I’ve had the pleasure of working with Heather many times on negotiated settlements. I have worked with you a few times even in litigation in the context of settling smart. That’s a great program that we use frequently with clients. We want to talk about when we bring that in and how strategic we are at doing that. Heather and I, either one of us have been the point of entry for people in the past. It may be that I’ll start with when the client comes through me and maybe you can explain what they go through you. Initially, I might meet with a client. Often, the number one concern is how much am I going to receive in asset allocation and what stream of income will I receive, if any.
That’s asset allocation and maintenance or child support. Those are the two things we’re solving for legally among many others, but primarily on the financial side, that’s what we’re looking at. Saying pretty big picture in trying to determine what those numbers look like, either in litigation, what we’re advocating for or a negotiated settlement. As a lawyer, I have a general idea of how money works and I have a good idea of what the court may determine as equitable distribution, but I’m not a tax expert. I’m certainly not an expert on how the value of money grows, etc. I bring in Heather who will look at a balance sheet with me at the right time and be another thought partner with me and the client to say which account might make the most sense.
She and her team will be thoughtful on everything, from a cost basis all the way to the emotion behind why this account over that account. We’ll pretend the distribution of assets is 50/50. She helps us determine what 50/50 might look like because there are many ways to carve out that outcome. She may say being more thoughtful on the stream of income might be a little iffy. You consider taking more than 50% of the assets that may be something that Heather comes up with or I might say, “Heather, we’re thinking about looking for a lot more on assets, but not as much on the stream of income because there is some concern that way.”
Good lawyers are not insisting that it be just within the law. Good lawyers are creative. Share on XHeather might run those scenarios and help us see what that outcome looks like. I feel like one thing we should say at the outset, if there’s a gender statement that we make, is it’s not meant that we only represent one spouse or the other. Both of us are used to working with everything from the primary breadwinner, men, women or whatever that might look like. Heather, I know you have a woman services team that you’ve built and taken great pride in. Maybe if you could spend a little time helping our audience know what that is, that would be helpful.
Heather: For our divorce practice group, we have divorcing men and women as Beth said, whether it’s the breadwinner or spouse that’s never been involved in the finances. I also lead our women’s service team, which is important post-divorce because women tend to live longer. Their planning needs are more robust. They also tend to help parents and kids and grandkids more. That means they need more assets. They often do fewer years in the workforce. We help them with Social Security, which is often less. The combination of all of those pieces makes the planning even more critical for women than it tends to be for men.
In divorced households, we find the complexity of dealing with adult children, especially with high net worth families that we all deal with. They’re usually going to still help their twenty-year-olds. Sometimes their 30-year-olds as well, but the details of that often aren’t negotiated in the settlement. Big picture for college, the bigger those picture expenses will be. A lot of what we do is helping with post-divorce. How do you reconcile that with your spouse? How do you get a solution that’s good for the family? When you can’t work things out on things that were negotiated, when is the right time to go back to your attorney?
What comes first? Is it the chicken or the egg? Do people come to you first when they’re on the brink of divorce? Walk me through that process because I’m sure a lot of people are confused. We have a wealth manager that we work with. I never saw him working with their wealth manager on planning for divorce. Hopefully, never, but how do you work together and what does come first?
Heather: It depends on the case. I’ve had our divorce practice group for about several years. We’ve had our women service team for many years. Part of that was out of me unexpectedly getting divorced several years ago. Through that process, I realized that we could help to divorce families, both men and women, much more than we were through the women’s service team. I wrote a book a couple of years ago. I write for Forbes on divorce. Because of all that, because we helped over a thousand families nationwide, our clients know that if their children, friends, whoever or themselves are getting divorced, they often do come to us first. We help them get organized. We streamline the finances. We give them the right fit attorneys.
We’d love firms like Beermann who are proactive on Alternative Dispute Resolution, ADR, with mediation and collaborative when that’s the right fit. If they need to be, we’re tough litigators and we’ll navigate the process the way that has to be and the legal system. We are strong advocates of people having choices and getting educated. We will recommend the attorneys and often there are other professionals that involved. Having said that, we very much get involved either from referrals for Beth or other attorneys as well as clients who find out their friends, family, colleagues and partners are getting divorced and need the sophistication on the tax side and the finances.
Especially now with the change in alimony/maintenance loss where that’s not deductible by the payer or tax go to the recipient. There are more strategic things that we can do in the right situation for splitting assets to save both the payor and the payee, both spouses on taxes by looking at should we get more on one retirement account? Are there charity remainder trust or other legacy estate planning issues that were set up as a family that now we can be thoughtful and save the whole family on taxes?
Beth: That holistic approach is super important. The point of entry could be Heather or it might be me as I stated at the beginning. When I’m meeting with that person for the first time, I’m definitely not applying a one-size-fits-all approach. I’m hearing the client. That’s one of your strengths as well. Listening to the clients as much as people say it all the time, I feel like listening usually drives my advice. I’m not sitting there and nodding my head, letting them know I’ve heard them. They will leave with a plan. That plan first is which process do you think makes the most sense for you? In my head, as I’m hearing the clients, I have an idea, but ultimately the client decides. At the end of the day, no one wants to litigate, but sometimes it’s the only option.
As I’m hearing all of their stories, let’s pretend they choose to do a form of Alternative Dispute Resolution. We’re going to call it ADR. In that process, they have power. Whereas in litigation you’re giving up some of your power to the court as is your spouse, which is the best way to keep people in ADR. Having said that, when you have control, in order to use that control, you need trusted advisors. One is the financial wealth manager, Heather, your story to tell, but maybe you could talk about how your point of entry was through a different professional, a divorce coach, and how that coaches use, believe it or not, in all three processes utilize completely differently, which is a whole other podcast. The divorce coach is another trusted advisor we both depend on often.
Heather: As I mentioned, I have divorced a few years ago unexpectedly and realized at that time that I didn’t know I need divorce attorneys. I had met a divorce coach through some networking. She had helped other clients. We’re fortunate our existing clients have a very low divorce rate. I reached out to her because she’d done a good job with our clients. My kids at the time were young, 5 and 7. They helped us with parenting, with the finances and recommended a team. Through that process, my former spouse and I were able to interview multiple attorneys and find the right fit and it was Beth in Beermann for us.
At the end of the day, no one really wants to litigate but sometimes it's the only option. Share on XThe coach can help even though it’s an additional professional you’re paying for, it can help reduce costs overall because it keeps the process moving and helps you from getting hung up on an emotional issue or a trigger that you may have had in the marriage. I feel very strongly that people want to be educated because the right fit for that family is the right fit that’s going to get them through the process overall with the least amount of cost, complexity, collateral damage, life damage, time and the relationships in the family.
For us, that was collaborative and Alternative Dispute Resolution, but that’s not always the case. As a professional, one of the toughest cases I’ve seen is somebody that we didn’t get involved with until a couple of years into the case and they started out with mediation. It didn’t work out. They ended up going to a full-blown trial. It ended up being four years and a lot of costs. Had they seen the right professionals upfront, they might’ve been able to assess that maybe mediation wasn’t the right fit for that family. Unfortunately, if you have to litigate, you’re often better starting that way and starting in another one and going through all the goodwill you might have as far as working on it and the time and money that took to start and still go through the whole litigation. It’s not one is better than another, it’s the right fit for the family.
Beth: That’s where the coach comes in no matter which process. In that example, I’ll take what Heather gave. Let’s pretend they weren’t a mediation, but they had a coach. A very important distinction, a coach is a mental health professional stepping out of their role as a therapist. They are not looking back and figuring out how did we get here. One of our colleagues, another divorce attorney, gave the best eloquent difference between a therapist and a coach. A therapist is going to unpack and repack all your luggage for the trip. Do that several times with you and for you until you know whether you’re going on the trip.
A coach is going to grab your bag as it is and walk with you through the airport and get you on the plane and off on your way, the runway. It’s a beautiful analogy. At the end of the day, the coach cares so they’re trained as a mental health professional. Ultimately, it’s all about forward momentum. Let’s not pack and repack that those clothes because that’s therapy. Another issue that I insist that my clients have therapy because that needs to be done as well. The coach needs to keep everybody going.
In the mediation example, that coach could have been working with a person at a much lower hourly rate than a lawyer working on all the emotions. Do I want or need this fight? We’ll pretend it’s a Saturday night that they’re hung upon. Who gets the kids on Saturday night? Again pretend, what do you want? Is it about Saturday night or is it about more time? As that coach works on that emotional issue, that’s not legal. It could be legally. Again, in litigation, even in mediation, lawyers can do that at a much higher hourly rate. We’re not trained or as equipped as a mental health person to figure out what that’s about. Back to the money side and how we would use a trusted advisor, run the analysis on the financial side. How many times do we have clients who are insisting upon keeping the house, as an example? We spend hours, sometimes days on this topic. What do we do to help them get unstuck?
Heather: When we run the analysis, it shows them what if you hold it long-term? What if you change it? A lot of it is the conversation asking the what if the house mean for you? What does that look for stability for the kids, for the community. One of the cases that we worked on many years ago, the wife we were working with was very important to her to keep the house. That was a real sticking point through the process. Beth and Beermann did a great job of negotiating, keeping the house and getting the spouse to share in some of those costs. That was the best solution for the family so that the teenagers could stay there.
A few years into it, unexpectedly, the wife decided she didn’t want to stay there. Because she had pushed so hard for it and it’s gotten such a nice settlement in terms of having the spouse pay for it, there were certain parameters written in the agreement for the cost-sharing of that, for the tax deductions, which all changed when the property then was sold. That was an example of where we were working with a client ongoing, managing investments, the cashflow, the taxes and all of those pieces. There we were able to talk about it and had to come back, get the legal representation to go back and renegotiate the document. Write new documents so that it meant not only legal requirements but also tax requirements for the tax deductions for changing the house.
Beth: The best example I can give for why I insist on having a financial advisor in every one of my cases, I met with the woman that after the divorce, we did not represent her during the divorce. No one talked to her about what it meant to carry the costs of the home. The lawyer did a great job, negotiated, got her the home, got her a nice financial settlement with a stream of income that most of us would dream of. It wasn’t enough. As an example, in this one, the woman had a home on the lake. No one talked about what realistic taxes look like. No one talked about what maintenance looks like. Everyone heard the need that it was very expensive, but no one looked through the emotion. Now you don’t have any spending money because you’re house poor as we all know the term. The lawyer did a phenomenal job arguably, but had they had a thought partner with the wealth advisor, it would have been a much more enriched conversation with a decision that served the client well.
Heather: When we do our settle smart analysis, we do the projections and show what does this look like, how is the money allocated in different ways and what does this mean. Do you have money at 93 if you need it? Is it barely getting by or do you have money for your kids or charity and whatever is important to you? People can make thoughtful decisions on what the impact is long-term. We always do those though in context of what the attorney is telling us this passable in their case because there are the guidelines from whatever state they’re in and what’s possible in our case, giving the assets. Wealth managers have thought on that set unrealistic expectations of what somebody wants or what might be possible. It’s given the facts of your case where we could end up running those numbers and helping them understand.
Beth: All too often, you’ll hear a lawyer be critical of, “This is great. I’m getting her a good deal,” or we’ll say the wealth advisor looks at it and starts running the analysis and saying, “You’re going to run out of money.” Now there’s fear set in the client’s brain and the lawyer has to try to clean that up so to speak. It’s important that there be a release sign so that everybody can communicate and use this holistic approach.
In a financial settlement, insist on having a financial advisor because no one talks about what taxes and maintenance looks like. Share on XCan you use the holistic approach no matter what type, whether it’s litigated or collaborative?
Beth: You can, you should, and you must. Collaborative by its nature is already holistic. An important distinction we should probably talk about is the difference between you and a financial neutral in that. Do you want to explain that?
Heather: In a truly collaborative process, you’re going to have a financial neutral, which is truly representing both spouses and there are lots of benefits of that. They’re looking at the family as a whole. They’re trying to come up with a solution. While we do that as well, we are typically more of an advocate for one party when one spouse is coming to us as a new client during the process. There are benefits to that because what we hear and when we get brought in during the collaborative process, even though we won’t do the hourly financial neutral work, it’s because one spouse doesn’t understand as much as the finances. They need someone to more explain it to them and take their perspective and run these projections for them, not necessarily neutral for both sides.
The other difference I see because we do work with financial neutral on cases is because they tend to work on specific cases. A lot of them might be CPAs and do taxes and stuff, but they don’t manage investments long-term. They don’t have as good as understanding as what our families like this does it cost to live on the North Shore, Downtown, more expensive suburbs in Chicago or LA, New York, wherever it is. The reason is that’s important is because so few families live on half of what they have. Almost every family, how many zeros they have, are going to have to make some adjustments. What I see is as a wealth manager with many years of experience, I can help them better navigate, this is practical to potentially change versus this versus when I go through the numbers, it’s financial neutral.
It’s easy to change numbers, but it’s not always practical that they could live that. It’s a distinction based upon the experience of the neutral and the wealth manager. One of the things that are important when you’re hiring the right team is you definitely need legal expertise. You need some emotional support, whether that’s a therapist, a divorce coach. You’re also getting from your friends and family, but you want to caution there. On the tax and financial expertise, a lot of attorneys are sophisticated on the taxes. They have a lot of experience in employee benefit plans, buy and sells, all of those business issues, particularly here at Beermann on what that looks like. You have to get that, but it doesn’t mean you have to have a different person for each area. It’s hiring the wealth manager, the attorney, depending on your relationship with the CPA, financial neutral so that all the areas are getting put together overall.
To clarify, what would be the difference between what a CPA might do for a client and what you might do for a client?
Heather: Most CPAs are going to be able to say there’s a loss carry and maybe that the family has on the tax return. How are we going to split that? Depending on their expertise, they may or may not look at existing gains on holdings and how they’re separating stocks or bonds or mutual funds. A few of them will do projections. Most of them won’t. Some of them might be more involved in a marital balance sheet again and separating. It depends. The CPA is definitely going to be able to look at the tax return and advise the family though. How do you deal with some of these ongoing tax issues that are going to transfer from a joint return to individual returns? We don’t prepare tax returns, but I am a CPA so I can help with that process as well. Not all wealth managers can and some CPAs manage investments now so they can do a lot of the pieces that we do.
Beth: Heather and I are a super creative team formation. I can think of a couple of instances where we have in our head who the right accountant would be and it’s often the same person. Because again, another trusted advisor who thinks like us, this holistic approach so that the client knows that they’re safe legally, financially and emotionally. A divorce is whatever percentage you assigned to it. It’s highly emotional. Financial is the end of the game. What do they care about? They want to know that they’re safe and that they’re going to have enough money going forward.
Legally what we’re doing is narrowing all the options so that it falls within the law. Good lawyers are not insisting that it be within the law. Let’s get creative. We’ve been a creative time and again, remember an ADR, you can be creative. In court, you have to follow the law and the judge can’t, won’t, should not be creative. The court has to follow the law. If the people are fighting over the home, the home gets sold. Next, if the people are fighting over this account 50/50. You get the importance of trying to encourage people on ADR.
Again, here at Beermann, not only are we not afraid of court, that’s where we sometimes or more often than not end up. Remember in court, 95% plus of cases settle eventually because of the threat of that not so thoughtful approach. We both are committed to giving some thought. Why not do that early on rather than standing on the courthouse steps and suddenly the sky is falling. We got to get creative. Without that full team approach from day one, you’re working from behind. That’s why early on both of us want to get that team early on.
Anyone would be fortunate to have either of you or even better both of you on their team. Thank you. Are there any final thoughts you’d like to share with anyone who might be reading?
Beth: It’s important to reach out to people who’ve been through a divorce in addition to any professional who touches the divorce space because we’ve all built our reputations and we feel confident in our individual reputations. Talk to people, find out who’s thinking holistically, who’s on the cutting edge, who’s doing some of this outside the box thinking wherever you are and go meet with them. The other thing is it’s important to interview like in any process you want to hire the brightest and best, but you need to interview more than one to make sure that that’s who you want to work with. It’s a very intimate relationship. If you don’t feel that connection, you should seek it out elsewhere.
Heather: The last thing I would say is it’s well worth spending the money on a good professional team. I hear a lot, my friend, mom, coworker who got divorce said this and they’re well-meaning and trying to help, I’m sure. The law is specific and each family’s issues and assets are specific. The law has changed so much for both child support and maintenance. The tax law with property splits that is important and worth investment upfront. It’ll pay off long-term for sure.
If anything, spend the money upfront and it will save you a lot. Thank you for reading. Please subscribe to Beermann’s podcast channel and like us on Facebook and LinkedIn. Thank you.
Important Links:
- BDF
- Beermann
- Facebook – Beermann LLP
- LinkedIn – Beermann LLP
- http://www.BeermannLaw.com/attorneys/beth-f-mccormack/
- https://www.BDFLLC.com/about-bdf/your-bdf-team/heather-locus/
No representation is being made that any strategy shown will or is likely to achieve results similar to those shown in this presentation. BDF does not provide legal, tax, insurance, social security or accounting advice. Clients of BDF should obtain their own independent tax, insurance and legal advice based on their particular circumstances. The information herein is provided solely to educate on a variety of topics, including wealth planning, tax considerations, insurance, estate, gift and philanthropic planning.
Past performance may not be indicative of future results. Different types of investments involve varying degrees of risk. Future performance of any investment or wealth management strategy, including those recommended by Balasa Dinverno Foltz LLC (BDF), may not be profitable, suitable for you, prove successful or equal historical indices. Historical indices do not reflect the deduction of transaction, custodial or investment management fees, which would diminish results. Any historical index performance figures are for comparison purposes only and client account holdings will not directly correspond to any such data. BDF clients must, in writing, advise BDF of personal, financial or investment objective changes and any restrictions desired on BDF’s services so that BDF may re-evaluate its previous recommendations and adjust its investment advisory services. BDF’s current written disclosure statement discussing advisory services and fees is available for review at www.BDFLLC.com or upon request.
About Beth F. McCormack
Beth F. McCormack focuses on highly complex family law matters with vast experience in complex litigation, as well as Mediation and Collaborative Law. Beth also represents children, when appointed by the Court, which makes her unparalleled in her ability to navigate complex parenting issues. Beth appreciates the sensitivity surrounding high net-worth, high-profile, and child-related matters, with each requiring a very different skill set.
Beth’s practice is founded on compassion and empathy. She sees it as her responsibility to be aware of each person’s needs, seeking the most appropriate solution for each client.
About Heather Locus
Heather is passionate about helping people make complex decisions. As a BDF owner, head of our Divorce Practice Group, and founder of our Women’s Service Team, she solves problems by balancing the emotional and behavioral components of financial decisions with the tax and legal issues.
Since taking the right steps at every turn matters, Heather empowers divorcing men and women to make sound decisions throughout all the phases of divorce. Often as the first divorce professional people talk to, she helps families hire the best-fit attorneys, mediator or other professionals needed. Heather and her team assist in key decisions such as whether to settle or continue negotiations, then fully implement separating assets and managing the investments to fund a full life post-divorce. Heather uses her technical knowledge and first-hand experience to guide people through this unsettling situation to create a full life as they redefine it. She authored The Next Chapter: A Practical Roadmap for Navigating Through, and Beyond, Divorce and is a regular contributor to Forbes.com
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No representation is being made that any strategy shown will or is likely to achieve results similar to those shown in this presentation. BDF does not provide legal, tax, insurance, social security or accounting advice. Clients of BDF should obtain their own independent tax, insurance and legal advice based on their particular circumstances. The information herein is provided solely to educate on a variety of topics, including wealth planning, tax considerations, insurance, estate, gift and philanthropic planning.
Past performance may not be indicative of future results. Different types of investments involve varying degrees of risk. Future performance of any investment or wealth management strategy, including those recommended by Balasa Dinverno Foltz LLC (BDF), may not be profitable, suitable for you, prove successful or equal historical indices. Historical indices do not reflect the deduction of transaction, custodial or investment management fees, which would diminish results. Any historical index performance figures are for comparison purposes only and client account holdings will not directly correspond to any such data. BDF clients must, in writing, advise BDF of personal, financial or investment objective changes and any restrictions desired on BDF’s services so that BDF may re-evaluate its previous recommendations and adjust its investment advisory services. BDF’s current written disclosure statement discussing advisory services and fees is available for review at www.BDFLLC.com or upon request.
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The content of Beermann LLP podcasts is intended for general information only, and is not intended to be construed as legal advice regarding any specific case or situation. If you have any questions regarding the content of this podcast and you are currently represented by counsel, we recommend that you address your questions to your attorney. If not, we suggest you contact our offices.
“Please Note: Balasa Dinverno Foltz LLC (“BDF”) does not serve as an attorney, accountant, or insurance agent. BDF does not prepare estate-planning documents or tax returns, nor does it sell insurance products. Please see Important Disclosure Information in the notes of this podcast. BDF’s current written disclosure statement discussing advisory services and fees is available for review at www.BDFLLC.com or by request.”
