Cindy Richey, CFP®, CDFA®
Divorce is a seismic life event for men and women. Even under the best of circumstances, both sides usually feel anxious about whether they will be financially secure in the future. But what happens in divorce when women make more money than their husbands?
More Women Than Ever Making More Money Than Their Spouses
More women have taken on the role of the primary earner in the family household. According to data from the U.S. Census Bureau, 30% of women in dual-income households make more than their spouses. If you add in the women who make about the same as their husbands, that number goes up to 47%, according to a survey by TD Ameritrade.
The bottom line is it is increasingly common for the traditional tables to be turned. Instead of the husband fighting to keep what he perceives is his, high-income married women often face the same concerns with respect to their income and assets.
Tips for High-Income Women Facing Divorce
Here are some guidelines to help you make smart financial decisions during your divorce.
Know the key factors in negotiating alimony
Alimony is much different from child support. Child support is generally based on a formula that includes the income of the divorcing spouses. Alimony, also called spousal support, is negotiated by the parties or mandated by court order in a contested divorce.
According to DivorceNet.com, alimony is based on many factors, including:
Length of the marriage
Prior contributions either spouse made to the other’s career advancement
Income needs of the lower-earning spouse
Employability of the lower-earning spouse
How assets and debt are divided in the property settlement
Non-marital assets of either spouse
Either spouse’s age or health status
Support needs for children or elderly parents
An experienced attorney can assist in negotiating the terms of the alimony, as well as specific laws that apply in your state.
Don’t automatically agree to keep the family home
The home can be a significant asset in a high-net-worth family. If children are still living at home, it may be desirable for one spouse to keep the house until the children are out of high school.
The expense of maintaining a large residence may logically fall to the higher-earning spouse; however, women should be cautious after choosing this option. It’s usually a bad idea to exchange one dollar of home equity for one dollar of investment assets.
The family home comes with repair bills, property taxes, insurance costs, and renovations that may be needed just to maintain the property’s value. Also, real estate cannot quickly be converted to cash. On the other hand, investment assets can easily be converted and historically have much higher growth potential.
An experienced attorney or Certified Divorce Financial Analyst® (CDFA®) can help you consider alternatives that allocate assets fairly between both you and your spouse while accomplishing the goal of keeping the home for a time.
Take an active role in the financial details
Even women who have high incomes and impressive career accomplishments often leave day-to-day financial management to their husbands. A study by Swiss banking group UBS found that among high-net worth couples, nearly half of women defer to their husbands for investing and financial planning, while only 20% of couples say they make financial decisions together.
Rest assured, it does not take an advanced knowledge of financial matters to understand your proposed financial settlement. And much of the data gathering and analysis can be supported by professionals, such as a CERTIFIED FINANCIAL PLANNER™ (CFP®) professional or Certified Divorce Financial Analyst (CDFA).
In working with professional advisors in your divorce, put yourself in the role of the executive. Clearly communicate your priorities and expectations. Hold your advisors accountable and lean on their expertise.
Our fee-only wealth management firm in Kansas City, Mo., helps high-income women transition through and beyond their divorce. Contact us for a complimentary 30-minute call to discuss your situation.
