The Three Stages of Divorce: A Crash Course

Preparing clients for what to expect can make the divorce process go smoother and build your relationship.

By Mariella P. Foley
Mariella Foley
Mariella Foley

As an advisor, I have seen it many times. Women at a turning point in their lives, ready for change and ready to take charge of their future due to a divorce.  Either they are taking that first step, or they recently had the rug pulled out from under them.

There never seems to be enough time for all the questions. Sometimes fear leads the conversation; other times it is frustration and determination. In either scenario, they are looking for hope that their future can be brighter than it is today. They are also looking for help — someone to partner with who will advise and guide them to make important financial decisions.

Once we start talking, I often learn that my clients have not even hired a divorce attorney yet.  That’s because they need a sounding board to think things through first.

When meeting with clients in these situations, the objective is to provide reassurance and explain the three stages of divorce from the perspective of an advisor. It is important not to downplay the legal process or the emotional stress of each stage; however they need to understand the steps involved.

Stage 1: Pre-divorce

Questions are running rampant, and it can be difficult to know where to begin. Regardless of who initiates the divorce, there is information that your client needs to know before launching into this process. This includes organizing and knowing which financial documents to gather, including copies of tax returns, and statements from all investment and bank accounts, as well as any liabilities such as home mortgages or other personal debts. This data gathering is necessary to build out your marital (and pre-marital) balance sheet.

Be sure to remember and include less frequently referenced assets such as airline miles, cryptocurrency, available tax credits or tax carry forwards, and any personal possessions with value worth noting such as antiques, automobiles, art, etc.

It is important to have copies of any legal documents that were drafted during your clients’ marital years, such as a business agreements, trusts, and any executed prenuptial or postnuptial agreements. Additionally, understanding the marital lifestyle details will be important in setting expectations for what the post-settlement could look like.

This stage also involves selecting an attorney, which may take some time to conduct the necessary research and to interview attorneys.

Stage 2: Negotiation

The petition has been filed with the court and the divorce is now in motion. The attorneys are working with their clients to come to an agreement on various matters. This stage can be relatively quick, or it can take a significant amount of time, depending on the circumstances and the desire of each party to move things forward.  It can be the most complicated stage because of the many moving parts and potential issues that may arise. It is also the most important part of the divorce process because decisions must be made regarding child custody, alimony, and division of marital assets.

During the negotiation stage, various possible outcomes are analyzed. For example, there are different ways to divide the marital assets, different alimony options and terms, and the decision of whether to sell the marital home now or defer the sale to post-divorce. These are just some of the many other factors that are reviewed during this stage.

A more complex balance sheet may also require an evaluation of a family business, business partnerships, or various types of equity compensation. During this stage, an advisor can be instrumental in helping identify and assess marital assets and comparing different possible scenarios for their division.

It is critical to ensure that any potential settlement is properly viewed from a tax perspective, cash-flow perspective and risk perspective. This is also the time to review insurance policies to determine whether certain coverage is no longer needed and/or if additional or new coverage must be obtained. These steps are necessary to evaluate whether a potential settlement can meet each party’s short-term and long-term financial goals.

Stage 3: Post divorce

Once the settlement has been agreed upon and the document is signed, plenty still needs to be done post-divorce. This includes the actual segregation of the marital assets, both taxable and retirement (see my Rethinking65 article “Splitting Retirement Accounts in Divorce”). Investments may need to be moved from one account to another (along with the respective cost basis). IRAs may need to be transferred (be sure this is done properly!) and bank accounts set up or reviewed for any future automated payments.

Any qualified domestic relations orders (QDROs) issued will need to be monitored to ensure there are no unnecessary delays. Retitling may be required for assets such as automobiles, real estate, partnerships or business interests. The sooner your clients begin this retitling process, the less likely that anything will be left behind or overlooked.

Aside from the assets, it is highly recommended that a new budget be established, with a full understanding of the sources and uses of monthly funds. The best way to see the long-term impact of this new lifestyle is to update the long-term financial plan and review the investment portfolio. Don’t forget to encourage clients to review their estate plan and all beneficiaries. The best time to begin this is as soon as the divorce is final.

Final words

Each stage of the divorce process involves a great deal of data gathering, review, and discussion. Remind your clients that working throughout the process with a trusted advisor, especially a Certified Divorce Financial Analyst, will help ensure the most comprehensive approach and set them up for long-term success.

Mariella P. Foley is a partner and wealth advisor with Cerity Partners in Westfield, N.J. She focuses her practice on working with women to build their financial confidence. Mariella is a Certified Financial Planner, an Accredited Domestic Partnership Advisor, and Certified Divorce Financial Analyst. Contact her at or 908-374-2570.



Latest news

Industry Groups Oppose New Advisor Best Practices Rule

FSI and others say Nasaa’s rule proposal is confusing and could negatively impact Main Street investors.

Study Reveals Insight into Affluent American Investors’ Mindsets

Key findings of the study include a noticeable decrease in financial security among affluent Americans.

Did ETF Investors Profit from Hamas Attack?

A U.S. professor stands by his research showing there was a spike in short selling of an Israel ETF leading up to the attacks. The Tel Aviv exchange says the research is inaccurate.

Ex-Wells Fargo CEO Sues Bank For $34 Million In Withheld Pay, Stock

The former CEO says the bank canceled stock awards and withheld a bonus he had earned before stepping down.

Black Swan Fears Drive Caution, Plus 60/40 Three-Decade Performance

VIX sees record trading as looming economic and geopolitical risks keep investors cautious about a potential return of volatility.

Carson Group: Still Too Few Women in Wealth Management

Its latest report confirms the industry has made little progress in gender diversity despite a lot of talk.