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How Do You Split Up Debt in a Divorce?
Dividing debt in a divorce can be complex. EP Wealth’s Linda Ginder, CFP®, EA, CDFA®, shares insights on handling mortgages, loans, and credit...
Financial outcomes after divorce are shaped by the roles spouses took on during marriage. EP Wealth CFP®, EA, CDFA®, Linda Ginder, reveals who is most affected and how to approach financial planning post-divorce.
Who suffers the most financially in a divorce? The answer has a lot to do with the roles spouses play during the marriage, as EP Wealth CDFA® Linda Ginder explains. Find a divorce financial advisor near you.
Who Suffers the Most Financially In A Divorce?
Despite their best efforts to arrive at an equitable agreement, financial disparities between spouses after divorce are a reality for some couples. There is a good body of research on the subject that shows women bear the heaviest financial burden when a couple divorces. But as a Certified Divorce Financial Analyst® at EP Wealth, I know that inequalities may have more to do with household dynamics than gender.
Challenges Facing Stay-at-Home Spouses
In my work as a CDFA®, I would say, that in some cases, the spouse who stays home during the marriage typically fares worse in divorce than the working spouse. That is because when they exit the workforce, they tend to stop growing those skills and developing the experience that makes them marketable.
The more time that passes, the more challenging it can become to reenter the job world and earn the income required to become financially independent. Now, that’s not to say that everything a stay-at-home parent does is not valuable. It absolutely is.
And some couples decide early on that one spouse will maintain the household income, while the other stays home and cares for the children. It’s often a mutual agreement. But in the context of divorce, it can be harder for the spouse who stopped working to recover the income lost during their absence from the working world.
It’s important to mention that the age and time someone divorces can also affect their financial well-being as a single person. For example, someone who only takes two or three years off and divorces at a young age could financially recover more easily than someone who hasn’t been employed for 15 or 20 years. That could be because the first individual simply has more time to save for retirement.
How Are Stay-at-Home Spouses Affected?
I have seen how a divorce can affect a stay-at-home spouse. For some clients, this means a drastic lifestyle change.
Let’s say their soon-to-be-ex always provided financially for the household. Now, in a divorce, that dynamic changes. The spouse who stayed home has to make important financial planning decisions about their future.
They may have to create and stick to a budget for the first time. They must decide what to do with the marital home.
That’s where I come in and help them consider different options. Do they have the income to keep the house? Can they afford to buy their ex out and retain the family home? Does it make sense for the couple to sell the home and split the proceeds?
In some cases, the primary earner can potentially provide alimony for a specific amount of time, allowing their ex-spouse to go back to school or acquire new skills so they can resume working and begin supporting themselves.
RECOVERING FINANCIALLY AFTER DIVORCE
After divorce, stay-at-home spouses may find themselves facing financial decisions they haven’t had to deal with in years—sometimes ever. I’ve worked with clients who suddenly find themselves responsible for budgeting, managing debt, and building credit in their own name. It’s a major adjustment, but there are steps that can help ease the transition.
One of the first things I advise is pulling a credit report. If most financial accounts were in a spouse’s name, it’s important to start building independent credit. Opening a credit card, even with a modest limit, and paying it off each month can be a smart way to get started. At the same time, it’s worth reviewing any joint debts. Some clients are surprised to learn they’re still responsible for balances on shared credit cards, even if an ex-spouse agreed to pay them in the divorce settlement.
Debt management is another key consideration. Refinancing a mortgage or consolidating credit card balances may help make payments more manageable. It’s also a good time to explore employment options. For those returning to work, even part-time income can provide financial stability while adjusting to life after divorce.
There’s no one-size-fits-all approach, but taking small, strategic steps and budgeting before a divorce is finalized can make a big difference in regaining financial independence.
GRAY DIVORCE AND RETIREMENT
Divorcing later in life often means untangling decades of shared finances. I’ve seen firsthand how this can impact retirement plans. A common concern is how to divide retirement savings in a way that protects both parties long-term.
Social Security benefits are another factor. Some individuals may still be eligible to collect spousal benefits from an ex, depending on the length of the marriage and other factors.
Housing decisions can also be challenging. Keeping the marital home might feel like the right choice emotionally, but it’s critical to consider whether it’s affordable long-term. I’ve worked with clients who initially fought to keep their homes, only to realize later that property taxes, maintenance, and mortgage payments made it a financial burden. Selling and downsizing can free up assets that may be better used elsewhere, like funding future healthcare needs.
Speaking of healthcare, this is another area where planning ahead is essential. Losing access to a spouse’s employer-sponsored health insurance can be costly, and for those not yet eligible for Medicare, it’s important to explore coverage options before finalizing a divorce agreement. Long-term care planning is another factor to weigh—without a spouse to rely on for caregiving, it may be necessary to look into long-term care insurance or other funding strategies.
It's a Numbers Game
Ultimately, one way to make decisions about dividing assets and other financial aspects of divorce is to look at the numbers. As a CDFA®, it’s my job to have these conversations with clients. I encourage them to be realistic about what things cost, and what they can comfortably afford.
I know these conversations come with a lot of emotions. Divorce is a life-changing event. The goal of divorce financial planning is to provide the information and guidance that can help couples make educated decisions for the next chapter of life.
To speak with an EP Wealth CDFA® in your area, call 877-590-5426 or connect online today.
DISCLOSURES
- Information presented is general in nature and should not be viewed as a comprehensive analysis of the topics discussed. Content does not involve the rendering of personalized investment advice, nor is it intended to supplement professional individualized advice.
- As the author of this piece, EP Wealth Advisors, LLC (“EPWA”) has tailored the messaging of this article to align with the categories, services, qualifications, capabilities and services that it offers and can service. It is intended to serve as a tool containing general information that should assist you in the development of subsequent discussions with the appropriate professionals. EPWA makes no representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information presented. All expressions of opinion by the author are subject to change without notice.
- EPWA is not in the business of providing legal services or advice. Always consult your tax advisor and/or attorney regarding your specific situation.
- The Certified Divorce Financial Analyst (“CDFA®”) that are employed by EP Wealth Advisors, LLC are not practicing attorney, accountant, tax professional, or legal expert. All assessments and subsequent recommendations limited and are performed exclusively under the guise of financial planning. An attorney must be retained in order to professional and accurately assess legal options and/or to provide counsel. We also recommend consulting a CPA, accountant, or tax professional.
- Hiring or working with a CDFA® does not guarantee or ensure that a client or prospective client will experience encouraging or favorable results.
- Information presented is general in nature and should not be viewed as a comprehensive analysis of the topics discussed. It is intended to serve as a tool containing general information that should assist you in the development of subsequent discussions. Content does not involve the rendering of personalized investment, tax, or legal advice nor is it intended to supplement professional individualized advice by the appropriate professional(s).
- The decision to work with a CDFA® professional will differ amongst clients and depend on individual circumstances of each respective client. There is no guarantee or warrantee that the services offered by EP Wealth Advisors, LLC and/or a CDFA® will satisfy your divorce service needs. Services offered by other professionals may align more to your specific needs.
- EP Wealth Advisors, LLC. is registered as an investment advisor with the SEC and only transacts business in states where it is properly registered or is excluded or exempted from registration requirements. SEC registration does not constitute an endorsement of the firm by the Commission nor does it indicate that the advisor has attained a particular level of skill or ability. Information presented is general in nature and should not be viewed as a comprehensive analysis of the topics discussed. It is intended to serve as a tool containing general information that should assist you in the development of subsequent discussions with the appropriate professionals. Content does not involve the rendering of personalized investment advice nor is it intended to supplement professional individualized advice. Please consult a professional Financial Advisor before applying any of the approaches or strategies made referenced directly or indirectly in this publication.
- The information presented here is not intended to be regarded as a complete list of things to consider, including but not limited to, categories, services, or qualifications that a client or prospective client should contemplate when assessing or comparing Financial Advisors and/or Firms. As the author of this piece, EP Wealth Advisors, LLC (“EPWA”) has tailored the messaging of this article to align with the categories, services, qualifications, and capabilities that it offers. There is no guarantee or warrantee that the services offered by EPWA will satisfy your financial services requirements. Services offered by other advisors may be more suitable to your specific needs.
- There is no guarantee nor is the intention of this article to establish any sense of assurance, that, if followed, the strategies referenced here will produce a positive or desired outcome. In fact, there is no guarantee or warranty that any of the steps detailed will enable the ability to achieve appropriate, successful, profitable or desired results. The possibility of unfavorable and unsuccessful results is not lessened by the information and strategies made referenced here.
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