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Life Health > Health Insurance

Separation Anxiety

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Even those advisors who don’t specialize in “divorce planning” often get involved with their clients’ marital situations and dissolutions. And while some news reports have touted the events of September 11 as being a great impetus for couples to dismiss all plans of divorce, attorney Marlene M. Browne says that she and her colleagues have found otherwise. “It’s more a case of ‘Life’s too short,’” says Browne; couples are deciding in a flood to divorce and get on with their lives.

What are some of the biggest issues facing divorcing couples and their advisors? “Valuing businesses is more important than ever, but more difficult,” Browne says. “With the fallout of September 11, the country did no business for seven days.” This has seriously affected how businesses are valued in divorce settlements or splits, since for many businesses it’s not known yet whether that loss of business was a “blip” or whether the business will, in fact, fail. “The money isn’t there now to pay what they thought they would pay,” says Browne. “Cash flow is a problem and no one knows when it will change.”

Browne also points out that advisors will have to decide whether it’s worth it to hire a forensic accountant to determine where the money went. With the downturn in business and the loss of valuation in so many areas, spouses might not be hiding assets; those assets may simply be gone. Do your homework before deciding whether the expense of a forensic accountant is worth it, or whether your client might simply be left with another bill and no assets with which to pay it.

Another issue to watch is employee benefits, which have taken on additional value as a potential settlement asset. “They can be more valuable than the home asset [family residence],” says Browne. She reminds us that all the traditional financial assets in executive compensation packages, such as stock options, phantom plans, and other forms of compensation, are most likely severely reduced in value. That makes insurance, notably health insurance, even more important. Other issues to consider are life insurance and pension benefits, and the legal paperwork to ensure that the provision of such benefits is enforced.

In this time of layoffs, downsizing, and consolidation, Browne also warns that “women have to make sure they get part of [their ex-husbands'] severance packages, or they will be facing severe problems. [These packages] have to be valued and split, and they’re as important as pensions.” In line with this is the need to be sure that advisors find out every part of the benefits package, so that a dollar figure can be put on it and an asset division can be made fairly. Women who were divorced 15 or 20 years ago “did not get part of [their spouses'] pension,” Browne notes. As a result, now that these women are aging, they have no resources to fall back on for their own retirement.

Last but not least, advisors should be aware of the Children’s Health Insurance Program, established in August 1997. This program includes provisions for children to be covered by a parent’s health insurance despite what divorce may do to the family coverage.


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