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How To Help Your Adult Child Through A Divorce
Key Considerations For Emotional And Financial Health
By Christy Pedersen
Learn more about Christy by visiting her bio page.
I recently helped a client guide his adult child, a daughter, through a divorce. I watched the two of them struggle with a range of issues including custody of children, the emotional burden of the breakup and how to protect the adult daughter’s financial interests.
Divorces are difficult and can drain a person’s energy and focus. This is where a parent can be a real help to their child, if the child is willing. In my experience, a parent can actually strengthen the bond with their child, and even their grandchildren, if the parent offers the right kind of support.
I’d like to share some insights with you that I believe can help your family through this difficult time.
The major goals
Most parents, in my experience, have two major goals as it relates to an adult child going through a divorce: protect the child and grandchildren and preserve relationships. Anyone with a son or daughter-in-law has already learned how tricky it can be to navigate discussions with your own child about their relationship.
In many cases, this can be further complicated by the fact that you have developed your own relationship with the in-law and also want to ensure your relationship with the grandchildren will remain as strong as ever.
While you may feel as if there is little you can do in this situation, I recommend that you not underestimate your influence. Even if your child does not admit it, they need your help now more than ever before. Stressful situations like divorce make it very difficult for people to think clearly and take the best steps possible toward a better future. You can be a voice of sanity through this process.
If your child is open to even a modicum of support, here are four practical suggestions to help you preserve relationships and protect your child’s financial interests. These are also, by the way, the steps that your child should take even if they are not open to your participation:
- Build a balance sheet and cash flow statement.
- Make sure you have an accurate picture of the value of assets to be divided.
- Build a picture of the new financial and lifestyle realities post-divorce.
- Share your story.
Let’s explore ways to accomplish these goals that will almost certainly strengthen your relationship with your child.
Build a balance sheet and cash flow statement
One of the very first steps, from a financial perspective, that your child needs to take is building out a balance sheet and cash flow statement. These documents not only serve as a starting point for what your child might have to work with going forward, but they will also need to be submitted to the court.
I have found that most new clients in their mid-30s and 40s have stopped budgeting (if they ever did), and while they have a general sense of their various financial accounts and debts, it’s rarely been thoughtfully prepared into a formal document.
As a parent, you likely have a good sense of your child and their lifestyle. You also have the experience to know what to look for as far as spending categories and various accounts and assets they might have.
One area where clients are often least aware is company benefits. Does your child have any deferred compensation? Are there stock options or restricted stock? What are the terms for vesting and expiration?
Offer to help your child build out a list of all financial accounts and assets and all debts, including terms. Help them to think through where their earnings go as far as taxes, insurance, housing, debts, transportation, groceries, clothing, entertainment and other such expenses.
This process will lay the ground work for what their new lifestyle might look like after the divorce.
Make sure you have an accurate picture of the value of assets to be divided
Once all of the assets, accounts, liabilities and debts have been identified, look for opportunities to go beyond face value. Here are some areas to look closely:
- A Traditional IRA or 401k with a $250,000 balance does NOT equal $250,000 in home equity.
- A $500,000 brokerage account split in half might not really be worth half if one side ends up with all of the low-basis tax lots or less-liquid investments.
- A deferred compensation account might be invested in volatile assets that could change dramatically before vesting.
If you do not have the expertise to complete these analyses, I recommend that you reach out to me so I can either help you complete the analysis or even do it on your behalf. Digging in to the financial details is an important step you can take to protect your child’s long-term financial interests.
Build a picture of the new financial and lifestyle realities post-divorce
Once there is a reasonable budget that accounts for the former family lifestyle, help your child through the process of re-assessing what the post-divorce financial statements might reflect.
You can serve a valuable role in helping your child determine where realistic cuts can be made. When emotions are running as high as they do in these situations, decision-making and creativity is meaningfully diminished. You can play a critical role in helping to ideate creative solutions to the new financial reality that your child will have to adjust to.
Share your story
While divorces are certainly difficult times, they also can open doors for communication and meaningful reflection. I recommend that you both listen to your child and share your story about past difficulties and how you overcame them, particularly the financial components.
You might be surprised at the rich conversations that result as you reminisce about your own life and past challenges. It’s a tremendous opportunity to share how you faced financial tradeoffs in your life and how you set and managed priorities.
What shaped your own values around money? How is your child’s life different from your own and how can they make tradeoffs and set priorities to reflect their own values? What is the opportunity for them to set examples for their children?
Done well, all of this could be a valuable opportunity to strengthen the bonds in your family without creating any bad will, even if your child ultimately remains with their spouse. It opens the door to start or continue a broader dialogue about the role of money in your family and how it interacts with your values. It allows you to clearly state or reiterate your hopes and dreams for your children, while listening to theirs.
How can I help?
Of course, everything I’ve suggested here is based on the assumption that you have the emotional energy to be a resource to your child as they go through the divorce. Some parents find this situation to be so painful that they’d prefer just to be supportive, a listening ear. You might also realize, after looking at the financial risks, that you prefer to have a partner with you on this journey.
This is where I might be able to help you a great deal. If you would like help with moderating a family meeting with your child – or if you’d like us to work with your child on creative ways to maximize their new reality, let’s have a conversation.
The information contained in this article is provided for informational purposes only. No illustration or content in it should be construed as a substitute for informed professional tax, legal, and/or financial advice.