The Big Freeze

By Shaun Peterson On 05/07/2021

Divorce creates loss- a loss of a person, loss of a planned future, loss of a perceived lifestyle, etc.  Deep emotional wounds are created and oftentimes, these wounds cause clients to experience the “Big Freeze.”

As a CDFA I focus on the financial aspects of divorce.  My goal is to help divorcing clients understand their current financial situation and what their financial situation will look like post-divorce.  We spend a lot of time focusing on the variables where we consider numbers and projections.  Along with numbers and projections there is another constant, the emotional toll a divorce takes on a person/couple.  Divorce creates loss- a loss of a person, loss of a planned future, loss of a perceived lifestyle, etc., etc.  Deep emotional wounds are created and often times I’ve seen those wounds cause clients to experience what I call the “Big Freeze.”

Typically, I see the Big Freeze occur with the person in the relationship that wasn’t heavily involved in the financial/business decisions during the marriage.  Not that they were kept out of the decisions, but they just weren’t involved because they preferred that their significant other handle the financial affairs.  They put their trust in them or had other tasks in the relationship that they felt more comfortable handling.  Now, post-divorce they have some big decisions to make that, often times, they can’t handle.  The common phrase I hear is “I just need to process all of this.”  I often advise clients to not make any knee jerk decisions, but there are a few that require expediency.  I’ve listed 5 “Big Freeze” situations below and suggestions to help recent divorcees overcome them-

  1. Managing assets- They likely didn’t receive “new” assets, but they now fall under their management so its new to them.  Commonly, a divorcee will receive as part of a settlement stocks, bonds and cash.  They likely have never managed these types of assets before and lack the understanding or knowledge of what to do with them.  This can cause a moment of indecisiveness so the comfortable move is to “think about things.”  My advice is to consult with a financial advisor who has experience and who actively listens to your concerns while also explaining your options carefully.  The decision to do nothing with new assets might leave a divorcee with assets they shouldn’t own or cost themselves future growth and/or income opportunities with those assets.

  2. Failing to update an estate plan as well as beneficiary designations- Having an estate plan with a spouse is very common and advisable, however, objectives and needs change with a divorce.  Taking the time to consider estate planning wishes post-divorce is a very important step.  Goals have changed and are unique.  Without updating documents it’s unlikely that new goals will be met.  Also, don’t forget to update accounts that pass on by beneficiary designation.  The most common are 401K plans, IRA’s, life insurance policies and annuity contracts.  If a former spouse is left as a beneficiary and an account owner passes away, the former spouse will receive the balance of those accounts.  Most of the time this isn’t the intention!

  3. Not trusting the right people- When going through a divorce, family and friends will most likely weigh in and voice their opinion on what you should do.  Relying on loved ones feels good, but consider that they don’t know the details of the divorce.  Your professionals such as your financial advisor, CDFA, CPA, attorney and psychologist should provide helpful advice.  Their advice might conflict with family and friend’s advice which can cause a divorcee to “freeze” and not know who to trust.  Meeting with your professionals and seeking their advice is a huge step in the process.

  4. Staying in the comfort zone for too long- An easy path to take because it requires no decision making, but it may not be the path to where a divorcee now needs to go post-divorce.  Staying in what is comfortable can be a big mistake.  This can apply to financial matters and lifestyle matters.  Even though making different decisions are hard, a divorcee needs to consider all of the other paths and not lock into the way things were in the previous chapter of their life.

  5. Moving on emotionally- This is a tough one, but we all know divorce is a very emotionally charged process.  Often times I’ve seen clients remain fixated on what happened or become spiteful towards their ex. This prohibits them from moving forward emotionally and they become stuck in the past.  Mental health is a huge issue these days and reaching out for professional help is common and acceptable.  Doing so can help a divorcee process the change and enable them to move forward to whatever awaits them in the world of opportunities that lie ahead.

As a CDFA my most important job is to consider all the financial assets during divorce for my clients, but I believe it is important to understand all the other issues clients are facing during their divorce.  The more I understand about a client’s situation the better I can advise them and help them move forward after the process is over.

 

Tagged with: divorce, decisions, assets, trust, emotional, comfort zone, financial, planning, CDFA