For Michelle Buonincontri, getting divorced wasn’t just an emotional blow; it was also a significant financial setback.
Buonincontri, who now works as a certified financial planner and certified divorce financial analyst, estimates that her lack of a prenuptial agreement and the terms of her divorce settlement ultimately led to her losing out on about $1 million in retirement savings.
When Buonincontri got married in 1997, she and her then-husband each already owned property. They chose to live in the house that Buonincontri had bought on her own with a roughly $20,000 down payment before they were married.
Fifteen years later, when the couple initiated divorce proceedings, that decision came back to haunt her.
Buonincontri’s parents got divorced, and her father developed health issues. To support her father, Buonincontri and her husband agreed to refinance the home’s mortgage and give him the proceeds.
At the time, though, Buonincontri was primarily a stay-at-home mother, working only part-time as a software developer. In order to qualify for the new loan, she added her husband to the house’s deed so that the underwriter would consider his income.
The house was located in New York, and she had assumed that state law would protect her right to the home in the event of a divorce, because it was her own property.
She realizes her mistake today. “I should have had a marital agreement that said it was my property,” she said.
Divorce proceedings put a major strain on her retirement savings
Initially, the couple planned to go to a mediator to handle their divorce, which wouldn’t have been expensive. But they bowed to pressure from family and friends and took the court route instead.
Buonincontri and her ex-husband agreed to sell the home as part of the divorce settlement, with the proceeds meant to be split evenly between the two, even though she had originally purchased the home on her own.
Complicating matters, health concerns arose for one of Buonincontri’s two kids as the divorce was being finalized. In order to be closer to family for support, she decided to move to Arizona, where she now lives.
She ultimately agreed to give up custody of her other child to her ex-husband so that she could leave New York. After she moved, Buonincontri’s ex-husband changed his mind regarding selling their home, and it became difficult for her to enforce the property sale from across the country, she said.
In her divorce, Buonincontri retained her individual retirement account, which contained both separate and marital assets.
However, the divorce settlement did not reflect that she had kept this IRA as a concession in exchange for not receiving spousal-support payments from her ex-husband and delaying child support, Buonincontri said. It allegedly incorrectly identified the account as containing only Buonincontri’s own assets.
By this point, Buonincontri and her husband had spent around $200,000 in legal fees between the two of them, she said, which exhausted most her cash savings. On top of that, Buonincontri had to dip into her retirement savings and rack up credit-card debt to secure housing in Arizona, furnish her new home and pay for her child’s expenses.
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Eventually, Buonincontri was faced with the prospect of going to court to hash out the sale of the New York house and settle the alleged discrepancy regarding the IRA. To avoid putting her children through more emotional turmoil and incurring further attorney fees, Buonincontri decided to let her ex-husband keep the home rather than sell it. At the time, the equity in the home that would have been split after the mortgage was paid off would have added up to roughly $250,000.
“It’s had a significant impact on my retirement planning,” she said. “When I moved I had to dip into my retirement assets to buy a home for me and my children because I didn’t have that money.”
Between the lost return on the sale of the home and the costs she incurred to pay for a lawyer and move across the country, Buonincontri said she lost around $200,000 that would have gone toward her retirement. She estimate those funds would have grown to $1 million over 20 years. Those calculations don’t include the additional savings she missed out on as she worked to pay off the debt she accrued in this time.
She has not yet earned that money back. “I’m still working towards that,” she said. “It was a huge loss. Based on the trajectory my husband and I had at the time, we could have retired at 50 with several million dollars.”
What she could have done differently — before she got married
As Buonincontri says, no one gets married thinking they’re going to get divorced. “Folks are more likely to talk about their sex life or their most recent encounter on Tinder MTCH, -0.71% than they are to talk about finances,” she said.
Because both she and her ex-husband had significant assets before they got married, the two could have avoided a lot of frustration had they drafted a prenuptial agreement. “Just like you plan for death by having life insurance, you should think about your marriage the same way — what if divorce happens?” she said.
Additionally, it’s important to work together as a couple to determine which assets to keep separate and which are considered jointly owned, she added.
The benefits of having a financial analyst in divorce proceedings
Around two years after she moved to Arizona, Buonincontri got her divorce financial analyst certification, and today she advises clients who are ending marriages through her firm, Being Mindful in Divorce. “I wanted other families to know there are alternatives,” she said. “Had a CDFA been part of my process, it would have made things clearer.”
Buonincontri said she turns to her personal experience with divorce when working with clients. Certified divorce financial analysts are hired to help couples looking to end a marriage work through the division of their assets to ensure an equitable settlement. CDFAs can be hired to work on behalf of one or both spouses.
When they work with both spouses, the CDFA plays a neutral role. They typically ask to see multiple years’ worth of financial statements, including bank statements, credit-card bills, tax returns and retirement statements. They use these documents to verify the information on the affidavit of financial information provided to the court.
Beyond just looking at assets, these financial analysts will also study the couple’s cash flow and model expected future returns on investments to ensure that the ultimate settlement is fair for both parties. A CDFA can also help a person seeking a divorce to get a budget in place as they adjust to life being single once again.
The divorce process, she said, is overwhelming and exhausting. “When you work with a CDFA, it just becomes about the data. It helps to take the emotions out of the economics.”
This story was updated on Sept. 18, 2019.