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Steer Clear of Financial Advice from Friends and Family During Your Divorce

posted by admin 3:42 PM
Thursday, November 3, 2011

Imagine you are enjoying a wonderful evening at a five-star restaurant. You’d like to order a bottle of wine, but you’re not sure which one would best accompany your meal. Would you ask the bus boy or valet for their recommendation? Of course not! If you’re ordering wine at a five-star restaurant, you want the advice of the wine expert on staff. Naturally, you would turn to the sommelier.

The same logic applies to other aspects of daily life. If you have a problem with your car, you take it to a trusted mechanic. If you have a concern about your heart health, you consult a cardiologist, etc.

So, to whom should a woman turn when she has concerns about the financial aspects of her divorce?

The answer is simple: She should consult only with a professional divorce financial expert – someone who is specially trained to handle the multifaceted financial aspects of today’s complex divorce settlement agreements.

Unfortunately, that’s often easier said than done.

Why? Because when it comes to divorce, there’s no shortage of friends and family who are willing to lend their advice.

In fact, as I see it, divorcing women need to learn to make an important distinction. They need to learn: 1) where to get financial advice, and then, just as importantly, 2) where NOT to get financial advice. Quite frankly, the opinions and recommendations of friends and family can often be more detrimental than helpful. They all mean well, of course. But, this is definitely one of those instances where a little knowledge can be a dangerous thing.

To illustrate my point, here is my short list of people you should “tune out” if they start volunteering financial advice during your divorce:

1. Friends, family, or anyone who claims to have “been there” (or knows someone who has)

Lots of people have a divorce story to tell, and usually, they’re quite eager to share it.  In reality, though, no two divorces are alike. Even relatively fundamental things like differences in geography can have a profound impact. Just because a friend of a friend who lives in Silicon Valley received a settlement that included half of her husband’s tech company doesn’t mean you will get the same deal in your east coast divorce. (See my earlier post for more details about the differences between Community Property and Equitable Distribution States.)

Likewise, even though your cousin kept her marital home , that doesn’t mean you should. And, discussion about your stock portfolio can lead to a veritable minefield of misinformation, as well. Uncle Joe, who helped you get on the right track with investing as a twenty-something, just isn’t the right person to help you understand how dividing your current portfolio will impact your long-term financial well-being.

As I mentioned earlier, all of these people are well-intentioned, and there’s no doubt that they can provide support for you in other ways during your divorce. But, when it comes to advice about your finances, please learn to say, “Thanks –but, no thanks.”

2. A financial professional who doesn’t specialize in divorce

A CPA can file your taxes or give you a snapshot of your current and past financial status.  A typical financial adviser is hired to help you invest in stocks, bonds and mutual funds.  But should you rely on financial professionals like these during your divorce? No, you shouldn’t.

Instead, you need someone with a skill set specific to divorce finances.  A Certified Divorce Financial Analyst (CDFA) specializes in divorce finance and will carefully weigh each settlement proposal presented and project how it will affect your short- and long-term finances while calculating the tax implications for each scenario.

Keep this in mind: The US is home to more than 1 million accountants and some 320,000 financial advisors. But there are only about 3,500 CDFAs who are specifically trained in the financial aspects of divorce.

What’s more, many CDFAs have completed additional education and training. For example, in addition to being a CDFA, I have attended law school and have also completed dozens of advanced training courses in finance and divorce, including many of the same continuing education courses that are required for divorce and other attorneys (trust and estate, asset protection, etc.).

3. An attorney

Finding a firm that specializes in divorce/family law and dedicates at least 75 percent of its practice to divorce is a MUST.

But, these days, there are numerous critical financial tasks that are beyond the scope of even the finest divorce attorney’s expertise. For example, preparing financial affidavits and projecting the financial and tax implications of each divorce settlement option are now the purview of CDFAs.

Put another way, think of the CDFA as the financial quarterback of your divorce team. A CDFA is responsible for creating comprehensive financial analyses and projections so you and your divorce attorney can fully understand the short- and long-term financial and tax implications of each proposed divorce settlement offer. Then, your attorney can use that information to substantiate and justify his/her positions when negotiating with your husband’s attorney.

Without a doubt, if you’re going through a divorce, you’re going to get advice –whether you asked for it or not. The trick is to know which advice to heed and which advice to ignore. Get the specialized help you need by hiring a CDFA. They’re the professionals that can evaluate your financial circumstances before, during and after a divorce, while helping you plan for a secure financial future.

All content on this site/blog is for informational purposes only, and does not constitute legal advice. If you require legal advice, retain a lawyer licensed in your jurisdiction. The opinions expressed are solely those of the author, who is not an attorney.

 

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How To Start Preparing Your Personal Finances for Divorce

posted by admin 3:04 PM
Monday, August 29, 2011

“A journey of a thousand miles begins with a single step.”

When the Chinese philosopher Lao-tzu said that nearly 3,000 years ago, he certainly wasn’t talking specifically about divorce – and yet, his words of wisdom do apply.

Divorce is a journey, of sorts. And, even though the mere thought of divorcing your husband may seem completely overwhelming at first, you do have to engage in the process. You have to take the initiative. You have to begin with that all-important first step.

As a Divorce Financial Strategist(TM), my advice is that you start this “journey” by getting a handle on your personal finances.  With just a few relatively simple steps, you can be on your way to establishing a firm financial foundation, one that will serve you well as you proceed through the divorce and long into the future, too.

For example, in order to start preparing your personal finances for divorce you need to:

1. Take inventory of all financial documents and records. Gather all your financial records, including bank account information, mortgage statements, credit card bills, wills, trusts, etc. (See more details in our Divorce Financial Checklist.) Once you have collected them, don’t keep these records in your home. Make copies, and take them to a trusted friend/family member, or use a safe deposit box that your husband can’t access.

2. Begin securing funds for legal and other professional fees. You’ll need resources to hire a qualified divorce team.   If your husband controls all access to the family funds, he can make this difficult (if not impossible). Choking off the money supply is a common tactic, but there’s no reason you have to fall victim to this kind of financial squeeze. Be proactive instead. Make sure you have funds that are secure and available only to you.

3. Open new accounts in your name. Your divorce attorney may instruct you to withdraw up to half of your joint funds and deposit them in new accounts.  (State laws will dictate what you can and cannot do.) Don’t use the bank where you have your joint accounts. Go to a different bank, and open a new checking and savings account in your name. Moving forward as a single woman will require that you establish good credit, so open a new credit card account in your name, as well. Keep in mind, though, that new federal regulations are making it harder than ever for women with little or no income to establish credit on their own. You’ll have to proceed with caution . . . just make sure you do proceed.

4. Get a copy of your credit report. While gathering your financial records (Step 1), be sure to get a copy of your credit report, too.   Monitor it so you can keep tabs on your credit score. (See my post, How To Protect Your Credit Score During Your Divorce, for more tips.) Plus, if you keep a watchful eye on your credit report, you’ll also be the first to know of any unusual activity. Is your husband charging gifts for his girlfriend on your joint credit cards? Or is he dissipating marital assets in some other way?

5. Open a post office box. You need your mail delivered to a secure, locked box that only you can access. Make sure you use this address to receive correspondence from your divorce team, your new accounts, etc.

6. Change your will, medical directives/living will, etc. Most states won’ t allow you to completely disinherit your husband until after the divorce is final. But, you can take steps to prevent him from making medical decisions on your behalf or inheriting all of your assets should you die before the divorce settlement agreement is signed. Remember, you’ll also want to change beneficiaries on life insurance policies, IRAs, etc.

Once you have completed these initial steps, you will be on your way towards a new and secure financial future. Take it step by step, and you’ll start feeling less overwhelmed, more knowledgeable and better equipped to continue on your journey to a single life.

All content on this site/blog is for informational purposes only, and does not constitute legal advice. If you require legal advice, retain a lawyer licensed in your jurisdiction. The opinions expressed are solely those of the author, who is not an attorney.

 

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I Have Been Ordered To Pay – How Long Will Alimony Last?

posted by admin 10:00 AM
Tuesday, March 15, 2011

When Mary and John married the plan was for Mary to work while John completed his doctorate in literature.  The idea was that John would eventually get a job in academia.  That never happened. John was unemployed during most of the marriage.

When Mary and John decided to end the marriage, Mary thought that they would split the marital assets and that would be it.  She was surprised to find that she was considered the primary breadwinner and that John was the “economically disadvantaged”  spouse who needed help getting back on his feet. She was ordered to pay alimony for three years.

According to the Federal Bureau of Labor Statistics, women are the primary breadwinners for one-third of all marriages.  This means that more and more husbands are the recipients of alimony (also known as spousal support or maintenance).

State laws differ, but generally speaking “economically disadvantaged” (dependent) spouses are granted temporary alimony / maintenance based on the length of their marriage and whether they have the ability to financially support themselves (For more details on how alimony is determined, click here - http://bedrockdivorce.com/blog/?p=44).

So this leaves a lot of women asking, “How long will alimony last?”

In certain situations, it is possible that alimony / spousal support will be granted for a lifetime.  However, depending on the circumstances it is more likely that maintenance will be granted for a certain period of time.  Regardless, there are two situations where alimony will almost always terminate:

1.    If the receiving spouse remarries; or,
2.    If the paying or receiving spouse dies.

There are certain other circumstances that may be considered as grounds for terminating alimony such as if the receiving spouse is living with another person as if they were a married couple.  However, having alimony terminated in these situations may mean going back to court and more legal fees.

If you are a woman and the breadwinner of your family and are contemplating or facing divorce, contact one of our Divorce Financial Strategists™ who can guide you through the process so that you will have a better understanding of how much alimony, if any, you will need to pay and for how long .

All content on this site/blog is for informational purposes only, and does not constitute legal advice. If you require legal advice, retain a lawyer licensed in your jurisdiction. The opinions expressed are solely those of the author, who is not an attorney.

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One of the issues that often gets overlooked during your divorce is securing your divorce settlement payments, like alimony and child support, should something happen to your ex-husband.  The death of an ex-spouse, and subsequent loss of that income, could be financially devastating.

The Divorce Financial Strategists™ here at Bedrock Divorce Advisors™ bring up this issue with all of our clients because we’ve seen what losing this income can do to families.  Our recommendation is that a life insurance policy be set up in such a way that you will receive a tax-free, lump-sum payment of what you would have received over time from your alimony, child support and/or other divorce-related payments.

It is important to set up this life insurance policy before your divorce has been finalized.  This is because your husband could refuse to cooperate after the divorce in getting the required medical exam.  Or, you may find that he is uninsurable.  Either way, you need to know this before the divorce is finalized so that, if necessary, you can find alternate ways of securing your divorce settlement payments.

It is also critically important that you become the owner or irrevocable beneficiary of the policy.  If you are not, your ex-spouse could stop making payments and you would never know about it until it was too late.  However, if you are the owner or irrevocable beneficiary of the policy, you would be notified of non-payment of the premium and could take action before the policy lapsed.

Using life insurance to ensure divorce settlement payments can be very complex.  The laws and regulations differ from state to state.  Therefore, it is very important that you consult with someone who is knowledgeable and experienced in using life insurance and other methods to secure divorce settlement payments.

You might also consider setting up a disability insurance policy.  Statistically there is a higher chance that your ex-husband would become disabled rather than actually passing away.  If something happens to him and he is no longer able to work, he might seek a reduction in his alimony and child support payments.  Unfortunately, unlike life insurance, the ex-wife cannot own a policy on her former husband.  So you would need to put a mechanism in place to make sure that the disability policy payments are made.

If you have any questions about how to secure your alimony, child support and other divorce settlement payments, please contact one of our Divorce Financial Strategists™ here at Bedrock Divorce Advisors and we’ll make sure that you take the right steps.

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