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Posts Tagged ‘Splitting Assets’

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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Should I Keep the House?

posted by admin 1:35 PM
Monday, September 26, 2011

Many women start divorce proceedings unprepared for the emotional rollercoaster surrounding the marital home.

Often, it starts as an internal struggle.  After all, most women fully expect to keep their house. To them, it represents a place of comfort that will provide solace during, and after, a time of great uncertainty.

But at times, the marital house can be just the opposite. It can serve as a painful reminder of all that went wrong with the marriage.

Mix in the feelings (and opinions) of a husband and children (not to mention the fact that the marital residence is typically a couple’s largest asset), and it’s easy to understand how a single piece of real estate can ignite a contentious tug-of-war.

Despite all these emotions, however, every woman must answer the question “Should I keep the house?” based on practical financial reasons. Part of our job at Bedrock Divorce Advisors is to complete the financial analyses and projections needed to help a woman understand if she can afford to do so, and if so, for how long.

Are you trying to decide whether or not you should keep your marital residence? If so, here are four key questions you need to consider:

1. Is your marital home a good fit for the new “single” you? Perhaps the house you’re living in now was purchased with the needs of others in mind. Did you choose the location because it was convenient for your husband’s business and travel?  Or did you seek out certain accoutrements largely because they were conducive to entertaining his business associates? If you did, maybe those accessories now seem frivolous and unnecessary.  Are the children you raised in the home grown and living on their own? This could be the right time to downsize and find a place that better suits your life now. It’s important to sort through and separate what you needed from a home in the past vs. what you need now and in the future.

2. What is the current value of the house? Because the marital home is often one of a couple’s largest assets, an unbiased third party real estate appraiser can be an integral member of your divorce team.  An appraiser will calculate the market value of the house by comparing it to homes recently sold and those that are currently on the market.  Ideally, these comparable houses are in close proximity to your home and have similar square footage, acreage and amenities.  Using this information, the appraiser will present an accurate selling price in the current competitive market.  The appraiser’s report could feature prominently in divorce negotiations whether or not you decide to keep the house.

3. What is the cost of keeping the house? Along with mortgage payments, you’ll also have to pay for taxes, utilities, seasonal maintenance, monthly service contracts and perhaps even additional staff to manage the property. Costs like these can add up to become a significant addition to your monthly expenses.   You’ll also have to consider looming repairs and renovations.   While projects like these may add value to the home, they could also prove to be a further financial drain on your resources.

4. What will you have to give up in order to keep the house? Often keeping the marital residence is a tradeoff, rather than an exchange of cash.  In other words, your spouse will keep something that is presented to be of equal value in exchange for the house. If you are concerned about hidden income/assets/liabilities, the possible dissipation of marital assets and/or the value of any item that’s under negotiation, you may need to add a forensic accountant and/or a valuation expert to your divorce team. They can determine the true worth of a business, professional practice or other asset with a keen eye for any misrepresentations that could skew that figure.  The valuation expert can also establish the value of stock options (and/or restricted stock, etc.) and intangibles such as  an advanced degree or training to help ensure that you do not unwittingly give up something of inequitable current or future value in exchange for the house.

Choosing whether or not to keep your marital residence may be one of the most difficult decisions you have to make during your divorce. Give yourself the time to think it through carefully, and remember: Think Financially, Not Emotionally®. You need to strategically manage your assets and develop a sound, comprehensive plan for financial stability and security in the 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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Divorce Alternative – Collaborative Divorce

posted by admin 10:51 AM
Wednesday, May 11, 2011

Last week I discussed two divorce alternatives – DIY divorce and mediation. As you may have surmised, I have reservations about both of these options.  Especially about the DIY divorce!  But mediation does have its place as does another type of divorce alternative that is gaining in popularity – Collaborative Divorce.

Collaborative Divorce

Simply put, collaborative divorce occurs when a couple agrees to work out a divorce settlement without going to court.

During a collaborative divorce both you and your husband will each hire an attorney who has been trained in the collaborative divorce process. The role of the attorneys in a collaborative divorce is quite different than in a traditional divorce. Each attorney advises and assists their client in negotiating a settlement agreement. You will meet with your attorney separately and you and your attorney will also meet with your husband and his attorney. The collaborative process may also involve other neutral professionals such as a divorce financial planner that will help both of you work through your financial issues and a coach or therapist who can help guide both of you through child custody and other emotionally charged issues.

In the collaborative process, you and your husband as well as your respective attorneys, must sign an agreement that requires that both attorneys withdraw from the case if a settlement is not reached and/or if litigation is threatened.  If this happens, both you and your husband must start all over again and find new attorneys. Neither party can use the same attorneys again!

Even if the collaborative process is successful, you will usually have to appear in family court so a judge can sign the agreement. But the legal process can be much quicker and less expensive than traditional litigation if the collaborative process works.

However, I have found that the collaborative method often doesn’t work well in complicated situations or when there are significant assets because, just like in mediation, all financial information (income, assets and liabilities) is disclosed voluntarily. Often the husband controls the “purse strings” and the wife is generally unaware of the details of their financial situation. When these circumstances exist, the door is often wide open for the husband to hide assets. Many high net worth divorces involve businesses and professional practices where it is relatively easy to hide assets and income. Additionally, the issue of valuation can be quite contentious.

Similar to Mediation, as a general rule, Collaborative should not be used if:

- You suspect your husband is hiding assets/income
- Your husband is dominating and you have trouble speaking up or you’re afraid to
- There is a history or threat of domestic violence (physical and/or mental) towards you and/or your children
- There is a history of drug/alcohol addiction

Because of these factors, I usually advise my clients to work with an attorney that can go to court and litigate for them if it becomes necessary. The reason is, if the collaborative process
breaks down, you don’t want to start all over again from the very beginning with a new attorney and pay new retainer fees.  That is a huge waste of money.

Most divorce attorneys, at least those that we recommend, will always strive to come to a reasonable settlement with the other party. But if they can’t or if the other party is completely unreasonable then, unfortunately, going to court might be the only way to resolve these issues.

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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Divorce and Your Grandmother’s Diamond Ring

posted by admin 10:00 AM
Tuesday, April 5, 2011

During divorce there are so many things to divide with your husband that you may have forgotten all about the diamond ring your grandmother gave you many years ago. But when you finally get around to thinking about it, it hits you like a ton of bricks.

Can my husband take my grandmother’s diamond ring in our divorce?

Most likely he can’t. That’s because that diamond ring would be considered your separate property. It was a gift or inheritance given to only you by someone who is not your spouse. (For a more extensive discussion on the differences between separate and marital property, please see my Huffington Post article). The only way there might be an issue, is if you used marital funds to repair the ring, replace a missing diamond, or somehow increased the ring’s value. If marital funds were used to increase the value of the ring, it may still be considered your separate property, but the increase in value may be considered marital property. That increase in value would then be thrown into the pot with all of the other marital assets.

On the other hand, all gifts that your husband gave you after you were married (and that you gave him) for anniversaries, birthdays, etc., are considered marital property and they would also be part of that pot of assets that gets divided. I know that seems unfair, but that’s the law.

However, any gifts that you received from your husband before your marriage, including your engagement ring, would be considered, in most cases, your separate property, since you received them while you were still single.

The bottom line is that you should never commingle your separate property with marital property. Then, if you should later divorce, there would be no question about what is rightfully yours. Another way to decide what should be separate property and what should be marital property is through a prenuptial or postnuptial agreement. (For a more detailed discussion on this, please see my Huffington Post article.)

If you are getting divorced, or thinking about it, and have questions about how your family heirlooms and other assets might be affected, please contact us. One of our Divorce Financial Strategists™ will help you protect what is rightfully yours.

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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