Bedrock Divorce Advisors
Posts Tagged ‘affluent women’
Steer Clear of Financial Advice from Friends and Family During Your Divorce
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 leader 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.
Should I Keep the House?
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.
Do You Live in a Community Property State or an Equitable Distribution State?
Divorce laws differ from state to state, and so the simple truth is this:
Where you live impacts how assets and debts will be divided in your divorce case.
So, in addition to recognizing the difference between separate and marital property, you also must understand the laws that govern your place of residence.
The first step is to determine whether you live in a Community Property State or an Equitable Distribution State.
There are nine Community Property States: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin. Couples living in Alaska can “opt in” for community property, and Puerto Rico is a community property jurisdiction.
(You may be interested to know that the Community Property system is derived from Spanish law, and that’s why it’s found predominantly in the southwestern states.)
The remaining 41 states are known as Equitable Distribution States (or Common Law States).
What’s the difference between a Community Property State and an Equitable Distribution State?
In a Community Property State, both spouses are typically considered equal owners of all marital property. In other words, if you live in a Community Property State, whatever you earn or acquire during the marriage is co-owned by both parties, regardless of who earned it or whose name is on the title. That means whatever you earn or acquire during the marriage is spilt 50-50 during a divorce.
If you live in an Equitable Distribution State, the law “sees” assets somewhat differently. In an Equitable Distribution State, if your name appears on an asset (the deed to a house or the title to a car, e.g.), you are considered the owner. However, in an Equitable Distribution State, your spouse has the legal right to claim a fair and equitable portion of those assets in a divorce.
The equitable distribution of assets may result in a 50-50 split of marital property, or it may not. The goal in an Equitable Distribution State is not a 50-50 split. The goal is a fair (equitable) distribution of family property.
A variety of different factors are considered when dividing family property in an Equitable Distribution State. For example, equitable distribution may be based on:
- the length of the marriage
- the age and health of the parties
- the income and future earning capacity of parties
- the standard of living established during the marriage
- the value of homemaking and childcare provided during the marriage
- the value of the investment one party made to help with the education, training of the other party
- other factors
Please keep in mind that the entire discussion above involve marital property. Separate property is a different matter.
Whether you live in a Community Property State or an Equitable Distribution state, assets that you bring into the marriage or receive individually (an inheritance or your grandmother’s diamond ring, e.g.) remain yours. This separate property is exactly that –separate –unless you co-mingle it with marital property. For instance, if you deposited the inheritance from your parents into a joint bank account, it’s likely that those funds would no longer be considered separate property. Instead, once co-mingled, these funds would be considered marital property and subject to division as required by your state’s laws.
In a nutshell, here’s the difference between a Community Property State and an Equitable Distribution State:
In a Community Property State, marital property is divided 50-50.
In an Equitable Distribution State, marital property is divided equitably, based on a variety of factors.
Assets aren’t necessarily the only thing acquired during marriage. Debt is often acquired, too. And just as assets are divided in divorce, debt is divided, as well. Generally speaking, the division of debt follows the same principles as the division of assets. For example, in most Community Property States, both spouses are equally responsible for the repayment of debt acquired during the marriage, even if only one spouse enjoyed the benefit. (I’ll discuss the division of debt in more detail in a future blog post.)
Okay. Are you now feeling comfortable with the distinction between Community Property and Equitable Distribution States? You are? Great! Then, I won’t feel too badly about offering this one last wrinkle:
A few states have laws with both Community Property and Equitable Distribution characteristics.
(As I’ve said before, the division of assets can get complicated quickly!)
Please, consult with your divorce attorney to learn which laws are specific to your state, and remember, when it comes to divorce, geography is critically important. Regardless of where you live, it’s essential that you seek guidance from a qualified divorce team concerning the particular circumstances of your individual case.
All articles/blog posts are for informational purposes only, and do 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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