1 personal financial planning for divorce fpa ma-november 19, 2010 jeffrey h. rattiner, cpa, cfp®,...
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Personal Financial Planning for Divorce
FPA MA-November 19, 2010
Jeffrey H. Rattiner, CPA, CFP®, MBA, RFCRattiner’s Financial Planning Fast Track® – CFP® education
JR Financial Group, Inc. – Financial and Tax Planning
6410 South Quebec Street, Centennial, CO 80111-462814850 N. Scottsdale Rd.; Ste 355; Scottsdale, AZ 85254
Tel: (720)529-1888; Fax: (720)[email protected]
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Jeffrey H. Rattiner, CPA, CFP®, MBA, RFC
Mr. Rattiner is president and chief executive office (CEO) of Rattiner’s Financial Planning Fast Track®, Inc. and The JR Financial Group, Inc. which is a multi-purpose holding company with offices in the Denver and Phoenix metro areas serving consumers and the financial services industry.
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Rattiner runs the nationally acclaimed “Financial Planning Fast Track® which is a boot camp for financial advisors to take them through the education requirements mandated by the CFP Board of Standards within 7 months. His 22+ years of preparation experience demonstrates his long-time commitment to help advisors successfully complete the CFP ® Certification Examination. Rattiner teaches the following classes:
“Personal Financial Planning” “Insurance Planning” “Investment Planning” “Income Tax Planning” “Retirement Planning” “Estate Planning” “CFP Examination Review Course”
Rattiner was also rewarded the “1997 Distinguished Faculty Member-Teacher of the Year” by Community College of Denver.
Training
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Writing Personal Financial Planning for Divorce: Real World Solutions –
John Wiley & Sons “Rattiner’s Review for the CFP Certification Examination - Fast
Track” – (3nd ed.) John Wiley & Sons “Rattiner’s Financial Planner’s Bible: The Advisor’s Advisor” – John
Wiley & Sons “Financial Planning Answer Book” – CCH/Aspen “Getting Started as a Financial Planner” (2nd ed.) – Bloomberg
Press “Adding Personal Financial Planning to Your Practice”-American
Management Association “Personal Financial Planning Library” for Harcourt Professional
Publishing. Co-authored “Practicing Financial Planning” textbook He has been a columnist for Financial Planning Magazine and
Financial Advisor Magazine.
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Background Bachelor of Business Administration (BBA) with an
emphasis in Marketing Management from Bernard M. Baruch College of the City University of New York
Master of Business Administration (MBA) in Certified Public Accounting from Hofstra University
Certified Financial Planner education from New York University
Certified Financial Planner (CFP) Certificant with the CFP Board of Standards in Denver, Colorado
Certified Public Accountant in New York, Colorado, and Arizona
Insurance Broker
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TABLE OF CONTENTS
Chapter 1: WHAT IS MARRIAGE? slide # 7Chapter 2: MINIMIZING THE DAMAGE slide # 17Chapter 3: PAYING FOR DIVORCE slide # 20Chapter 4: PLAN OF ATTACK slide # 31Chapter 5: ALIMONY AND CHILD SUPPORT ISSUES slide # 40Chapter 6: INCOME TAXES slide # 52Chapter 7: RETIREMENT PLANS slide # 75Chapter 8: VALUATION ISSUES slide # 90Chapter 9: REDESIGNING YOUR PERSONAL FINANCIAL
PLAN AFTER THE DIVORCE slide # 100Chapter 10: AFTERWARDS: THE 25 STEPS TO FUTURE
SUCCESS slide # 154Chapter 11: PLANNING FOR SAME SEX COUPLE DIVORCE slide # 162
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Chapter 1: The Unthinkable
My wife and I were happy for twenty years. Then we met.-- Rodney Dangerfield
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Chapter 1: What is Marriage?
Financial Contract Business Deal
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What is Divorce?
Emotional Nightmare Irrational Process
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Objectives of Divorce
Minimize Damage 50/50 Split of Assets to start with Stay Focused on the End Result Be Prepared
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“Top 10” master financial checklist you need to ponder during the divorce process:
1. What do we own (assets)?
2. What do we owe (debt)?
3. What have our budgeted revenue and expense numbers looked like based on previous experience? (planning)
4. What sources of income do we expect to have going forward? (support)
5. What is the total marital estate worth now (assets – liabilities)?
6. Has everything been factored into account (future contingencies, compensation, unforeseen issues, etc.)?
7. Do I have all the paperwork necessary to begin (all the legal documents necessary for transferring title, verifying information, etc.)?
8. Can we negotiate a split ourselves or do we each need representation? (to help keep the cost down)
9. Which type of divorce makes the most sense? (with the goal of minimizing the damage)
10. How do we negotiate to encourage a “win-win” scenario for each spouse? (fair division of assets, debt and income) knowing that the ultimate conclusion is a lose-lose proposition
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Kinds of Divorce at a Glance
Kind of Divorce How It Works Hassle and Expense
Summary Spouses, who haven't been married long and don't have children or many assets or debts, file together
Relatively simple paperwork; lawyer usually not necessary; often only one filing fee
Default One spouse files for divorce, the other doesn't respond Relatively simple paperwork; lawyer may or may not be necessary
Mediated Trained, neutral mediator helps spouses work out settlement agreement without court fight
Not cheap - except compared to a contested divorce; can help spouses communicate
Collaborative Each spouse hires lawyer, but everyone agrees to settle out of court using negotiation and four-way meetings
Can take longer than mediation, but cheaper, nicer, and quicker than contested case
Arbitrated Spouses hire private judge to hear evidence and decide contested issues outside of court
faster and slightly less expensive than trial; can be more civil than court trial and provides greater privacy
Contested Souses hire lawyers and fight out issues at trial Expensive, stressful for everyone (especially children), guaranteed to ruin chances of civil relationship in future
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Representation
Educating Yourself Should You Go It Alone Attorneys
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Blocking Out the Competition
Playing Offense
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Becoming Too Passive
What happens when you don’t take the initiative?
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RATTINER’S PLANNING TIPS1. BE COMFORTABLE WITH YOUR DECISION TOPURSUE THE DIVORCE
(REGRDLESS OF WHO INITIATED IT.)2. The divorce process is a business decision. Keep emotions in check and pursue it as you would
any other business deal.3. Get a handle on your finances. Start with a budget so you can determine the assets, debt and
income issues that need to be addressed.4. Trial, permanent and legal separation are geared towards the same thing, but demonstrate
different ways of getting there. This goes back to answering the question, is divorce right for you?5. There are many different types of ways to approach divorce. Select the method that gives you the
least amount of discomfort. A method that helps maintain your health is primary. If it is also easier and cheaper for both spouses to run, that is a major plus. In addition, it offers you the best chance of a complete and overall recovery in the shortest amount of time.
6. The person you divorce is not the same person you married.7. Don’t sweat the small stuff. Pick and choose your battles carefully. Look at the big picture. Not
everything is a major battle or a huge catastrophe.8. Don’t be a part of the blame game. Take it from a CPA, two wrongs don’t make a right.9. Work with and attorney always. Don’t go through the motions without any counsel walking you
through the process. Even if your ex asks you not to work with one, you owe it to yourself and your ex to become as educated as possible.
10. Rely on a close family member or friend to bounce ideas off.11. Don’t be too hasty. Step back from the situation, try to look in from the outside and act rationally.12. Remember, it’s ultimately all about the children! Don’t make waves with your children by trying to
get revenge on your ex.13. Look at various scenarios including a best case and worst case picture. This will provide you with
some boundaries as to what to expect.14. No matter how bad it seems now, just remember my mother’s saying, “this too shall pass.”
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Chapter 2: Minimizing the Damage
The secret of a happy marriage remains a secret. --Henny Youngman
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Chapter 2: MINIMIZING THE DAMAGE In a lose-lose situation, the objective is to
try and get out of the marriage with as little damage as possible.
Damage includes financial and emotional issues – Pick your battles – Stay focused
Staying out of court Negotiating the deal
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Rattiner Damage Control Tips
Taking Care of yourself – It’s all about me! Protecting Your Mail Protecting Your Computer Open Your Own Credit card and Bank Account Close Joint Credit Accounts Protect Your Separate Property Filing a Tax Return Temporary Support Agreements Innocent Spouse Rule Re-enter the Workforce
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Chapter 3: Paying for Divorce
Marriage is grand…divorce is about 100 grand.
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Chapter 3: PAYING FOR DIVORCE Costs Involved What Should You Pay for in the Divorce? How Long Will these Expenses Go On? Creating a Budget Litigation Budget Analyzing Your Income Keep Your Income Separate Going Solo Solo Assets Separate Property Joint Assets Before Divorce Papers Have Been Filed After Divorce Papers Have Been Filed What is Truly Important How to Pay for It: Prevent Paying for Your Ex’s Legal Fees Your Monthly Budget Income Allocation for You and Your Ex Your Balance Sheet
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Costs Involved: What Should You Pay For & For How Long?
Everyday life New Temporary Costs – legal fees,
valuation experts, mediators, therapists, arbitrators
Pay as you incur
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Creating a Budget
Monthly Budget – the 3 C’s Litigation Budget
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Analyzing Your Income
Include income from all sources
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Keep Your Income Separate
Don’t Commingle!
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Separate Property
Keep separate!
Solo Assets – Those assets in Your Name Only, such as retirement plans
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Joint Assets
Before You File – use anyway you want
After you File – you are legally prohibited from doing anything that would harm your jointly owned interests or spouse’s separately owned property
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What is Truly Important
Have sufficient assets to feed and shelter each spouse until the divorce is final
Divorced spouses find out too late that there are cheaper ways to go about this process
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How to Pay for It: Prevent Paying for Your Ex’s Legal Fees The bigger wage earned generally loses here
Begin liquidating jointly owned assets
Put your attorney fees on a credit card
Take out a joint loan to pay bills
Use retirement assets
Sell assets, such as rental real estate
THE BOTTOM LINE: IT ALL ENDS UP IN THE ATTORNEY’S POCKETS!
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Rattiner’s Planning Tips1. Many costs show up for the first time during the divorce process. Take an accounting
of what each one represents before you act on it.2. Try to shorten the divorce process, where possible. The longer it goes, the more
expensive it becomes3. When figuring out how much each spouse needs during the divorce process, the first
thing you should do is to create a budget.4. Lawyers will provide you with a litigation budget if you request one.5. Once the divorce process is underway, keep your income separate from that of your
ex.6. As long as separate property is not commingled, it should remain separate property
after the divorce.7. Joint assets should be taken care of in a fiduciary capacity by each spouse during the
divorce process.8. Your responsibility for using and caring for joint assets differ before and after divorce
papers have been filed.9. Taking out a mortgage, home equity line of credit, liquidating assets in a joint
account, credit cards, and retirement accounts are all sources for paying legal fees during the divorce
10. Don’t forget the tax angles of your expenses, since this will truly determine what you have to spend during the divorce.
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Chapter 4: Plan of Attack: Let the Games Begin Love is the quest, marriage the conquest
and divorce... the inquest.
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Chapter 4: PLAN OF ATTACK Taking Your Ex Out 1-800-MOBSTER Litigation Anything Other Than Litigation Mediation The Mediator The Mediation Process Collaborative Divorce Arbitration The Prelims – Gathering the Evidence Discovery
Releases Interrogatories Depositions Subpoenas
Working Discovery’s Usefulness Going After Hidden Assets Personal Fault Issues
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Taking Your Ex Out
I KNOW WHAT YOU’RE THINKING!
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1-800-MOBSTER
Speak to me after this session for a direct contact!
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Litigation
Avoid at all costs!
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Anything Other Than Litigation
Mediation
Collaborative Divorce
Arbitration
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Going After Hidden Assets
Discovery
Interrogatories
Subpoenas
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Checklist for Hiring a Mediator1. What is your style of mediation?2. Do you have a specialty?3. Do you see couples separately and/or together?4. How do you charge and what are your fees?5. How many mediations have you performed? Is this your full time
job?6. What kind of background or training have you had? Are you a
judge?7. How do you work with spouses who each have their own attorney?
Are attorneys part of the process or do you refer legal issues to them directly?
8. What do you do if you see the mediation process breaking down?9. Do you work with and refer spouses to other professionals, such as
CPAs, CFPs, attorneys, therapists, etc.?10. How is confidentiality handled?11. Are you willing to testify in court, if need be?
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Rattiner’s Planning Tips1. It never pays to take your ex out. Be smart about the entire divorce process. Look at the big picture.2. Avoid litigation at all cost. It is too expensive, too demanding and will not enable you to get the result
you are trying to achieve. You can’t control the ultimate outcome.3. Mediation is a better bet if you and your ex can agree to it. Having an independent person be the
referee allows for a more equitable settlement. Remember, you’ll never be happy with the final outcome, but it will help minimize the damage and hopefully provide you with a settlement you both can live with.
4. Hire a former judge as the mediator. That person has the experience necessary to understand the issues, close the gap and wrap up the case. You always want to employ a no nonsense approach to be implemented by a no nonsense judge.
5. Make sure you understand the mediation process before moving forward. It puts both spouses on the same playing field looking for similarities between the parties rather than differences.
6. Collaborative divorce is another good option because the whole goal is to avoid going to trial. You need both sides to be open, honest and cooperate with each other. And you need both attorneys to feel the same way.
7. Arbitration is usually a winner take all scenario. If binding, you lose your right to challenge the decision. If non-binding, you’re probably not going to get from it what you should.
8. Discovery is a necessary step because it helps gather all the information you need to make the right decisions about the final outcome of the case. If you have your doubts about things, it forces the other spouse to act.
9. To go after hidden assets, make sure it is a worthwhile investment. It can be expensive if you get other people involved and not worth the cost.
10. Trying to prove personal fault issues are not really necessary in the grand scheme of things. It doesn’t get you closer to your ultimate goal of settling the case and moving on with life.
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Chapter 5: Alimony and Child Support Issues
The definition of alimony: The screwing you get for the screwing you got!
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Chapter 5: ALIMONY AND CHILD SUPPORT ISSUES Alimony (Maintenance and/or Spousal Support) Calculation and Length of Alimony Can the Payee Spouse Receive an Extension
for Alimony Payments?Remarriage
Initial Payment of Alimony Modification of Alimony Payment Hiring a Vocational Expert Deductibility Alimony Requirements
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Alimony (Maintenance and/or Spousal Support)
Definition - Alimony is designed to help the spouse with the lesser earnings potential gain the necessary training to re-enter or advance in the workforce
Temporary award – Concerned with the future needs of that spouse
Factors Involved – Length of marriage, each spouse’s age, vocational skills of each spouse, standard of living during the marriage, conduct of each spouse, who will maintain the household for the children, liabilities of each spouse, previous sacrifice of of one’s earning potential
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Calculation and Length of Alimony
Each spouse’s ability to earn income
Past earnings and projected future earnings
Can both spouse’s support themselves individually – then maybe no alimony is awarded
Your age
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Hiring a Vocational Expert
Absolutely necessary for the at-home spouse
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Alimony Requirements
Payments must be made under a divorce or separation instrument.
Payments must be made in cash. No designation of the payment from one spouse to the
other is considered to be alimony. If separated under a decree of divorce or separate
maintenance, the spouses cannot live in the same household.
Payments must end at the death of the payee spouse. Payments can not be considered child support. You and your ex cannot file a joint tax return with each
other.
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Alimony Recapture (Too Much Alimony Paid Too Soon)
If the spread of payments is greater than $15,000 per years 1 and 2, or years 2 and 3, with payments going downward, alimony recapture may be an issue
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Nick pays his ex-spouse, Carla, $60,000 alimony during the first year, $35,000 during the second year, and $12,000 during the third year. Calculate the amount of alimony recapture.
Example: Recapture of Alimony Note. Do not enter less than -0- on any line.1. Alimony paid in 2nd year 1.$35,0002. Alimony paid in 3rd year 2.$12,000_3. Floor 3.$15,000_4. Add lines 2 and 3 4._27,000_5. Subtract line 4 from line 1 5.
$8,0006. Alimony paid in 1st year 6. 60,000_7. Adjusted alimony paid in 2nd year
(line 1 less line 5)………… 7.27,000_8. Alimony paid in 3rd year 8.12,000_9. Add lines 7 and 8 9.39,000_10. Divide line 9 by 2 10.19,500_11. Floor 11.$15,00012. Add lines 10 and 11 12.34,500_13. Subtract line 12 from line 6 13. 25,50014. Recaptured alimony. Add lines 5 and 13
*14.$33,500*If you deducted alimony paid, report this amount as income on Form 1040. line 11. If you
reported alimony received, deduct this amount on Form 1040, line 31a.IRS Publication 504
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Child Support
Many states have a state calculator to help you figure out the amount yourselves
Modification can occur
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Alimony and Child Support – Tax Summary Chart
Deductible by Payor Taxable to Payee
Alimony Yes Yes
Child Support No No
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ALIMONY AND ITEMIZED DEDUCTIONSIF you must pay all
of the… AND your home is …
THEN you can deduct and your spouse must include as alimony…
AND you can claim as an itemized deduction…
Mortgage payment (principal and interest)
Jointly owned Half of the total payments
Half of the interest as interest expense (if the home is a qualified home)
Real estate taxes and home insurance
Held as tenants in common
Half of the total payments
Half of the real estate taxes and none of the home insurance
Real estate taxes and home insurance
Held as tenants by the entirety or in joint tenancy
None of the payments
All of the real estate taxes and none of the home insurance
Source: Adapted from IRS Publication 504 Divorced or Separated Individuals (2007) p.12
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Rattiner Planning Tips1. Alimony is deductible for the payor spouse and taxable to the payee
spouse.2. Child support is neither taxable nor deductible by either spouse.3. Alimony is generally not awarded for short term marriages which have
durations of less than five years.4. Make sure you call in a vocational expert to help assess the at home
spouse’s ability to earn income after the divorce.5. If spouses agree to a lump sum award of an alimony payment, it cannot be
altered in the future.6. Regular monthly payments of alimony can be modified by the courts in the
future.7. Alimony payments always end at the death of the spouse and usually at
remarriage.8. If you front load alimony to the tune of greater than $15,000 between years
one and two or between years two and three, some of the alimony may need to be recaptured.
9. Child support payments can always be modified.10. Awarding temporary alimony may not always be a good idea because it can
be used as a precedent for awarding permanent alimony.
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Chapter 6: Divorce Can be Taxing (Income Tax Section) Marriage is the only war in which you
sleep with the enemy.
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Chapter 6: INCOME TAXES
Divorce Can Be taxing Property Settlements (IRC Section 1041) Exceptions to IRC Section 1041 Purchases Between Spouses Transfers in Trust Passive Activity Loss Property Deferred Tax Liability Recordkeeping Requirements Gift Tax Issues Property Basis Filing Status
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Divorce Can Be taxing
There are many things to consider. Attorneys are probably not the best source for this type of information
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Property Settlements (IRC Section 1041)
Transfers between spouses pursuant to a divorce are done income tax free
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Purchases Between Spouses
Original basis and holding period accompanies the transaction. Property basis is the original basis from the transferor spouse
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Deferred Tax Liability
You may have future tax issues when you sell property. Many times attorneys don’t facto in the net effect. Examples include depreciation recapture, capital gains, primary residence sale, and future tax rates
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Filing Status
(S/H) Single (M/J) Married Filing Jointly (M/S) Married Filing Separately (H/H) Head of Household (Q/W)Qualifying Widow
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Exemptions
Have the divorce decree state clearly who is entitled to the dependent exemption
You’ll always get a deduction for yourself
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Is there any way for the dependency exemption to be awarded to the non custodial parent?The answer is yes if all of the following apply:1. The parents
a. Are divorced or legally separated under a decree of divorce or separate maintenanceb. Are separated under a written separation agreement, orc. Lived apart at all times during the last six months of the year
2. The child is in the custody of one or both parents for more than half of the year
3. The divorce decree or separation agreement provides the noncustodial parent can claim the child as a dependent or the custodial parent signs a written declaration (Form 8332) that he or she will not claim the child.
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Form 8332: Release of Claim to Exemption for Child of Divorced or Separated Parents
Custodial parent needs to sign
Can be released for one or more years
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Sale of Principal Residence
Residency Requirements - Must live in the house for two of the last five years
$250,000 – single
$500,000 – married filing jointly
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Co-Owning the House
NOOOOOOOOOOOOO!
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Remarriage
You can use the new spouse’s time in the house to meet residency requirements
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Single Spouse selling the house after the Divorce
Sales Price $600,000
Cost $200,000
Gain on Sale $400,000
Exclusion $250,000
Taxable Amount $150,000
Tax Liability @ 20% $30,000
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Married Filing Joint Taxpayers Selling the House During the Divorce Process
If you are not officially divorced, you are still considered married and can thus continue to file married filing jointly. In that case, the couple can still take the $500,000 exclusion.
In the next example, look what happens if the spouses sell the house while still legally married and filing jointly.
Sales Price $600,000Cost $200,000Gain on Sale $400,000Exclusion $400,000 (can go as high as $500,000)Taxable Amount $0Tax Liability $0
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Exception to the Two Year Rule
An exception exists to the two year rule if the house is sold due to unforeseen circumstances. In these cases you can pro rate the gain on the house.
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Unforeseen circumstances include moving for any of the following reasons:
job change health issues divorce
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John and Jane Smith purchased a house for $300,000. Six months later they were legally divorced. Jane, who is now single, and is the sole owner of the house, decides to sell the house for $400,000 after the sixth month. How much of the gain would be taxable to Jane?Step 1: Sales Price $400,000Cost $300,000Profit $100,000
Step 2:$250,000 single exclusion x 6/24 = $62,500 can be excluded from the sale of the house
Step 3:Profit $100,000Excluded Gain $62,500 Taxable Gain $37,500Note1: The 6/24 represents living in the house for 6 months out of 24 months (2 year requirement). Note 2: If Jane sold the house at the end of 2 years (instead of six months), then the entire gain (up to $250,000) would have been excluded from capital gains tax. IRS Publication 523.
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Tax Deductibility of Divorce Costs
Deductible if: In connection with the collection or refund of any tax For the production or collection of income (i.e., alimony)
Aggressive position, but probably doable.
Itemized bill from the attorney specifying investment and/or tax advice
Where: Schedule A: Itemized Deduction, Miscellaneous 2%
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Like Kind Exchanges Under IRC Section 1031 Like kind does not mean “identical”. It means “similar” Sell property first Identify up to 3 properties to purchase within 45 days Close on any of the 3 within 180 days (both from the
date of escrow) Can be multiple properties What happens if that doesn’t work? – reverse like kind
exchange
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Nonstatutory Stock Options (NSO)
NSOs do not meet specific IRC requirements for special tax treatment.
Who is entitled? Employees and Independent Contractors
Difficult to value because of future market valuations
Restricted Stock Options – Section 83(b) Election
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Tax Credits Regarding Children
Child Tax Credit Dependent tax Credit Adoption Expenses Credit Education Tax Credits
American Opportunity CreditLifetime Learning Credit
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Rattiner’s Tax Planning Tips1. A transfer of property between spouses pursuant to a divorce does not create a
taxable event for either spouse.2. The recipient spouse keeps the same tax basis for property transferred from the
transferor spouse.3. Filing status is determined as of the last day of the calendar year (December
31st)4. Filing married filing separate keeps the liability issue separate between the
spouses.5. Head of household should be used as a filing status for a divorced spouse who
maintains a household for dependent children.6. If you are planning on selling your house as the recipient spouse, you may want
to do it during the divorce process in order to take advantage of the $500,000 exclusion.
7. Divorce qualifies as unforeseen circumstance. That means if you sell the house within a two year period, you may be able to exclude part of the capital gain.
8. You don’t have to worry about the capital gain exclusion from a home sale where you transfer the sale to the other spouse as part of the divorce.
9. If you retain a rental property from the divorce and wish to exchange it for another more expense property, you can do it under IRC Section 1031 and defer the capital gain.
10. If you claim a child under the age of 17 as your dependent, you may qualify for the $1,000 per year child tax credit.
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Chapter 7: Retirement Plans: (Rules, Types and Valuation)
The secret to successful investing for retirement is to keep your first spouse!!!
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Chapter 7: RETIREMENT PLANS
8 Critical Elements To Think About
What the employee spouse is entitled to due to vesting schedules and other issues
Type of retirement plans to divide QDROs Valuation of retirement benefits How much of the valuation are you entitled to receive? Whether to accept the retirement benefits or an equivalent amount
of other assets Protection of your retirement benefits if your spouse remarries or
dies Discovery of overlooked or hidden assets
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Vesting Rules
Qualified PlansDefined Benefit: 5 year cliff 3-7 year gradedDefined Contribution Plans 3 year cliff 2-6 year gradedPersonal Retirement and Nonqualified Plans Immediate vesting
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Types of Retirement Plans
Qualified Plans Defined Benefit Defined Contribution – includes 401(k) plans
hybrid - 403(b) plansPersonal Retirement Plans SEPS SIMPLEs IRAS
Nonqualified Plans Deferred Compensation Supplemental Executive Retirement Plans
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Qualified Plans
Defined Benefit Plans Defined Contribution Plans
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Personal Retirement Plans
IRAs SEPs SIMPLEs
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Nonqualified Plans
Deferred CompensationRabbi Trusts457 Plans
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Qualified Domestic Relations Orders (QDROs) Method of dividing up retirement assets
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Inquiries to the Plan Administrator
Participant's account or benefit statements from the date of the marriage
Summary plan description Current QDRO procedures Distribution policy and forms
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Valuation of Retirement Plans
Defined Benefit Plans – employer master plan
Methods for Dividing a Pension Buyout method (immediate offset method with other
assets) Wait and see method – split at date of retirement Reserved jurisdiction method – ask the court to wait and
value later because of too many unknown variables; i.e. stock options, bonuses to be paid on dependent factors, and other sources of compensation that can’t be determined until later on)
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Valuation of Retirement Plans
Defined Contribution Plans
Personal Retirement Plans
Participant knows the value in each of these accounts
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Using Retirement Assets to Balance Out Equity Very effective tool
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Overlooked Plans
Past plans
Frozen plans
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Rattiner’s Retirement Plan Mistakes Checklist1. Has the attorney identified all past and present retirement plans? Yes No2. Does the attorney understand the differences among all the types of
retirement plans that you or your ex possesses (i.e. qualified vs. personal vs. nonqualified plans and/or corporate vs. government plans)? Yes No
3. Was a QDRO obtained during the divorce process and not afterwards? Yes No4. Has your attorney stepped up to the plate and either prepared the QDRO
or is on top of someone else preparing the QDRO? Yes No5. Has an outside party been hired to help value the retirement accounts? Yes No6. Does the value of the retirement plans ask for accrued benefits as opposed
to vested benefits? Yes No7. Does the value of the retirement plans include all the activity within the
retirement account, such as gains and losses, interest and dividends received? Yes No
8. Has the attorney noted what will happen if the parties die during the process? Yes No
9. Has the attorney acknowledged and completed the issues necessary for continuation of medical care coverage for the non-participant spouse? Yes No
10. Did you walk away from the divorce comfortable with the approach used by the attorney and others as to the way the calculations were made in the division of retirement plan assets? Yes No
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Name of Asset Current Value Rate of Return (%) Date Full Benefits Begin
Defined Benefit Plans:
Company Ret Plan-Yours
Company Ret Plan-Ex:
Defined Contribution Plans:
Company Ret Plan-Yours
Company Ret Plan-Ex:
Personal Retirement Plans:
IRA #1 - Yours
IRA #2 - Yours
IRA #1 – Ex:
IRA #2 – Ex:
SEP – Yours
SEP – Ex:
SIMPLE-Yours
SIMPLE – Ex:
Nonqualified Plans:
Yours:
Ex:
Other:
Yours
Ex:
Valuation of Retirement Plan Assets
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Chapter 8: Valuation Issues: (Property Division and Business Concerns)
I was married by a judge. I should have asked for a jury.-- George Burns
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Chapter 8: VALUATION ISSUES
Valuation issues are always tricky and seldom accurate!
And they certainly don’t measure what will happen in the future (i.e. the economy or your profession) when you are valuing assets to pay for future debt!
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Property Division
Common Law
Community Property
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Common Law
Equitable distribution
41 states plus Alaska
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Community Property
Equal Distribution
9 states plus Alaska
TWIN CLAN W Texas Wisconsin Idaho Nevada California Louisiana Arizona New Mexico Washington State
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Closely Held Business Valuation
To consider if the business is marital property, you’ll need to address these issues:
Was the business established before or after the marriage?
Did it grow substantially during the marriage?
If the business did grow, was it due to the fact that your ex was a stay-at-home spouse who did not work full-time in the business?
Was separate property from either spouse invested in the business?
Was it a joint business run by both spouses?
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Business Valuation Documents Needed1. Last five years of individual tax returns and documents (Form 1040)2. Last five years of business tax returns and documents [Form 1120S (S
Corporations); 1120 (C Corporations); 1065 (partnerships, limited liability companies, limited liability partnerships)]
3. K-1s for 1065 or 1120S4. Income (Profit and Loss) statement5. Balance sheet6. Listing of shareholders or partners who own a piece of the company7. Capital accounts of the partners if the business is a partnership8. Retained earnings statement9. List of cash accounts and any investments10. List of aged accounts receivable (money due the business)11. List of aged accounts payable (money the business owes others)12. Business plan and projections13. Key officers compensation14. Key officers life insurance15. List of existing contracts16. List of partnership agreements in affect
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Valuation ReportThe business valuation report should include Full description of the business Method of valuation Name and qualifications of the evaluator Names of relevant documents that were
reviewed Full explanation for the rationale for the
evaluation Date the business was valued Reason for the valuation Relevant industry standards
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Professional Practices - States that consider professional practices part of the marital estate at this time include:
Arizona California Colorado Connecticut Indiana Kentucky Maryland Michigan Montana
Nevada New Jersey New Mexico New York North Carolina Ohio Oregon Virginia Washington
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Key Stock Option Questions
1. Is the stock option part of marital property? In other words, was it earned and received during the marriage?
2. How is the option valued?
3. When is the option valued?
4. What are the tax consequences when the option is exercised?
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Chapter 9: Redesigning Your Personal Financial Plan After the Divorce
Americans divorce so much we are called the land of the free, and we get married so often that we are called home of the brave.
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Chapter 9: REDESIGNING YOUR PERSONAL FINANCIAL PLAN AFTER THE DIVORCE
You are ready for Stage 2 of Your Life. You will need to re-examine all the prior aspects of your life and then start anew.
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The New and Improved Game of Life Start with a budget Save 10% of your gross income Establish an emergency fund of 3-6 months of
gross living expenses Purchase essential insurances Revise your legal documents
All of this can be accomplished through a financial plan
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Planning for Life’s Uncertainties
Job change/unemployed Revise your cash flow Remarriage Protecting the kids from a prior marriage – QTIP plan Withdrawing money from your retirement accounts.
Develop a retirement needs analysis Ownership designations on invested assets and
disposition of closely held business interests Changed tax filing status Constant monitoring of life events
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GOING THROUGH THE PERSONAL FINANCIAL PLANNING PROCESS
1. Gather all Necessary Data2. Objectives need to be set3. Process all the information into
meaningful financial statements4. Develop recommendations5. Implement those recommendations6. Monitor your situation annually
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LIFE CYCLE ANALYSIS
Based on following the previous discussion of the personal financial process that you need to follow very closely, and where you want to end up, the following chart shows you what you should be doing at the appropriate time in our life.
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Ages 20-29; and 30-39:
Have an emergency fund equal to six months of gross living expenses
Make sure you always have adequate and continuous insurance coverage for life, disability, health, homeowners, automobile, and umbrella.
Be careful if moving between jobs and short changing your pension benefits or other deferred compensation arrangements.
Roll over any retirement benefits into an IRA or to your next 401(k). Minimize your income tax bite buy maxing out your deductions. Contribute regularly to your 401(k) and/or IRA, and any other
retirement fund. Purchase a home with a 15 year mortgage so that by the time you
retire, your housing costs will be under control. Write a will. Discuss retirement plan benefits with your human
resource personnel.
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Ages40-49: contribute regularly to your 401(k) and/or IRA, and any
other retirement fund. Check your social security statement annually to ensure
that all your wages have been credited correctly. If not, contact them immediately.
Analyze personal assets, and work out a plan for funding an adequate retirement income.
Actively manage your IRA and other retirement funds with appropriate emphasis on capital gains oriented investments.
Review your will every three years or when moving to another state. Review it with an experienced attorney.
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Ages50-59:
contribute regularly to your 401(k) and/or IRA, and any other retirement fund.
Check your social security statement annually to ensure that all your wages have been credited correctly. If not, contact them immediately.
Analyze personal assets, and work out a plan for funding an adequate retirement income.
Review your retirement income an expense projection staking inflation into consideration.
Confirm the beneficiary designations on life insurance policies, annuities and retirement plans.
Join AARP (American Association of retired Persons). Review your will every three years or when moving to another state.
Review it with an experienced attorney.
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Ages60-64
Discuss early retirement offers with a financial planner Collect the documents necessary to process social security benefits Determine whether it makes sense to sell your primary residence
and take the tax consequences into effect. Prepare detailed cash flow projections from estimated year of
retirement until age 90, taking inflation into consideration. Practice living for a month under your new retirement income Determine the status and duration of ongoing loans and mortgage
commitments. Determine which activities will keep you active during retirement. Consider different retirement locations Inquire about possible retirement entitlements from previous
employers Consider long-term care insurance
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Ages65+
Live and enjoy life! Take care of your health Be active, if health permits
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1. Cash Flow Management: It All Begins HereTips Improving Your Cash Flow for Organize Yourself Better. Dedication. Leave home with Less Cash. Kill the credit cards. Give yourself and family members weekly spending
money – an allowance Set “Saving” as a priority expense. Refinance your debt during times of lower interest rates. Give yourself “Incentives” for a job well done.
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2. Budgeting: Be SmartWhen establishing your budget, keep the following
purposes in mind: Set a forecasted amount for each revenue and
expense item Identify variances between actual and budgeted
numbers Define possible problems in spending patterns Identify opportunities to overcome these
problems, and Help you realistically plan to improve your
spending patterns
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Consider the following tips when developing your budget:
Design a budget form that is suitable to you.
Forecast your income. Summarize past expenses. Estimate future expenses.
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3. Debt Management: A Difficult Task
Don’t overextend!
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Rules of thumb in assessing whether a home mortgage will be offered to a prospective borrower. Monthly housing costs (including principal, interest,
taxes, fees and insurance) should be no more than 28% of the prospective borrower’s gross income.
Total monthly payment on all debts should be no more than 36% of gross monthly income. According to the underwriting guidelines for the Federal National Mortgage Association (Fannie Mae), this includes:
monthly housing expense (including taxes and interest) monthly payments on installment/revolving credit monthly mortgage payments on non-income producing
property) monthly alimony, child support, or maintenance
payments
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Debt Management Tips
Don’t go crazy. Shop Around. Review credit card bills. It happens. Credit
card companies do make errors.
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4. Insurance Planning Essentials: Protecting Your Financial Assets
Rattiner’s Rule: If you can’t afford to replace the loss or if it would kill you to write the check to replace the loss, then you need insurance!
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Types of Insurance
Types of Insurance Life Insurance Disability Insurance Health Insurance Homeowners Insurance Automobile Insurance Umbrella (Liability) Insurance Long Term Care Insurance
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Life Insurance
Rule of Thumb – Needs analysis should equate to roughly 7 times gross salary
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Disability Insurance
You have no one else to depend on.
60% of gross salary
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Health Insurance
Get as much as you can afford!
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Homeowners Insurance
Purchase an HO3 and HO15 or HO5
Purchase riders
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Automobile Insurance
Liability and uninsured/underinsured coverage should be identical
Collision and Comp – Use Rattiner’s Rule
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Umbrella (Liability) Insurance
Don’t underestimate!
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Long Term Care Insurance
Ask your kids if they are up to the challenge!
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5. Investment Planning – Investing for a Secure Financial Future
The Uncomfortable Realities About Saving and Investing.
Know why you are investing Invest for growth Diversify across investments Diversify within investments. Take control over your investments
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Investment Parameters
Risk Tolerance Time Horizon Liquidity Marketability Tax Consequences Diversification
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Asset Allocation: Brinson Hood Beebower Study 94% of the volatility of the portfolio return
is due to the asset class selected 4% is due to security selection 2% is due to market timing
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Investment Types
Cash/Cash Equivalents Fixed Income Equities Hard Assets: Real Estate, Gold, Precious
Metals Collectibles
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Tips For Investing In Bonds
Seek expertise when necessary Keep an eye on price volatility Ladder maturities Compare interest rates Don’t chase yield Diversify Keep maturities relatively short Use mutual funds for investing in unusual bonds Consider the tax effects
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Types of Stocks
Blue Chip Income vs. Growth Cyclical Interest Sensitive Defensive
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Tips for Investing in Stocks1. Never buy stocks indiscriminately2. Select a promising industry3. Diversify4. Buy low and sell high5. Stay abreast of market trends6. Use stop-loss orders to protect against loss7. Buy value8. Buy low P/E high dividend stocks9. Buy stocks in companies with strong dividend
payment records10. Finally, rely on your own experience and judgment.
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Hard Assets: Real Estate, Gold, Precious Metals An inflation hedge
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Real Estate: Direct vs. Indirect Ownership Don’t overload here
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Collectibles
Don’t bank on this!
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6. Retirement Planning: How Long Will Your Money Last Running Out of Money is Your Biggest Challenge
Retirement Needs Analysis – The 3 Step Process
Step 1: What will be your shortfall at retirement?Step 2: What will be the lump sum needed at retirement?Step 3: How much do you need to save today on an annual
basis to arrive at the lump sum needed at retirement?
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Common Retirement Planning Mistakes Not taking advantage of contributing towards your
retirement plan, such as a 401(k) or 403(b) plan Neglecting to prepare retirement income and expense
projections during your working years Expecting social security to cover all your needs at
retirement Accepting an early retirement offer from your employer
without thinking it through Failing to take out required Minimum Distributions
(RMDs) after age 70 ½
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7. Estate Planning
Common Issues to Think About
Minimizing the problems and expenses of probate and avoiding family conflict
Providing your new spouse with too much responsibility and flexibility Providing for the conservation of your estate and its effective management
afterwards Minimizing taxes at the time of death Avoiding leaving the children too much too soon Provide for adequate liquidity to cover taxes and other expenses without a
forced sale of assets Providing for estate management in the event of incapacity Organizing all your important papers affecting your estate plan – the death
folder
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How Much Will You Leave Behind for Your Heirs? The concept of “zeroing out”
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Letter of Instructions
Plans out exactly what should be done
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Qualified Terminal Interest Property (QTIP) Trusts Protects the kids from a prior marriage
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FINANCIAL PLANNING SUMMARY WORKSHEETSDebt Solvency Worksheet – 10 Basic Questions
Take this quick 10 question survey to help you manage your debt.1. Is more than 20 percent of your take-home salary used for credit card payments? Yes
No2. Are you charging more each month than you are paying off? Yes
No3. Have you received calls from credit card companies because of paying bills late? Yes
No 4. Do you charge things impulsively? Yes
No5. Are you approaching the limit on your charge cards? Yes
No6. Do you find yourself paying only the minimum payments on your charge cards? Yes
No7. Have you defaulted on a mortgage or rent payment more than once? Yes
No8. Are you uncertain about how much money you owe? Yes
No9. Are you using the cash advance on one credit card to pay off another card? Yes
No10. Is the balance in your savings account shrinking? Yes
No
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INSURANCE POINTERSWhen reviewing your client’s life insurance policy:
a) separate long-term needs from short-term needsb) recalculate needs regularlyc) review ratings of existing carriersd) review reasons why current insurance was purchasede) determine how original needs have changed and identify new needs f) review beneficiary designationsg) review policy riders and optionsh) review each policy’s featuresi) compare client’s current health if debating whether to switch policiesj) if it’s a term policy, evaluate conversion and renewability features and feasibilityk) if it’s a permanent cash value policy, evaluate the true cost of insurance with the value receivedl) determine it makes sense to gift one of the client’s life insurance policiesm) determine whether it makes sense to name a charity as a revocable or irrevocable beneficiary
and establish a wealth replacement trustn) determine whether it makes sense to establish a charitable trust to own the life insurance on the
cliento) evaluate the effect of current life insurance ownership on its value in the estatep) determine if any incidents of ownership exist for insurance that is intended to be outside the
estateq) determine if beneficiary designations of any policies owned outside the estate will cause
inclusion within the estate
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2. When reviewing your client’s health and disability policies:a) Inquire whether your client opted for the best type of medical
coverage based on their family situation.b) Determine the monthly disability neededc) Determine whether sufficient coverage exists under the client’s
current policy, or was the existing coverage purchased many years ago when the client was earning a lower salary.
d) Determine whether the policy provides a definition of “own occupation”
e) Determine whether the policy noncancellable and guaranteed renewable
f) Determine whether a provision for residual and partial disability exists
g) Determine whether a guaranteed insurability rider or COLA rider have been added
h) Determine whether the elimination period is appropriate
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3. When reviewing long-term care insurance:a) Identify qualification triggers for benefit eligibility. The
use of ADLs and/or physician referral is preferred.b) Compare existing policy triggers to current products.
Consider replacement of policies requiring prior hospitalization.
c) Determine levels of care provided. Avoid policies that do not cover all levels of inpatient care. Evaluate client’s needs regarding home care versus inpatient care.
d) Review elimination period and relate to other resources for coverage.
e) Review benefit level relative to current costs and other available income.
f) Review benefit period relative to family history of client.g) Compare premium histories of guaranteed renewable
policies.
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4. When reviewing homeowners insurance coverage:
a) Ensure whether coverage is adequate to replace dwelling only. The replacement cost and the value may be two very different numbers.
b) Is the proper form of insurance in place? A homeowners policy on a property currently being rented out is not acceptable.
c) Determine the last time the client reviewed the cost of the coverage.d) Determine whether the client have replacement cost coverage or actual
cash value (ACV) coverage.e) Determine whether the policy contain an inflation-adjustment rider.f) Determine whether personal property coverage is adequate based on
assets owned.g) Determine whether replacement cost protection on personal property existsh) Determine whether your client understand the limitations on high value
itemsi) Determine whether your client has floaters for all high value personal
propertyj) Determine whether an HO 15 rider exists.k) Determine if disaster coverage is necessary and appropriate.
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5. When reviewing your client’s liability coverage:
a)Determine whether current policies include adequate coverage for the client
b)Determine whether current coverage is enough to qualify the client to obtain an umbrella policy.
c)With the client’s current circumstances, determine whether the client’s umbrella policy sufficient and cost-efficient.
d)Determine whether the client has any high-risk assets, such as a swimming pool, that would warrant additional or special coverage
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6. When reviewing your client’s auto policy:a) Consider whether state-mandated levels are
met and whether they are adequate.
b) Consider the deductible relative to other assets.
c) Determine whether it would be appropriate to remove collision coverage on older vehicles
d) Determine whether all owned vehicles are included on the policy
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7. When reviewing business insurance:
a) determine whether coverage is
appropriate.
b) determine whether insurance agents have been performing an adequate job of discovering all of the pertinent exposures
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Investment Pointers1. Summarize all of your investments2. Determine how your investment are allocated, in total, amount the
three investment categories: stock, fixed income and cash.3. Factor in your objectives when designing the right allocation of your
investments4. Put “savings” first. Save on a regular basis.5. Constantly monitor your portfolio. Don’t be rash in making changes.6. Substance over form. Make sure the investment merits outweigh
everything else.7. Taxes should be a secondary reason to invest.8. Don’t time the market, Long term buy and hold will usually work
best.9. Use mutual funds as your primary investment vehicle.10. Don’t chase returns. Keep with your long term strategy and don’t
deviate from your long-term objectives.
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Retirement Pointers1. If the client’s savings program will not result in a sufficient amount to fund his or her retirement lifestyle,
there are basically four courses of action:a) save more,b) earn more (a higher investment return on the retirement savings fund),c) retire later, ord) retire in a more modest lifestyle.
2. Wherever possible, the client should be saving through a tax-deferred vehicle such as a qualified plan, or personal retirement plan, such as an IRA, SEP or SIMPLE.
3. In determining the client’s retirement savings need, use appropriate assumptions for investment rate of return, inflation rate, years till retirement and years during retirement.
4. Retirement plan funds should be maintained in tax-deferred accounts to maximize the benefits of tax deferral. Urge the client to consider alternate sources of funds needed during the pre-retirement period, so that retirement plan balances will not be eroded.
5. Review beneficiary designations on all retirement plan accounts to ensure that they are consistent with the client’s goals.
6. Keep retirement planning in view as short-term decisions are being made regarding the use of income and assets.
7. Review the client’s retirement projections periodically; revise the analysis periodically, and in the event of material changes in the client’s situation (change of employment, divorce/marriage, death of spouse)
8. As the client approaches retirement, plan on incorporating the stretch (multi-general) IRA to enable the retirement funds to grow tax deferred as long as possible.
9. Fully analyze any projections made by other professionals when projecting a pension maximization or other recommendation.
10. Monitor the client’s investment return; compare to assumptions that were used to build the retirement fund. If the client’s investments are not realizing the expected return, the client may need to shift the investment allocation or modify the retirement lifestyle.
11. Monitor the client’s expenses compared to projections; modifications in lifestyle may be necessary.
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Estate Planning Pointers
1. In considering any gift or estate strategy, analyze the basis aspects of any particular property being planned for use in the strategy.
2. Where spousal transfers are involved, always check the citizenship of the transferee spouse.3. Where necessary, be willing to pay a small tax to achieve an important personal objective.4. Recommend a will even in situations where the plan in place will avoid probate completely.5. Encourage the use of a durable power of attorney and the medical proxies available under state law.6. Strongly recommend filing a will and other estate documents for safekeeping with the appropriate court.7. Among retirees consider all charitable giving techniques that would enhance current income.8. Review all indications of domicile and try to consolidate domicile as much as possible.9. Avoid presenting clients with probate and revocable trusts as an either-or proposition.10. Use joint ownership arrangements sparingly as an estate planning technique.11. Estimate estate liquidity needs and identify sources of liquidity.12. If life insurance is to be purchased as a source of liquidity, avoid even initial ownership by the insured.13. Discourage clients from using joint, mutual or reciprocal wills, and/or joint trusts.14. Compile a family tree for the client, clarifying relationships and identify critical dates (e.g., marriages, births, deaths, gifts,
etc.).15. Construct a net worth statement for the client, extrapolating from that the degree of planning appropriate.16. Identify items that would be classified as income in respect of a decedent in a prospective gross estate, and attempt to
determine how best to handle those items.17. Make sure the client understands the planning limits imposed by spousal rights in community property states and
common law states.18. Determine and present to the client the estate plan that the client currently has (even if it is all intestacy).19. Don’t allow the generation-skipping transfer tax to discourage clients from making transfers to grandchildren or others
until the exemption is fully utilized.20. Consider carefully what plans are in place for the disposition of pension plan benefits and whether different dispositions
should be explored.21. Assess the adequacy of provisions for minors and dependents, and make recommendations as needed.22. Where there is a closely held business interest, determine definitively how the succession in interest is to be achieved,
whether by a buy-sell agreement or through another technique.23. Survey the postmortem elections that might be available to the particular estate and adopt strategies that will preserve the
availability of these elections.
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Guidelines for Preparing a Will
10 Item will preparation ChecklistThe following items should be included in a will:1. Statement that the document is a will.2. Statement revoking all previous wills.3. Your full name and location of principal residence.4. Specific transfers of property to the named beneficiaries. 5. Instructions for dividing the balance of the property.6. Identify trusts, including the names of selected trustees and
successor trustees.7. Names of guardians and alternate guardians for minor children or
special needs relatives.8. Designation of what monies are to be used to pay death taxes.9. Names of the executor and back-up executor.10. Signature and date. The will should be signed in the presence of all
of the witnesses.
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Chapter 10: Afterwards: The 25 Steps to Future Success Did You Know?
In a recent poll, American men and women were asked if they would marry the same person if they had it to do all over again. 80% of the men responded that they would marry the same woman. 50% of the women responded that they would marry the same man.
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Chapter 10: AFTERWARDS: THE 25 STEPS TO FUTURE SUCCESS An ex-spouse is like an inflamed appendix, they
cause a lot of pain and suffering, but after it's removed you find you didn't need it anyway!
RECAP:
SO WHAT DID YOU REALLY GET FOR $100,000+…?
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Financial Planning Responsibilities That Need to Be Followed Up
1. Read the Divorce Decree Hopefully One Last Time
2. Obtain Certified Copies of the Divorce
3. Make New Deeds for Real Estate4. Transfer Car Title5. Update Insurance Coverage and
Beneficiary Information
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Financial Planning Responsibilities That Need to Be Followed Up
6. Update Your Retirement Plan Beneficiary Designations7. Update Your Retirement Plan Accounts8. Update Your Estate Planning Documents, including
Wills, Trusts and Powers of Attorney9. Confirm that All Bank Accounts, Brokerage Accounts,
and Stock Certificates are Separated into Your Own Name10. Confirm that All Credit Cards, Other Obligations, and
Possessions are Separated by Having Your Ex Removed from the Accounts
11. Keep Meticulous Records12. Remove Personal Assets13. Name, Address and Work Related Changes
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Other Critical Issues That Need Your Follow-up14. Your Children15. Moving Away16. Modifying Child Support17. Your Kids and Post Divorce Syndrome18. Modifying Spousal Support19. Dating Again: Having Your Kids Cope20. Cohabitation Agreements21. Prenuptial Agreement22. Getting Married Yet Again (Remarriage)23. Mix and Match with the New Extended Family: Your version
of The Brady Bunch24. Support Groups and Persons25. The Bottom Line: Take Care of Yourself
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Rattiner’s Planning Tips1. When it’s time to recap the events, you will have learned much from the process. It would
have been easier, cheaper and healthier to work out the differences and the divorce during the process with minimal input from the lawyers.
2. Chapter two of your life states that you’ve been through the worst already and now it’s your time to take care of yourself going forward. Remember, if you don’t no one else will, and there’s a lot of people counting on you.
3. Read the divorce decree carefully. If you don’t agree with the conclusions, you need to correct it ASAP. Once the ink dries, it’s too late.
4. Obtain certified copies of the divorce decree because there are many documents and many instances where it is a necessity. Most entities you’ll need to deal with won’t accept unofficial legal copies.
5. Change the deed on real estate to your own name so you can apply for financing to buy your spouse out of his or her share of the housing interest. No tax liability is included in this transaction.
6. Transfer the car titles to the spouse who ends up with the car. Make sure you have all documentation for paperwork regarding paid off loans or other liens.
7. Update all your insurance policy beneficiary designations. Remember, insurance passes by contract of law and that will always supersede a will. If you don’t change them, then the person you want to get the benefits may not be legally entitled to them.
8. Go on COBRA health insurance if you are the non-working spouse who is in between jobs. Coverage can be extended for up to 36 months.
9. Update your retirement plan beneficiary designations. Look at the list you prepared for the court disclosing all the different types of retirement plans so you don’t forget any during the process.
10. Make sure you have completed a QDRO to actually split the money from a qualified retirement plan. The spouse who is likely to benefit from receiving those monies needs to be the one to pursue this along. IRAs don’t need to complete QDROs.
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11. Updating your will and other estate planning documents is important. The most current will is the one that is relied upon because it supersedes all previous wills. You need to make sure that it states that you are not married. Also change your health care proxies and powers of attorney so your ex can’t control any of your decisions going forward.
12. Confirm that all bank and brokerage accounts have been separated into your name only. Pass along a certified copy of the divorce decree to show that joint ownership is not to be applied in any circumstance
13. Make sure your ex is off any joint credit cards. Debts that he or she rings up could be your responsibility if you don’t follow through. Again, a copy of the certified divorce decree should be filed.
14. Keep meticulous records of all transactions involving the ex spouse. You may need them in court later on.
15. Remove all personal assets from your prior residence before the divorce becomes final. After that, it could turn into a “he said, she said” contest as to what belongs to whom.
16. Update various organizations relating to name, address and work related changes including notifying the IRS of an address change.
17. It’s always about the kids. Need I say more?18. If you are moving away, you better have good reasoning to do so. The noncustodial parent
will take exception to that and make your life a living misery. 19. If you need to modify child support, perhaps start by discussing it with your ex. If that
doesn’t work, go to mediation or back to court only as a last resort.
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20. Your children may never ultimately accept the divorce. It is your role to help them through the process, no matter how long it takes, so they can gain closure on the issue. Be persistent.21. You can try to modify spousal support. Good luck.22. After the divorce you need to be focusing on your new life. Dating is a starting point. How you work it in with your kids is the tricky issue. Don’t involve the kids early in the process. Only involve them when it becomes serious. One year is probably a good time frame before introducing he kids to your new love interest.23. If you are living with this new person, have all your issues tied to writing to prevent any future misunderstandings either while alive or at death before marriage through the use of a cohabitation agreement.24. Prenuptial agreements are a necessity. It sets the expectations from the beginning so everyone knows the deal ahead of time. You always must manage the other side’s expectations both before and after the process, if there is an afterwards. 25.Remarriage is tricky business. Make sure your kids and even your ex is ready for it. Protect yourself before it happens.26. The Brady Bunch may have been shown on TV in the 1970s but it exists more today than during any prior time period. Blending the families will be a constant challenge, so setting the ground rules in advance, managing expectations, and retaining important traditions and values will help go a long way.27. Support groups and individual counseling can help you get over the hump regarding the divorce and put you in a better place to succeed the next time around.28. When push comes to shove, you need to protect yourself and take care of your main asset – you! Nothing else matters if you can’t walk away from this grueling process happy, healthy and focused.
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Chapter 11: Planning for Same Sex Couple Divorces
Love may be blind, but marriage is a real eye-opener!
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Chapter 11: Planning for Same Sex Couple Divorce
Issues Specific for Same Sex Couples
Domestic partnership agreement/cohabitation agreement
Last Will and testament Income Tax Issues Estate Planning Issues
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The Personal Financial Planning Process
Step 1:First obtain copies of all of your and your partner’s financial information – assets, liabilities and income. You may have to focus on just compiling yours and then exchange it with your ex-partner since you likely have no legal access to their financial records.
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Step 2:Compile your financial information into a net worth statement. On the left-hand side of the page list all of your assets. On the right-hand side of the page list all of your liabilities.
These should be assets and liabilities held in your name alone, your ex-partner’s name alone and joint held. Indicate whether you came in to the relationship with this asset or liability. If possible indicate any additions or six attractions that have occurred during your relationship for each asset or liability.
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Step 3:
Gather information regarding the income both you and your partner were making at the time of your long-term commitment. Also, list changes to income for either party, changes to pursuit or attainment of education or career advancements that were made to benefit the partnership. And list the income each of you were making at the time of dissolution, plus a note regarding earning potential.
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Rattiner’s Divorce Summary
The best option is to stay married, when possible. If not, then you need to be smart, practical and shrewd about getting divorced. It’s an occurrence, that if not done right, can have devastating financial and emotional repercussions for the rest of your life! Your own personal financial planning for divorce can never be more important or have a bigger impact than now! All of the information shared today can be found in detail in my latest book published by John Wiley and Sons.
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Parting Thoughts!
If Love is Blind and Marriage is an Institution, then Marriage is an Institution for the Blind.
Sir, if you were my husband, I would poison your drink. --Madam, if you were my wife, I would drink it. - A conversation between Lady Astor and Winston Churchill
Men marry women with the hope they will never change. Women marry men with the hope they will change. Invariably they are both disappointed. - Albert Einstein
"I bought my ex a gift for her birthday, but she didn't use it so I'm not going to get her another." "What did you get her?" “A cemetery plot!"
We were very happily married for eight months.Unfortunately, we were married for ten years!
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The Lesson!
A cop tries to pull over a guy for speeding who tries to outrun him. Finally the guy gives up and pulls over. The now ticked-off cop walks up and yells at the guy, “Hey, what's the big idea?" The guy responds, Well officer, I have a very good reason for not stopping sooner. The cop replies, “if you can give me a reason that I have never heard before in all my 30 years on the force, I will not issue you a ticket!” The guy responds, "Last week my wife ran off with a cop and I was afraid he was trying to catch me to give her back!" "Off you go," said the officer.