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Denise French

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Archives for August 2018

A Tip That Can Save You Thousands: Dividing a 401-K in a Divorce

August 8, 2018 By Denise French, CVA, MAFF, CDFA, CRPC Leave a Comment

[three_fourth_last]money and divorce

As part of your divorce, are you receiving all or part of your former spouse’s 401-K? You may have an opportunity to take cash out of the account without paying the IRS’s 10% penalty (on funds withdrawn prior to age 59.5). To take advantage of divorce and 401K benefits, when dividing a 401-K in a divorce, have the portion you need, paid directly from the account to you. It does not need to be the full amount that you are receiving. You do not want to roll it into an IRA and then take it out because then you will be subject to the penalty.

Am I suggesting that retirement plans are a good source of cash when going through a divorce? Let me be clear. No, I am not suggesting that at all. I simply want to share that if you have a cash need and it makes the most sense to take it from a retirement account, the IRS does give you an opportunity to take money without penalty. Keep in mind, though, if the funds are in a pre-tax account, they will still be taxable when withdrawn. The plan administrator will withhold taxes when the distribution is made. However, it may not be enough to cover your tax liability, depending on your marginal tax rate, so you’ll want to plan accordingly.

How do I know how to best divide the 401-K in my divorce?

It is best to consult with your financial advisor and/or tax professional to determine the best source of cash for your individual situation with a divorce and 401K, especially when considering taking an early withdraw from a retirement account. Unfortunately, some professionals may not be familiar with this rule, which is one of the benefits of working with a CDFA (Certified Divorce Financial Analyst), who has specialized training in divorce financial planning. A CDFA can help you make the right decisions when dividing your 401-K and other assets in a divorce. A CDFA will help you maximize the money you receive while minimizing your taxes.

For questions or assistance with accessing the best source of cash for your particular situation or divorce and 401K information, schedule a no-cost consultation with our firm by calling 281-210-0057.

Filed Under: Dividing Property

Can You Make It On Your Own?

August 8, 2018 By Denise French, CVA, MAFF, CDFA, CRPC Leave a Comment

 

By Denise French, MAFF, CRPC, CDFA, IAR August 8, 2018

This question stops so many people in their tracks. You know your marriage is no longer working. You want to provide positive and healthy examples for your kids of how to live a good life and get along with your spouse. But you feel trapped. Because you don’t know if you can make it on your own financially if you divorce.

The main thing is to not stop at the unknown. Yes, you don’t know. So, go find out. This is where a Certified Divorce Financial Analyst® practitioner, or CDFA®, comes in. We will help you find out if you can make it on your own. And if you can’t, we’ll help put together a rehabilitation plan so that you can get to a point where you can.

I’ve seen this fear in clients from all walks of life; a homemaker that doesn’t feel like she can make enough money to continue living a certain lifestyle, a spouse that in their current job makes a fraction of what their mate makes, a couple where they earn similar amounts, but their finances are tied up in the home and retirement accounts, a primary provider who doesn’t feel like they make enough to also support their non-working spouse indefinitely.

A CDFA® professional will look at your income and assets and be able to craft a settlement that can take each of those scenarios into account. Do you need two years where maintenance is a little more to get training for a better paying job? Would it help with a home purchase to be able to access a portion of your retirement accounts penalty free? Will you still be able to save towards your retirement and future if you are paying maintenance. You can get knowledgeable answers to these questions that take out the guessing and give you a 20 year look at your financial future.

Recently a client was almost paralyzed with fear about not receiving maintenance and being placed in a position where their standard of living would drop dramatically. We were able to look at the marital assets as they existed and assure the client, that even if you just split the assets and received no maintenance, she could maintain a standard of living very close to what they had been experiencing.

Just like therapy, you may need a little coaching or help to figure out how to work a new budget. But you can craft a future with financial goals that will help you make it on your own. The answer is out there. The first step is finding a Certified Divorce Financial Analyst® professional to look at your assets and help you devise a plan to make it possible.

Filed Under: Divorce Finance

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