Archives for February 2019

Divorce Done Differently!

February 26, 2019 By Denise French, CVA, MAFF, CDFA, CRPC Leave a Comment

As soon as you begin to contemplate divorce, the nauseating, panic-attack-inducing realization of losing half of your net worth kicks in and you find yourself wondering if it’s even worth it to consider leaving if you’re just going to end up broke and starving. Mediation may not even be an option in your mind, but it should be.

You may know what’s in your estate but have no idea how to make divorce work financially. You may have no idea of what’s in your estate, and you are scared to death of leaving and becoming homeless.

There are ways to ensure that your financial future is not destined for disaster. First and foremost, be sure you involve a financial advisor who specializes in divorce on your team so that you will be fully informed of all the creative settlement possibilities that may be open to you.

A couple married 41 years came to me together last year for assistance with their divorce. They were completely amicable but had significant net worth and unsure of how to divide their estate. Several attorneys had told them to “just split it 50/50”. This couple not only had significant net worth in investments, but they also owned a business and multiple commercial properties. The husband was distraught at the thought of giving his wife half of his business. The wife didn’t work day to day in the business and it took special skills and licenses to operate the entity, plus this was something he had built from the ground floor up. His heart was in the business. Some of the commercial properties were rented and under contract with tenants which the husband had created. The other commercial properties were in areas that were currently depressed, not very safe and the husband had been trying to sell them for years. The couple just didn’t feel dividing it down the middle was the smart thing to do. They were referred to me to explore options.

After gathering all their financial documents and completing my analysis, I put together two reports for the clients. The first reflected an exact 50/50 split. This gave the wife half of everything for an even 50/50 split. The second was my creative settlement solution that resulted in a net 60/40 split but took into consideration tax planning and consequences as well as the needs of each party as they planned for the next phase of their lives.

In my creative mediation settlement option, the husband kept 100% of his business entity, the rental properties and the wife kept 100% of the investable assets. She walked away with 40% of the estate, but no business risk, no need to ever work again, and a financial plan that provided her with enough income to live day to day in a paid off house and travel internationally several times each year. Part of her investments were put in products that provided guaranteed income for life and the other in investments that can keep up with inflation. She had protection, safety and a solid financial plan. He had the business he wanted and the rental properties which he also wanted.

Needless to say, the couple was thrilled to pay my mediation bill knowing that I had found a way for the husband to keep the assets he wanted and the wife with enough assets to live comfortably for the rest of her life.

Don’t go into this blind. There are so many ways to ensure that BOTH of you get to keep more of your own money. Get the right experts on your team. We’d love to help you have a Divorce Done Different! Call us today.

Executive Compensation in Divorce

February 10, 2019 By Denise French, CVA, MAFF, CDFA, CRPC Leave a Comment

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By Denise French, MAFF, CDFA, CVA, CRPC

When you are facing divorce, it’s important to know all the components that make up your marital estate, especially if the assets include some form of executive compensation. If your spouse works for a large firm as an executive or at the management level, you may have some form of executive compensation in your estate. Many smaller firms also offer their top-level employees different forms of executive compensation plans. You can hire a specialist such as a Master Analyst in Financial Forensics (MAFF®) or a Certified Divorce Financial Analyst (CDFA®) to search for these types of plans. This executive compensation and divorce assistance may be able to make your results more desirable.

Once you realize you have some type of executive compensation plan, you then determine the value of the plan and the characterization of the plan (marital or separate property). The following is a brief overview of the most common executive compensation plans.

Employee Stock Options
The most common type of non-wage compensation used to be stock options in shares of the employer company. The two primary types of stock options are Incentive Stock Options (ISOs) and Non-Qualified Stock Options (NQs). The difference between the two is in tax treatment and transferability. They both will require some intricate work, specifically if there is a vesting schedule. For these calculations, you just want to bring in an expert to have it done right.

Restricted Stock
Restricted stock is now the most commonly used form of executive compensation. This is shares of company stock given to an employee as either compensation for past performance or an incentive for future performance. It’s critical to acquire the actual grant documents to know which the case is. This could determine the characterization of the stock as either marital property or separate property. The most common type of restricted stock awards is Restricted Stock Units (RSU’s). They provide the right to acquire shares at vesting. Again, the marital portion can be quite complex to calculate, but critical that you have it done. This is another job for that MAFF® or CDFA®.

Employee Stock Purchase Plan
This is a benefit wherein the employee is allowed to buy company stock at some regular frequency, usually at a price that is discounted from the current market price. When the shares are purchased, they can usually be sold immediately or held at least a year for more favorable tax treatment.

Deferred Compensation Plans
With this option, the employee can choose to defer some portion of current compensation until a future date. These deferrals may be salary, bonus, or even equity compensation. Sometimes the employer will also match these deferrals. These deferrals are typically discretionary and can change per the employees wish year to year. Also, any balances in the plan are likely marital property as well and should be analyzed carefully.

My spouse has executive compensation. Now what?

Now is the time to acquire a team of experts. The attorney is your primary point of contact. From there, we also recommend hiring a financial forensic expert for the financials of your divorce early in the process. We recommend bringing in the expert as early as possible in the divorce so the right documents can be requested, and the characterization can be known as early as possible. The sooner you know what you are facing financially, the better. If you have clear direction on what is in your estate, you’ll have a better idea of how to negotiate the best deal for you.

Bringing a financial expert on early in the case will also prevent last minute scrambling in mediation for documents and information. It will also help you strategize and give you time to explore all the financial options with your attorney and your financial expert.

The financial expert can also help ensure that the final Settlement Agreement is written to properly reflect the way the compensation will be handled. Executive compensation accounts are not usually eligible to be given to a non-employee spouse at the time of divorce so the employee spouse must have very specific instructions on what must happen to specific shares, options and grants upon vesting that takes into account the taxation responsibilities, etc.

Executive compensation can be very complicated and if you take it on yourself, you’re exposing yourself to a lot of risk. These assets are often substantial pieces of the marital pie and it is critical that they are valued correctly so that you can negotiate your settlement confident that you are really receiving what you are entitled to. This is one area you don’t want to scrimp on. This expert on your team could single-handedly get you thousands of dollars more in settlement by ensuring that EVERYONE has all of the correct information.

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HOW TO COPE DURING THE DIVORCE PROCESS

February 4, 2019 By Denise French, CVA, MAFF, CDFA, CRPC Leave a Comment

January is the historically the biggest month of the year regarding the number of divorces filed. We are now what professionals in the divorce world refer to as “Divorce Season”. Couples have had one last unhappy holiday experience and they are ready to call it quits, or they knew they were divorcing before the holiday season but wanted to wait until after for their children’s sake. You can start coping during divorce even when it hurts.

Now, it’s February, you or your spouse has filed for divorce and you are now in the process of getting divorced. That’s a big move and it’s a very unsettling time, to say the least!
I remember when I went through this, I had a wide range of emotions. I could feel any of the following in a single day: frustration, anger, powerless, denial, relief, confusion, frustration, rage, sadness, sorrow, shame, gratitude and fear.

Relationship separation and divorce are among the toughest life experiences people can face. Losing a relationship is a very painful experience, even if the relationship is not a good one. Many find that they may not be sad about losing an unloving, unkind spouse. They are sadder about losing what could have been or what was planned. I felt that way. I lost the huge family attached to my spouse. I lost the dream of being a stay at home mom (I’ve since retracted that dream after a moment with it). I also lost the dream of an intact, loving family unit. I was now going to be “one of those people” who would cry over not having their children at Christmas or Easter. Unfathomable. That was the worst blow of all.
These feelings can lead to practical difficulties such as loss of appetite, trouble sleeping, difficulties at work and social withdrawal. While these are painful and distressing, these feeling are normal and with time and coping during divorce, their impact will lessen.

Despite all the tough times, this change can bring about, it’s important to remember that life will get back to normal, although “normal” may look and feel different from what you’re used to or had hoped for. A new ‘normal’ will settle in, where it will be possible to continue living a fulfilling and happy life. It certainly has for me!! My life looks nothing like what I had envisioned when I married my ex-husband, but I think it’s far better than I ever could have with him. I wish him no ill will, quite the contrary I wish him well as he is the father of my child. I have neutrality surrounding emotions toward him – I feel neither love nor anger. It’s a beautiful place to be. However, getting here was no small task. Below are a few things I did to cope with the separation process. I hope they help you with coping during divorce as much as they helped me.

1. I had 6 girl friends on speed dial, and I’d call them all repeatedly. I had 6 because at the time that was the number of close friends I had. I didn’t want to wear any one of them down with my crying, sobbing, grief, and anger. I would call one and talk for a while (and cry for a while) and then call another. This was invaluable.

2. Music. One of my 6 made a play list for me. My list was from the album “Stripped” by Christina Aguilera. It helped me. I hear those songs today (12 years later) and I smile thinking of my friend who was so thoughtful, and I am reminded how far I have come.

3. Therapy. I really cannot stress this enough. Many people don’t like the awkwardness of sitting with a stranger who you are paying to talk about your issues, but it’s so helpful!!! My therapist was a life line, a cheer leader, a coach and a confidant. I could not have done this without her.

4. Support Group. This is another item on the list of stuff you won’t want to do but should do. I attended a “Divorce Care” group and it was also a lifeline. I also received the care, support and compassion I needed. My group of DC folks went out to dinner after each meeting. It was so helpful to be a part of others who were “recovering” from this experience – I could not have survived without them either.

5. Prayer & Meditation. You may not believe in God but having some type of “higher power” if you will, is going to save your life. Something bigger than you that can help you get through this. Connecting to my “higher power” was huge during this time. I also found I grew spiritually in a way I cannot describe. There were even a few moments where I had the “peace that passes all understanding”. My daughter would be in anguish over something that was said at her dad’s house and I would feel the peace (not all the time, but I did fee l it) when I should have felt anything but peace.

6. Purposeful Communication with your separated spouse. Of all the tools, this one I didn’t learn until after the divorce. This would have helped so much during the separation. (This also could have saved me several thousand dollars!!) When you are speaking to your separated spouse, have a purpose for the conversation. Keep the conversation on topic or politely (I cannot stress politely enough) recluse yourself. During the separation, it may also be a good idea to have a list of topics you are covering in front of you when you speak to your separated spouse. Have a purpose for each communication. Are you concerned with managing the marital home, co-parenting children or arranging schedules? Those are all good reasons to have to speak to him or her. If it’s just to vent or to tell them how they should do something, don’t talk to them!! Talk to your friends, your family, your support group or your therapist – but not to your spouse! Emotions are high right now and the less negative communication, the better.

7. Self-care. You are walking through one of the worst, most stressful experiences of your life. Give yourself a break!! Also, give yourself some love. I practiced this in many ways: coffee with friends, working out, walking, taking off work early to play with my daughter at the park, yoga, bubble baths, read a book or listen to audio recordings that lift you up. I also embarked on new things – I met new people through my church and through different social groups. I joined new groups. I volunteered and met new people in doing so. I created a new Christmas routine with my daughter the year of our separation. I took care of myself so I could better take care of my daughter and my clients at work.
These are the biggest tools I used to help coping during divorce. The experience was not easy, and I don’t wish to ever do it again. But, looking in the rear-view mirror, I’m glad it happened. Not only is life better today with a new partner, but after my divorce was final, I made a list of “gifts” I received from the divorce process. It was amazing how much had been given to me during such a terrible time. I was grateful. I hope at some point you are too.

If we can help you when you’re trying to navigate coping during divorce, please call. We at Divorce Strategies Group not only understand the divorce finance, we have been there ourselves and know what you are going through. We are here to help!

Archives for February 2019

My spouse has executive compensation. Now what?

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