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Denise French

Archives for March 2020

COVID-19 SMALL BUSINESS RELIEF PACKAGES – What Small Businsess Owners Need to Know

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Thanks to the COVID-19 pandemic, many small business owners face uncertainty. To compound this uncertainty, the White House announced this weekend it will extend social distancing guidelines until the end of April. Thankfully the government also recently completed the passage of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). With a massive $2 trillion allocated for businesses, individuals, federal agencies, and state and local governments, the CARES Act has been designed to distribute capital quickly and broadly. There are a number of provisions that impact small businesses. The regulations (and interpretations of the laws formatted as rules) are fluid, however here is a guide to what you need to know about COVID-19 and small businesses.

EMERGENCY ECONOMIC INJURY DISASTER LOANS (EIDL)

This program was already in existence through the Small Business Administration (SBA). In early March, the SBA’s disaster loan program was extended to all small businesses affected by COVID-19, but the CARES Act opens this program up further and makes it easier to apply.

Eligible Businesses
  • Businesses with 500 or fewer employees
  • The term employee includes individuals employed on a full-time, part-time or other basis
  • Tribal businesses, cooperatives, and ESOPs with fewer than 500 employees
  • Non-profit organizations
  • Individuals operating as sole proprietors or independent contractors
Details to Know
  • EIDLs can be approved by the SBA based solely on an applicant’s credit score.
  • EIDLs that are smaller than $200,000 can be approved without a personal guarantee.
  • Borrowers can receive a $10,000 emergency grant cash advance that can be forgiven if spent on paid leave, maintaining payroll; increased costs due to supply chain disruption; mortgage or lease
    payments or repaying obligations that cannot be met due to revenue losses.
  • Expands allowable use to payroll costs, costs of group health care benefits during periods of paid sick, medical or family leave and insurance premiums; employee salaries, commissions or similar compensations; interest on mortgage obligations; rent; utilities; interest on other debt obligations incurred before the covered period.
  • Coverage period January 31, 2020 through December 31, 2020
Requirements
  • Required to make good faith certification that the employer has been affected by COVID-19 and will use funds to retain workers and maintain payroll and other debt obligations
  • No requirement that applicant is unable to obtain credit elsewhere
  • Business MUST be operational on January 31, 2020
  • Must be used for:
    • Maintaining payroll to retain employees during disruption/slowdown
    • Covering increased costs due to interrupted supply chains
    • Paying rent/mortgage payments
    • Replaying obligations that cannot be met due to revenue losses
How to Apply

To apply for this loan visit the US Small Business Administration.  For everything you need to know about applying for a small business loan, see the U.S. Chamber’s Small Business Loan Guide.

PAYCHECK PROTECTION PROGRAM

The Paycheck Protection Program, one of the largest sections of the CARES Act, is the most important provision in the new stimulus bill for most small businesses. This new program sets aside $350 billion in government-backed loans. Currently, the SBA guarantees small business loans that are given out by a network of more than 800 lenders across the U.S. The Paycheck Protection Program creates a type of emergency loan that can be forgiven when used to maintain payroll and expands the network beyond SBA so that more banks, credit unions and lenders can issue those loans. The basic purpose is to incentivize small businesses to not lay off workers and to rehire laid-off workers that lost jobs due to COVID-19 disruptions.

Eligible Businesses
  • Businesses with 500 or fewer employees
  • Select types of businesses with fewer than 1,500 employees
  • The term employee includes individuals employed on a full-time, part-time or other basis
  • Tribal businesses, cooperatives, and ESOPs with fewer than 500 employees
  • 501(c)(3) non-profits with fewer than 500 workers and some 501(c) (19) veteran organizations
  • Individuals operating as self-employed, sole proprietors or independent contractors
  • Businesses, even without a personal guarantee or collateral, can get a loan as long as they were operational on February 15, 2020
Details to Know
  • IDLs can be approved by the SBA based solely on an applicant’s credit score.
  • The maximum loan amount under the Paycheck Protection Act is $10 million, with an interest rate no higher than 4%.
  • The lenders are expected to defer fees, principal and interest for no less than six months and no more than one year.
  • Generally speaking, as long as employers continue paying employees at normal levels during the eight weeks following the origination of the loan, then the amount they spent on payroll costs (excluding costs for any compensation above $100,000 annually), mortgage interest, rent payments and utility payments can be combined and that portion of the loan will be forgiven.
Requirements
  • Required to make good faith certification the employer has been affected by COVID-19
  • No requirement of application being unable to obtain credit elsewhere
  • No prepayment penalty
  • No personal guarantee or collateral is required for the loan
  • Business must maintain its March 24, 2020 employment levels through September 30, 2020 as much as practicable, and in any case shall not reduce its employment levels by more than 10%.
How to Apply

To apply visit your local bank or credit union who are conduits for the Small Business Administration (SBA) Loan process. Most firms that already participate in the Small Business Administration’s Loan program will provide a place to apply. Be forewarned, you cannot get a loan for this as of this writing. The SBA lenders have 30 days to gather the documents they feel will be necessary to facilitate the loans. Most lenders should have this information available in the next week or so.

While you wait for the loan process to be available, make good use of this time. Gather documentation supporting your payroll expenses over the last 12 months, netting out the portion of salaries in excess of $100,000 as well as other business expenses – mortgage/rent, utilities, etc. You will also want to gather your business documents – corporate articles, partnership documents, Bi-Laws, or equivalent as that will also be necessary.

CAN I RECEIVE BOTH AN EIDL AND PAYCHECK PROTECTION PROGRAM

Yes, small businesses can get both an EIDL and a Paycheck Protection Program loan as long as they don’t pay for the same expenses. However, be sure to check with your financial advisor or lender before taking both types of loans if you are not sure of the specifics of regulations related to COVID-19 and small businesses.

COVID-19 and Small Businesses

Struggling to keep up with the ever-changing regulations for COVID-19 and small businesses? Check back here frequently for up to date information or contact us for all of your divorce financial needs.

What is a Certified Divorce Financial Analyst or CDFA?

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It seems incredibly unfair that at a time when you are dealing with the emotional stress of separating from your spouse, you also have to deal with worrisome and complicated financial issues too. As much as any other time in your financial life, it is vital to get professional help with your money questions when you are experiencing a divorce. One person in particular who take a lot of weight off your shoulders is a Certified Divorce Financial Analyst or CDFA®.    For many clients, divorce is the largest financial transaction of their lives. The role of a CDFA® professional is to address the special financial issues of divorce and help litigants achieve a settlement that will work both today and in the future.

IDFA Institute for Divorce Financial Analysts

Prerequisites

The Institute for Divorce Financial Analysts (IDFA™) is the premier national organization dedicated to the certification, education and promotion of the use of financial professionals in the divorce arena.  The IDFA sets the standards for all CDFA professionals.  The eligibility requirements for CDFA’s are established by the Board of Advisors and reflect the fact that a CDFA is not an entry-level designation but an advanced program.

Individuals with a minimum of three years of professional experience in finance or divorce and a Bachelors degree are eligible to enroll in the CDFA® Program. IDFA will accept ten years of professional experience from those candidates that do not have a Bachelor’s degree. This includes experience as a financial professional, accountant, or matrimonial lawyer. Candidates should also have working knowledge of financial calculators before purchasing the program.

Skillset of a Certified Divorce Financial Analyst

Divorce Financial Planning is the application of the discipline of financial planning to settlement strategies in divorce. The process requires the synthesis of tax, insurance, retirement and other areas of knowledge with their specific application to divorce. CDFA holders must possess experience with a and a strong knowledge base of a multitude of divorce related financial and legal issues, including:

• Personal vs. Marital Property
• Valuing and Dividing Property
• Retirement Assets and Pensions
• Spousal and Child Support
• Splitting the House
• Tax Problems and Solutions
• Expert Witness Testimony
• Tax Law and Financial Issues Affecting Divorce

 

divorce financial solutions

Maintaining the CDFA Designation

Once a candidate completes the CDFA® course, the designation is valid for one year, after which a fee must be paid annually.  To assure continuing competency in tax codes, legislative and other ongoing developments in the field of divorce financial planning, a candidate must report 15 hours of divorce-related continuing education every two years.

Code of Ethics

The Code of Ethics and Professional Responsibility is provided as an expression of the ethical standards that IDFA has adopted and every CDFA professional has agreed to abide by. The code applies to every CDFA designee and candidate in conducting divorce-planning work.

1. Integrity: Maintain the highest standard of honesty and integrity when dealing with colleagues, IDFA, clients or lawyers.

2. Competence: In addition to satisfying the continuing education requirement needed to maintain the use of the designation, every CDFA professional should serve their clients competently. Therefore, acquiring the knowledge and skill necessary to do so in the area of divorce planning is required.

3. Objectivity: Objectivity requires a CDFA professional to be intellectually honest and impartial. Regardless of who hired him or her, a CDFA professional will always be objective when dealing with clients and their lawyers.

4. Fairness: To alleviate the risk of potential conflict of interest as well as to not confuse the public, CDFA professionals should separate their financial practices and their divorce-planning practices to ensure divorce-planning recommendations are made independent of the potential financial planning relationship.

5. Confidentiality: CDFA professionals shall hold client information to the highest standard of confidentiality. Short of client consent or appropriate legal process, a CDFA professional shall not release any information about their client before, during or after the divorce.

6. Professionalism: A CDFA professional’s interactions shall project the highest level of professionalism. Whether dealing with clients, lawyers, IDFA or any of its partners or subsidiaries, a CDFA professional will behave in a professional manner.

7. Scope: A CDFA professional, by education and training, is a specialist dealing in the financial issues of divorce. Working alongside the lawyer who is licensed to practice law, a CDFA professional must never (unless licensed to do so) advise clients on their legal rights.

8. Compliance: A CDFA professional will comply with all the laws related to the business they conduct and report to IDFA any actions by other CDFA professionals that are illegal or in violation of this code. In addition, a Certified Divorce Financial Analyst professional will comply with any requests from IDFA for information regarding any complaints brought against him or her. If IDFA, after comprehensive investigation, decides that either suspension or revocation of the CDFA designation is the proper remedy, a CDFA professional will comply with the order.

9. Unauthorized Practice of Law: A CDFA professional understands that in order to practice law, one has to be licensed. Under no circumstances will a CDFA professional represent that the IDFA certification is a license to practice law.

10. Support: A CDFA professional will always support our profession and IDFA as the main driving force behind the progress of the profession.  Additionally, a CDFA professional will not collude, debase or discredit IDFA or the profession

 

charts and calculatorDo you need a CDFA?

Simply put, if you and your spouse have assets of significant value, the financial ramifications can be quite complicated. At this emotional time, it’s best to trust someone experienced with these kinds of issues rather than trying to learn on-the-fly. Money mistakes made at this time could have far-reaching consequences for your new life.

How do I find a Certified Divorce Financial Analyst?

The easiest way to enlist the services of a CDFA is to ask your divorce attorney for a recommendation. If you want to find one on your own, the Institute for Divorce Financial Analysts can help you locate an analyst in your area. Find them here.

You will likely find having one less thing to worry about—or several less things—during this difficult time is of tremendous value to you. A CDFA can lift some of the burden from your decision-making load.  Schedule an appointment today with Denise French, CDFA who not only has the professional experience to help you with the finances of your divorce, but she’s walked through her own divorce and can help you navigate yours.

Dividing Financial Assets During Divorce In a Volatile Market

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The U.S. stock market continues to be a daily surprise – sometimes shock – to investors and businesses across the country.  While there’s never a promise of financial gains in the stock market, there are times, such as now, during which anxiety about your financial security is heightened.  Divorce is also a time when financial anxieties grow.  When the stock market and economy go crazy, you might worry you’d be crazy to pursue a divorce in a volatile market.

Economic fears are understandable, but you can get divorced during a tumultuous market and still come out with your financial security intact.  You will just have to be extra careful and strategic during property division negotiations.  This is also a critical time to enlist a Certified Divorce Financial Analyst (CDFA) on your divorce team.

divorce and your 401k

Know Type of Accounts and Cost Basis

If you are like many working couples, you have money saved in retirement accounts like an IRA or 401(K) as well as other money invested in the stock market.

A retirement account is also called a qualified account.  When you take funds out of an IRA to cash in your bank the money is taxed fully as if you had worked for a company and earned that money.  If you are under 59.5 years old you may also be hit with a 10% penalty on IRA accounts taken out in cash.  Conversely, if you cash funds out of a 401(k) or other ERISA governed group retirement plan owned by your spouse, you will still be taxed on those funds, but you will not pay the 10% penalty if you take them out pursuant to a divorce and a Qualified Domestic Relations Order or QDRO.  This all applies to a cash distribution.  Any retirement funds you move into your own IRA will have no tax due.

During volatile markets when the values are low, it will be wise to work with a Certified Divorce Financial Analyst to determine if now is the best time to convert these funds to a Roth IRA. If you do so, you will pay tax now on the lower values but not pay any tax in the future on the growth of the account or distributions from the account years down the road at retirement age.  Further you can also use ROTH IRA funds within certain parameters, for a first time home purchase or for education.

The non-retirement accounts are non-qualified accounts.  The taxes related to these accounts are handled differently than taxes tied to qualified, retirement accounts.  When addressing non-qualified accounts and stocks, pay attention to cost basis.  The cost basis of an individual security (stock) is the cost you and/or your spouse paid for it at the beginning.  Let’s assume you both decide to split the value of the stocks.  You want to look at more than the current value of your investments.  You need to know which stocks have increased in value since you bought into them and which have decreased in value.  This might sound backwards, but the stocks that have decreased in value compared to their cost basis can be better for your finances in a divorce.  Why?  Simply because of taxation.  If the government sees there’s been a financial loss, you aren’t taxed for that.  If you only get the share of stocks that have increased in value, the taxes you pay in capital gains could result in a lower payout for you.

stock options

Stock Market Risk Tolerance

Another factor to consider is the experience and comfort of the spouse who originally managed the account versus the spouse who is receiving the account.  For example, just because the spouse who traditionally handled the accounts is very aggressive and has a comfort level with stock market risk, the other spouse taking over those funds may not.  The accounts may need to be moved into a different set of stocks or other assets for the comfort level of the spouse taking over the stock account, especially in a turbulent market.

We had a client who’s spouse was a financial advisor.  He was very comfortable with stock market risk and understood complex investment concepts.  His wife had never had to worry about their investments.  We took over her account after the divorce and found it was invested in an extremely aggressive S&P 500 2x portfolio which meant it moved like the S&P 500 did, only twice as far.  In up markets that is great, they captured double the return of the markets.  However, in down markets it would be catastrophic.  We moved her into a more conservative portfolio which proved to be very helpful when the markets fell.

The Wording Will Make All the Difference

When dividing divorce assets and debts, the estate will usually be divided as of a certain date.  In Texas, you will typically be mandated to attend at least one mediation.  When you choose to finalize the details of your estate in mediation, that tends to be the date of division.  After mediation, attorneys will draft your divorce decree from the mediated settlement agreement, review it with you and then schedule a date and time to attend court to finalize your divorce.  These steps take time.  The date of division could be months away from the actual date of divorce (when you can start dividing the assets) which is why the wording in your division is so important.

For those who finalized the division of their estate in mediation in December of 2019 but didn’t get divorced until March of 2020, the wording would be critical.  For example, if you had stated you wanted a set amount you would be thrilled because the market losses would not affect you (unless the account became smaller than what you were awarded). Conversely, if you agreed to take 50% of the estate including gains and losses in the account you will participate in the market swings whether up or down.

No matter which option your choose and agree to in mediation, a set dollar amount or a percent of the estate, you will want to understand what you are choosing and have some level of control over the assets in such a volatile market.  This should provide peace of mind in knowing roughly what you are getting in your estate settlement.  You can also request the funds be put in more conservative investments while the divorce finalization is pending.  You do not have to sit in fear throughout this process, you just need to have help from someone who understands how this works.

S&P Index History - 1960-2020

Divorce in a Volatile Market: Keep Calm and Invest On

It is very common within a marriage for one spouse to control the investment decisions and the other spouse to not.  If you were the spouse who did not make investing decisions, you aren’t alone in not fully understanding how the markets and investments work.  For many who get divorced, the marriage ends and, suddenly, they are left wondering how to manage a stock portfolio.  This new post-divorce reality can lead to anxiety.  Worry about affording life after divorce, along with the felt ignorance when faced with the stock market, can result in a knee-jerk financial decisions.  Many with less experience running the finances will choose to simply cash out all the stocks they received through the division of assets.  Making the decision to cash out from an emotional place may provide some immediate relief; but could really hurt you in the long run.  While cash is the best place for an emergency fund and for safety for part of a portfolio in a falling market, it is also the one asset class proven to lose money to inflation over the long term.

A focus on financial planning for the future, however, can be a growth opportunity after divorce, both in the metaphorical sense and in terms of your net worth.  The financial markets can be your friend.  That may be difficult to believe, particularly at times when stock market volatility is an everyday headline, but the facts are clear: the US stock market is one of the best investments you can make.  History of the stock market has shown investing long-term is a strategic way to financially survive, even with volatile markets.

You Don’t Have to be a Financial Expert

When you decide to divorce in a volatile market, you aren’t signing up to become a financial expert.  However, it is wise to hire one.  During difficult market times it can be very scary but enlisting a Certified Divorce Financial Analyst or CDFA who is well versed in both the details of a divorce financial division and stock markets can be very helpful.  Many CDFA’s are experienced financial planners and advisors who have been through their own divorce and understand what you are going through both professionally and personally.  These professionals understand the markets and investing.  They are also trained to work specifically with divorcing couples and individuals and understand how divorce finance works.  These professionals can help you as they only focus on the finances a divorce case, and will work alongside you and your divorce attorney.

If you have questions or concerns about the financials of your divorce, schedule a call or video conference with us today to get the answers you need.