Archives for January 2021

What is a QDRO?

January 25, 2021 By Denise French, CVA, MAFF, CDFA, CRPC

A Qualified Domestic Relations Order (or QDRO, pronounced “qua-dro”), is a judicial order in the United States, entered as part of a property division in a divorce which divides a retirement plan or pension plan by recognizing joint marital ownership interests in the plan, specifically the former spouse’s interest in that spouse’s share of the asset.

QDROs apply only to employee benefit or pension plans subject to the Employee Retirement Income Security Act (ERISA), the American federal law governing private sector pensions. Domestic Relations Orders or DRO’s divide military retirement pay and Federal civil service retirement plans. A QDRO or DRO may provide for marital or community property division between the plan participant (the employee or former employee) and the alternate payee (the spouse of the employee or former employee). IRA’s, Roth IRA’s and SEP IRA’s are not subject to ERISA and therefore are not divided typically with a QDRO but rather paperwork from the issuing company.

QDROs and DROs must first be issued by a State-level domestic relations court. The QDRO or DRO is a separate document in addition to your divorce decree. It must be signed by both parties in the divorce as well as their respective attorney’s and the court. Once it is signed by all parties, the QDRO or DRO then needs to be sent to the company’s plan administrator. It must meet the standards of the plan to which it applies. Each company or issuing entity will have their own wording for QDROs and DROs.

Generally, you must have a separate QDRO or DRO for each plan. Each retirement plan is governed by different rules depending on the plan type (i.e. 401(k), Pension Plan, 403(b)). Each QDRO or DRO must be tailored to the requirements of each plan.

The timeline for receiving your awarded funds from a QDRO or DRO is approximately 90 days. We highly encourage you to request the QDRO/DRO process begin as soon as you have completed the mediation process or a decision on the estate has been determined. It is common for a QDRO/DRO to be sent for pre-approval. This is where he QDRO/DRO is completed but not signed, instead it completed with the plan participants information and the divorce decision as far as division is sent to the administrator for pre-approval. This process takes approximately 30 days. Once pre-approval is completed, you know your QDRO/DRO will be approved. We then encourage you to have the QDRO/DRO submitted in conjunction with your divorce decree. This tends to speed up the process and prevents the frustrating delays we have seen multiple times.

If you are in the midst of or finishing up divorce negotiations, we encourage you to schedule a complimentary 30-minute consultation to discuss your situation. We can potentially help you avoid costly delays and frustrations in the QDRO process.

Divorce Noise

January 10, 2021 By Denise French, CVA, MAFF, CDFA, CRPC

Over the years I have been doing divorce financial advising, I’ve learned so much from women just like you. It’s so normal for us to ask questions and want information from those who have already been through this overwhelming time in our lives.

I remember talking with my friends (many of whom had been divorced) and wanting them to understand how my experiences left me feeling afraid and alone. I wanted to compare my story to theirs. I wanted to not feel so alone. After so many calls and conversations, I’ve made lists and lists of what I’ve heard being said and I want to share some key takeaways with you. I hope it will help you “cut through the divorce noise.”

1. You don’t need to listen to people who don’t know what’s best for you.

Some well-meaning friends and family want you to quit worrying about everything you’ve got on your mind and “just get back out there.” If you’re not ready, then take it easy. You’ll be ready when you’re ready. There’s a huge, new world waiting for you when you’re ready!

2. Try to separate the emotional part of your journey from the business of divorce.

There are so many ups and downs and it’s important that you have emotional support so that you have a safe place to deal with all of the feelings you’re experiencing. That is the value of a coach or therapist.

3. One of the biggest issues women tell me is that they’re afraid.

Honestly, who isn’t afraid? It means you’re human, but it doesn’t mean you’re not going to be OK. Your fear can actually move you forward and push you to learn new things that you never dreamed you could learn.

4. Feeling lonely isn’t the same as being alone.

The reason some women don’t want to divorce is because they’re afraid of being alone. But the truth is that so many of us were lonely in our marriages! When I talk with women who are divorced, they actually like being alone and just being able to do whatever they want whenever they want!

5. Wanting to find all the answers online.

Many women tell me they are getting all their information online. While I do suggest you read about different options for divorce, for example, I don’t recommend you keep digging deeper and deeper trying to find the answers to all of your concerns. Again, that is where you can get in trouble with inaccurate information. It can lead you to doubt and waste time questioning what is true and correct in this process.

6. If you’re feeling so tired, hurt, and damaged emotionally right now, I’ve learned that so many of you are going to find love again!

Even if you’re not even interested right now, after you’ve worked on the role you may have played in the divorce, it may surprised to find that you’re interested in something new and healthier. It’s human nature to want connection with others. So give yourself time to figure out who you want to show up as now on a deeper level and you will attract what you need.

Don’t Give Up

I want you to know you’re not alone and we all have worries and fears. If I had to summarize what I’ve learned through the “divorce noise” is that we all struggle. But there is light at the end of the tunnel – it just can be a long tunnel and the light can seem so far away, but don’t give up.

And if you would more support and want to speak with one of our team members here at Divorce Strategies Group, please schedule your 30 minute complimentary consultation today.

Ten Financial Pitfalls for Women in Divorce

January 4, 2021 By Denise French, CVA, MAFF, CDFA, CRPC

During divorce, many women are concerned about financial survival—and with good reason. Studies show after divorce, the wife’s standard of living may drop almost 73% while the husbands may increase by as much as 42%. Many factors combine to lower a women’s standard of living after divorce. Child support may not be adequate to cover the true costs of child rearing, and she might have lost many important years of career growth, making it difficult for her to get back on her feet after divorce. By familiarizing yourself with the ten financial pitfalls of divorce for women, you can save yourself a lot of heartbreak and hassle in the future.

1. Believing you cannot afford an experienced attorney

Divorces are expensive. There is no doubt. The fees involved for a regular divorce with a qualified attorney are expensive – attorney fees, therapist bills, new living expenses and other advisor fees. Further, the funds previously used to support one household must now stretch to support two. If you are contemplating divorce, now is the time to begin amassing the funds you’ll need to stay afloat. Think of a divorce as a long term financial cost and plan accordingly before you file or when you first start to believe you spouse may be checking out of the marriage.

If you are not able to save cash for the divorce process, you still have the ability to hire good support for yourself. You can open a credit card in your name alone, while you are married, and use the marital income to qualify for a card. That card can be used for divorce related costs and at the end of the divorce, it is placed on the marital inventory as a debt of the marriage. You have power!! Contact Divorce Strategies Group on this topic and we will walk you through what to do.

2. Bad timing

Divorce is a marathon event which requires careful preparation. Before you act on the divorce, consult with legal and financial professionals, and read about the subject. Also, think about where you are in life. Did you or your spouse just start a business? Are you or your spouse just about to go back to school for a graduate degree and amass student debt? Life stages like this may cause you to pause on the divorce or act quickly before major community debt amasses. If you’ve been married eight years or just hit the nine year mark and your spouse is the major breadwinner, you might want to stick it out a little while longer before you file for divorce. In order to collect on your ex-spouse’s social security you must be married for at least 10 years from the date of marriage to the actual date of divorce. Finally, don’t just pack up and drive away in a car needing major repairs with old clothes on and kids who need braces. Fix what you need fixed, buy what you want to buy and get your kids situated with what they need before you leave, as much as possible.

3. No records

The three most important words during divorce are: document, document, document. Try to obtain copies of all financial records before your divorce begins. Make a clear copy of all tax returns, loan applications, wills, trusts, financial statements, banking information, brokerage statements, loan documents, credit card statements, deeds to real property, car registration, insurance inventories, and insurance policies. Also, copy records you can use to trace your separate property, such as an inheritance or gifts from your family. The corpus and the capital appreciation of these assets should remain your separate property as long as you can document them. Copies of your spouse’s business records can be a treasure map illustrating where hidden assets, if any, are buried.

4. Overlooking assets

Texas is a community property state. That means every dollar earned during the marriage belongs equally to each spouse. It matters not that the income went into your bank account, a business, a 401k or a second home – those funds belong to each spouse. Half of everything is yours! Even if you don’t want an asset, it can be used to trade for something you do want. Inventory safe deposit boxes; track down bank and brokerage accounts; keep pay stubs, retirement plans, and insurance policies. Don’t overlook hobbies or side businesses that might have expensive equipment or generate income.

5. Ignoring tax consequences

Tax consequences are one of the most overlooked or forgotten issues in divorce finance. Most financial decisions have tax ramifications. Should you take the brokerage account or the retirement plan? Should you keep the house or sell it now? Don’t ignore the hidden tax costs of divorce in making these decisions. Your situation may require some calculation by an accountant or divorce financial planner to determine if you are really getting the best deal. And, if there is a chance your past joint tax returns omitted income or overstated deductions, you may want to seek an indemnification clause to protect yourself if the IRS decides to audit.

6. Thinking ignorance is bliss

During divorce ignorance is not bliss, it’s expensive. As painful as it may be, diving in and participating in the process can help you recover more quickly from the divorce because you will have a healthy sense of control over the process, be focused on practical things, and be working with your ex to get things done. Also, taking an active role in the negotiations can help you achieve a better settlement. You will also likely have less conflict and litigation after the divorce, better compliance from your ex, and better sharing of information about the children. Your attorney will give you valuable legal advice which should weigh heavily into your decision making process, but all of the decisions are ultimately up to you.

7. Mixing money and emotion

This is really tough for women who were hurt during the divorce, however, it is crucial. Try to think of this from an unemotional, business like perspective. This is likely the largest business transaction you will make in your life – treat it as such. View your attorney as a paid professional rather than a friend or confidante. When your grief is overwhelming, go to a friend or support group, not to your attorney, who is billing you at his or her normal hourly rate. In addition, revenge is not helpful in long term planning and financial negotiations. It will not make you happy to declare war on your ex – it will likely just make you broke. Making the effort to bring the divorce to a successful conclusion with as little rancor as possible can help you financially today and in the future.

8. Not fighting for what’s legitimately yours

Divorce negotiations are not only about survival; they are about molding your long term financial future. It’s important to not let wanting to please others or look like “the good girl” get in the way of taking what is legitimately due you. You have to insist on getting what you legally deserve. Even if you hope you will eventually be able to reconcile with your ex, it is not guaranteed (you are getting divorced after all). Letting him keep all of his 401k because he’s worked so hard could put you in the poor house when you are older while he enjoys a great life. No matter your feelings, stand up for yourself and get your legal share. If you reconcile, that’s fine. If you don’t, you’ll still be able to take care of yourself financially. Taking what is rightfully yours (50% at least) is not being greedy, it is protecting your future and honoring your own value as a human being. No matter what your spouse says, you are worth it!

9. Taking the payment overtime versus the lump sum

Receiving a guaranteed, monthly, court ordered income sounds great doesn’t it? Yes, but what if your spouse loses his job? Becomes disabled? Quits his job and moves overseas to work? What if he just stops paying? What if his industry goes through 2 years of consolidation and he is laid off time and time again? What if he starts his own business? We feel like getting a lump sum is much better than a series of payments – court ordered or not. If he stops paying the court ordered support, guess what you have to do to get him to pay it again? Yes, go back to court. At some point, those court costs can be more than what you would get from him in the first place. Take the up-front money instead of the income when given a choice. You can create your own income stream for that lump sum payment or use it for other financial needs in the future.

10. Not getting good professional advice

Right now, you need all the help you can get! Divorce can be very complicated, so don’t try to do it all yourself. Hire an attorney who can give you excellent advice—even if he or she is expensive. Engage a divorce financial advisor to help you make wise financial decisions and create a roadmap for your future. Find a good therapist to help you emotionally. Don’t skimp now on matters which will affect the rest of your life.

Schedule a 30 minute complimentary consultation today to discuss your specific situation or call us at 281-505-8177 to discuss your concerns.