Ending a marriage? Don’t get divorced from financial reality in the process.

Ending a marriage? Don’t get divorced from financial reality in the process.

Sound financial planning may be the last thing on your mind when divorcing but it may never be more valuable.  A lawyer may be your first call when you decide you want a divorce.  A financial advisor knowledgeable about divorce matters should be your second

In many cases, a divorce has more impact on a person’s current and future financial well-being than any other event in their lives. Sound financial planning may be the last thing on your mind when your marriage ends — particularly if it ends in conflict — but it may never be more valuable.

Divorce happens in an emotionally charged environment.  While in this state of mind, you are making financial decisions which will affect the rest of your life.  It is critical to have a knowledgeable financial advisor on your divorce team walking along side you and your attorney.  Financial planners will give you the overview of financial guidance while your attorney will explain the law and guide you with legal decisions.

In general, for everyone except the very wealthy, divorce will hurt your standard of living. Two households are more expensive to maintain than one, and if one person in the marriage has been a stay-at-home parent, there is less income and assets to go around.  In addition, unless your marriage was short-lived and is ending amicably, you have no children and little marital assets and income, you should consult both a lawyer and financial advisor.

Online divorces are dirt cheap but a good idea only for very simple circumstances with mutually acceptable terms. Mistakes made in a divorce settlement have long-lasting financial effects.

Five key issues to consider in divorce

1. Mediation versus litigation:

A divorce settlement mediated with a collaborative approach has major advantages over litigation for the divorcing family. It typically costs less and has higher compliance rates than with litigated settlements. It often requires much less time and emotional turmoil.

More importantly, it can save a parent’s ability to co-parent minor children after the divorce.  The biggest potential downside is that if the mediation doesn’t work, you’ll end up in court anyway prolonging the ordeal.

2. Budget for the long-term:

A clear understanding of your long-term living expenses is crucial to negotiating support payments and a settlement you can live with. That’s particularly so for parents who retain primary custody of children.

Larger expenses such as tutoring, special needs, extracurricular activities, vehicle purchases and insurance, senior trips and college are among the future expenses which need to be addressed in a settlement. Ideally, child-support payments should be protected by term life insurance.

When you come to the negotiating table, it is critical to think about your expenses not just two to three years after divorce but ten and fifteen years out. The more you can discuss about current and long-term needs — particularly if there are children involved — the better.

3. Watch your assets:

Marital assets are not all created equal. A savings account with $100,000 is worth much more than a joint retirement account that will eventually be taxed or illiquid equity in a home of that amount. Make sure you consider the liquidity and after-tax value of all assets and the different risks that they present.

Holding onto the family home could be a very heavy financial burden. While it may be a source of comfort in a difficult time, it could come back to haunt you.  Mothers with custody of children often understandably want to keep the house. Then they come to us, and we walk them through the costs to upkeep the home and a plan to do so, if possible.   We also find it valuable to have older homes inspected to uncover are any potential large costs ahead such as termite damage, foundation repair or major plumbing repair.

If there are more complicated marital assets such as private equity, restricted stock, business interests or even cryptocurrency holdings, an advisor is essential to evaluate and advise on those assets.

4. Mind your taxes:

Like everything else in life, divorce settlements have big tax implications. Understanding how different assets and income streams are taxed is crucial to the equitable division of assets.

It is also important to be aware of less obvious items such as pre-paid taxes which may have been paid already out of the marital pot but could be refunded to or used by a former spouse or tax-loss carry forward benefits if a large amount of non-qualified brokerage funds are owned.

5. Update your life:

The key things to address when your divorce settlement becomes final include updating your will, powers of attorney, beneficiaries, and other estate-planning documents to reflect your changed circumstances.

If you have been out of the workplace for an extended period, think about whether you need to return to it and if you need training to help you get back to work.  If you need training, it is wise to research how much it will cost and negotiate for that in your divorce.  It’s hard telling a stay-at home parent that they should go back to work but in some cases they really should. A person’s largest asset may be their earning capability.  It can help you add to your nest egg and enable a better retirement.

A knowledgeable, experienced divorce financial planner can show you where you will be with or without returning to the workforce and if you are working, help you readjust your retirement plan to get back on track.

Divorce Strategies Group, LLC is a full financial planning firm for those engaging in divorce with a forensic accounting arm.  We understand the laws as they relate to finance in divorce, and we understand financial planning.  In conjunction with our sister firm, French Financial Group, we can help you walk through divorce and emerge with a strong financial plan for your future.   Please call us at 281-505-8177 or reach us online to schedule your complimentary consultation today.

Retaining Your Assets in Divorce

Retaining Your Assets in Divorce

After years of working with those going through divorce, we have found individuals with two factors really thrive during divorce.  Those who have (1) knowledge of the relevant facts and (2) realistic expectations are the most ‘successful’ in their divorce.  Without accurate accounting of your finances, you may find that you cannot afford your life, or you could jeopardize the retirement that you have worked so hard for. Conversely, you may find you have more than enough in assets to maintain your lifestyle, and you are secure financially.    With higher-than-realistic expectations you may spend thousands of dollars (or hundreds of thousands) only to find a fair division is 50/50 (or 53/47 but not the 80% you wanted).  For those going through a “gray divorce” or spouses who have worked at home, the financial ramifications can be even more significant for either mistake.

Hurt feelings and fear often combat rational thought – which we totally understand – we were the same way. Divorce is scary! With that in mind, we have created 7 tips to help those in divorce walk away with your financial future intact after you go your separate ways.

Budget your Post-Divorce Lifestyle.

Living separately can be scarier than living together – even if you were miserable!   To ease the fear, remember knowledge is power.   It is imperative to know your monthly income and expenses.   This is particularly important if one spouse has been paying the bills and managing the household finances alone.

Figure out your immediate needs and go from there. At Divorce Strategies Group we walk couples through their post-divorce budget early in the divorce process.  It is important that clients know realistically what they can spend each month following the divorce. This sets them up for a secure financial future and gives them peace of mind.  It can also help you negotiate from a position of power, not fear.

Manage Costs During the Divorce

A typical litigated Texas divorce ranges between roughly $20,000 to $40,000 or more. That is no small chunk of change to most couples.   We have been witness to divorces costing $60,000, $80,000 and more (reference unrealistic expectations and lack of knowledge above).

One way to mitigate the financial fallout of divorce is to choose early mediation over litigation. Mediation is a process in which a mediator helps divorcing couples reach an amicable settlement. The mediator facilitates communication between the parties to promote settlement and understanding between them. Mediation addresses child custody, child support, visitation, spousal support, and property division. The mediator does not act as a judge, attorney, or financial advisor, but assists the spouses in reaching a voluntary agreement. At Divorce Strategies Group our Mediation Process involves a team of experts that will work with you and your spouse to negotiate a divorce settlement that won’t break the bank.

focus photography of person counting dollar banknotes

The issue many attorneys, rightly so, have with mediation is it is done without guidance of someone who understands the law or someone who understands how finances work relevant to divorce.   These are both valid concerns.  We have seen couples negotiate a “do it yourself” divorce only to find they owe thousands later due to mistakes or someone lost out of hundreds of thousands because the agreements were not able to be legally completed (such a restricted stock plan) or the property documentation (such as a pension plan) was not completely correctly, thus the agreement is not enforceable.

To make sure you do it right, we include a Family Law Mediator Attorney with a Divorce Financial Expert to provide the right guidance to you the first time.  Visit Divorce Strategies Group for more information on our process.

Eradicate Debt

If you have joint debt with your soon-to-be ex-spouse, it is best to pay it off before finalizing the divorce.

Shared debts remain both party’s obligation in the eyes of a lender, even if the divorce settlement says only one spouse is responsible for paying it back. If the responsible spouse fails to make the payments, any defaults will show up on the other spouse’s credit history.

If the debt cannot be paid off pre-divorce and becomes only one spouse’s responsibility, the other should continue to have access to the account’s history to make sure it is being paid as agreed.  Better yet, have an attorney create an enforcement action in which you can take over the property or some other property if you are not able to be removed from the debt and your spouse, who was assigned the debt, fails to pay.  An attorney can help you make payment of the debt in your name contractual or binding in some other format.  Debt in divorce can be tricky It is wise to seek legal and financial guidance if you are dealing with large amount of debt or a significant debt (like a home mortgage).

Kids are Expensive

Kids can cost a lot, especially when you have not budgeted their future needs into the equation. Be sure to consider things like cars, car insurance, private school tuition, day care costs, summer camps, extracurricular activities, and even smaller things like school lunch accounts and back to school shopping. These costs add up over time.

woman wearing academic cap and dress selective focus photography

If you have children close to graduating from high school, it is important to be very clear about what each parent is willing to cover in college costs or any other expenses.  Another discussion to have is who will cover health care costs for your children after they graduate high school.  Who will the insurance fall under, who will pay for it, and how will out-of-pocket costs be covered from the time your child graduates from high school until they are fully on their own as a working adult?  Family courts do not cover this time period, but parents sure do, and contractual agreements can be made between the parties regarding this no man’s land of time for older kids needs.

Divorce during Retirement

Gray divorce is defined as divorcing couples who are 50 and older, and they are on the rise. These couples have their own unique situations and needs for the future. There may be annuities, retirement plans and life insurance policies.  We have had couples retire during the divorce which also brings a multitude of tax issues.

Retaining Your Assets in Divorce

One way to facilitate a smooth transition after divorce is to hire a Certified Divorce Financial Analyst. We work closely with couples during and after divorce to make sure they understand the assets they own, what income can be derived from investments and help them build a firm financial foundation.

Divorce for those over 50 is a critical life situation and likely the biggest financial transaction of your lifetime.  Your divorce could determine your lifestyle for the remainder of your years.  This is not to scare you, it is just important to have counsel if you are in this situation.

Receiving the Assets You Were Awarded

A common assumption people have during a divorce is they automatically own an asset the court has awarded to them.   Just because you were awarded the asset, does not mean you now own it.  There is a process to walk through after the divorce to take ownership and control of the property you were awarded weather that property was a home, a brokerage account, a bank account, or a retirement fund.  Divorce Strategies Group members can walk you through the steps you need to take to claim the assets you were awarded.  This is very important to do as soon as possible so your spouse cannot improperly move or hide funds you were awarded.    It is also important to complete the Qualified Domestic Relations Orders (QDRO’s) while your attorney is involved as these need to be filed with the courts and all parties (you, your ex-spouse and your attorneys as well as the judge) need to sign it.

Plan for Peace of Mind

The goal we have for all our clients at Divorce Strategies Group is financial peace of mind. When working with us, you will know what bills you need to pay every month and how much of your disposable income you can spend. You can spend your money in freedom because you know you have a plan for your budget, taxes, and investing. We can also help you adjust your financial plan if you experience new significant life changes.

Planning and budgeting are not fun concepts, but the fruits of these labors can provide a lot of fun (and security) in your future!!

Schedule a complimentary consultation with Divorce Strategies Group today.  No matter what phase of the process you are in – just starting, in the midst of divorce and have financial questions or wrapping it up and looking ahead toward your future.   We are here to help you thrive after divorce and move on to the next phase with confidence, strength and hope.

Oh, Divorce Debt. How Can I Ever Repay You?

Oh, Divorce Debt. How Can I Ever Repay You?

Q: My husband and I have a lot of assets—but we also have a lot of credit card bills. Everyone talks about dividing assets in a divorce settlement, but there’s not much said about debt. How does that work in terms of who pays what?

A: You’re so smart to ask this question! Most people don’t realize that during divorce, dividing debt is just as important as dividing assets. Although most states handle property and debt division differently, you can expect debt under a national contract (like with Visa) to be pretty consistent. (Pssst. See our friendly Texas Family Law Code about debt and divorce for specific details).  

 

Here are a few tips to help you get started….

  • Credit card companies are blind. They don’t care if you’re divorced; they just want to get paid. Broadly put: You are responsible for whatever is in your name. If you have several joint accounts, it’s best to pay those accounts with marital assets and either remove your spouse’s name or remove your name so that there is only one owner going forward. The fees for these transactions are small compared to the headache and hassle of keeping tabs on an account you no longer control (but are on the hook for). 
  • The cleanest option for mortgage debt is to sell the house and split the money. If that’s not a viable option, one spouse can “buy the other out” with a buyout refinance (if you want to keep the home you would, ideally, be able to qualify for a loan on your own).   This will not ever be mandated by your divorce decree (even the great state of Texas cannot make a third party lender accept you).

    If a refinance cashout isn’t on the table, one of you can stay in the house while both of you remain on the mortgage. Instead of a clean break from the debt, your spouse would have a “Deed to Secure Assumption,” which can be drafted by an attorney, to provide a layer of protection for the person who isn’t living in the home. This arrangement isn’t for everyone, but it can be the easiest option in tight markets. Details of this type of deed should be discussed with your legal counsel.  
  • Timing matters, in terms of when the debt was incurred. If debt was incurred before the marriage, then it belongs solely to the spouse that created that debt. If incurred during the marriage, then both spouses are equally responsible.  There may be special situations where debt was incurred as a result of paramour activity or “wasting” of marital assets. If that is the case, then an attorney can help you fight that battle during the pendency of your divorce.   

Now is the best time to get a handle on what you owe to whom. To cover both: Run a credit report on yourself and ask your spouse to do the same. This free report gives a current and comprehensive snapshot of where you are with your debt, as well as your credit score—both will come in handy when it comes to negotiating the terms of your divorce. 

In addition, we recommend calling every credit card company you have an account with to verify who is actually responsible for the account and who is just an authorized user. You want to gather all the information you can today in order to protect yourself in the future. 

And don’t forget—we can help! Contact Divorce Strategies Group for a complimentary consultation to see how we can help you sort through the maze of divorce finance.  

Cryptocurrency in Divorce

Cryptocurrency in Divorce

Coinbase (COIN) went public recently and had the attention of the investment world. Coinbase is a financial technology company that focuses on offering its retail users the ability to buy, sell, and own crypto and digital assets like BitcoinEthereumLitecoinDoge Coin, and other currencies on the block chain. Coinbase reported they have more than 50 million retail users.

The popularity of cryptocurrencies has skyrocketed over the last decade. You can’t watch Bloomberg or CNBC or any other financial news outlet without crypto being discussed. Significant wealth has been created for individuals owning crypto assets as well. On April 16th, 2020 Bitcoin was $7,354. On April 15th, 2021 Bitcoin was $63,214.

Some experts believe we are in the very beginning of a long bull market with crypto currencies and at some point the “crypto standard” will replace our current “gold standard”.  Financial advisors are struggling with how to offer these assets to their clients as a liquid, compliance approved vehicle is not readily available from a trusted source.   This is all rapidly changing.  Some experts estimate by the end of 2021 crypto currencies will become common place in portfolios as large financial institutions begin offering them.

Determining the Value of Cryptocurrency

Naturally, as a Divorce Financial Advisor, I began thinking how these types of assets were going to impact divorce settlements. In addition to Coinbase, investors can buy cryptocurrencies through companies like PayPal, Cash App, Robinhood, and Blockify. These relatively new types of investment vehicles should be examined very carefully by client’s getting divorced, attorney’s negotiating a settlement, and financial experts working for clients.  In addition, sometimes divorces take 6 or 9 months or even a year to finalize. With any asset as volatile as Bitcoin, you will want to make sure the marital balance sheet is updated before any financial agreement is reached.  Imagine the change in value of a Bitcoin holding from my example above. If Joe and Sally are getting a divorce and filed 4/16/2020 and he owned 3 Bitcoin valued at $22,062. A year later, and now that same Bitcoin is worth $189,642.

Analyzing cryptocurrency holdings in a marital estate is going to become more and more common moving forward. It will be crucial for the client, the attorney and the financial expert to work together to examine the potential impacts of taking the crypto asset versus giving it to their soon to be ex-spouse.

Determining the tax consequences will be a major issue as well. What is the tax impact if the crypto asset is sold? Were there any crypto assets sold in the year of the divorce? There could be a huge forgotten tax bill if you are not careful! Investors must report capital gains or losses from sales of cryptocurrencies on Form 8949 and Schedule D just like buying and selling property or stock. However, according to an article in the February issue of  Financial Planning, titled Crypto Creates New Hurdles for Financial Advisors This Tax Season, many firms only send out the gross proceeds of the Crypto asset sales. It is the investors responsibility to figure out their own cost basis. This can create many hurdles when determining a marital estate. This information is crucial to determine the impact of how the crypto asset should be split.

If you are handling crypto assets in your divorce contact us to help you navigate these waters to avoid costly mistakes and tax issues down the road.  Schedule your complimentary consultation today.

 

5 Smart Financial Tips to Plan a Divorce

5 Smart Financial Tips to Plan a Divorce

Thinking about divorce?  If you are, kudos to you for being here and reading this article.  Careful preplanning can save you time, money, and emotional turmoil.

This is already an emotional and stressful time. If you are like me and many of the people we guide through divorce, this also be a time when your thinking is the cloudiest. It is typical to have trouble understanding simple concepts or even wrapping your head around everyday problems.  That is normal!   Relax, take a deep breath, and know you can do this.  We can help.  Here are 5 simple things which can help you prepare financially for a divorce.

1. Have access to money – liquid cash or credit.

 This is vital!! You deserve to have access to funds for your basic living needs as well as professional support throughout your divorce.   This can mean a credit card in your name only, a separate bank account in your name, or even a stash of cash in a shoebox or safety deposit box.

Many couples function well working from joint accounts during their divorce, but we have also seen vindictive spouses empty joint accounts as soon as divorce is mentioned. You do not want to be left without access to funds to pay for divorce professionals or for basic living needs.  Be smart and take the necessary precautions before you discuss divorce with your spouse.

We do NOT mean hide money – we are simply suggesting you have access to funds which cannot be taken from you by an angry spouse without your approval.   You can open a credit card in YOUR NAME only while still using the marital income to qualify for a larger amount of credit.  There is nothing wrong with doing this prior to filing for divorce.  Be sure to do it before temporary orders are in place (aka when you file for divorce.)  If you have already filed for divorce, check with your attorney on what you can, and cannot do, under the laws in your county.

 

2. Gather all the financial documents you can find.

 Financial statements provide a road map to your estate.  They are the building blocks to a marital inventory and proof of ownership or debt.  I am referring to bank statements, retirement and investment account statements, mortgage statements, paystubs, tax returns, insurance policies, credit card statements, and anything else that seems important. Having copies of all this not only helps you stay informed about your financial situation but will save you money when you meet with a divorce professional and already have an organized file of your financial life.

Another reason to gather all the documents you can is to search for hidden assets.  We have had many women come into our office over the years with a box (or boxes) of documents.  One woman was told over and over by her husband they were “dead broke”. He would not even purchase new bed mattresses – he only bought them used.  By going through old tax records, we found $100,000 plus in CD’s and two rent houses she did not know they owned!

Information is power – gather all of it that you can, prior to beginning your divorce.

 

3. Take some time to thank about what you want in your future.

 It can be easy to get so wrapped up in the details of the present you forget about what is next. Do not make that mistake!   Stop and take some time to think about your life after your divorce. In particular – the financial side. Where do you want to live? What are your expenses going to be like? I recommend you put together a budget outlining all your expected living expenses. This will give you some clarity about what you will need moving forward and can lessen some of the anxiety about the future.

It may also make sense to work with a divorce financial advisor prior to filing so you can have an idea of what life after divorce will look like.

 

4. Find a Divorce Financial Coach or Therapist.

This may not seem like it is a financial step, but it is. A professional on your team that will help you make sound decisions can make a big financial impact on your future. Emotions run high during the divorce process and as we said earlier, your thinking will be cloudy. A divorce coach can help you work through those emotions to free your mind up for the business of divorce so you can objectively focus on the financial outcome.  A therapist can help you unbundle why you are in fear or why you feel the way you do and help you overcome obstacles entangling you emotionally.

When I went through divorce I had an amazing therapist guiding me and helping me untangle the feelings I had.  To be able to negotiate from a place of power, I had to get my emotions behind me and look at the situation like a business negotiation.  I worked with that therapist for 2 years after the divorce to help me not pick the same type of person and I didn’t. I am now remarried for nearly 12 years as of this writing and with a wonderful man who is very good to me and my daughter from my prior marriage.

 

5. Finally, think about how you would like to divorce.

If you think it is going to be a battle for every asset and advantage, then adversarial litigation attorneys will be involved, and the cost will be $20,000 – $50,000 or more. If you envision a more amicable process, then perhaps mediation is in your future. It will allow the two of you to talk through the issues and agree between yourselves what works best, saving a lot of money in the process. In either case you may want a financial professional, like a Certified Divorce Financial Analyst®, to be part of your team. The CDFA® can help remove any confusion about your financial situation, present options for the division of your assets, and provide a picture of how a given settlement will impact your financial future today and in the future.

A divorce is probably the largest financial transaction most people will undertake during their lifetime so make sure you are fully informed. These 5 simple things will get you started on the right track and help make the difficult process of a divorce go more smoothly.

For a complimentary consultation please schedule with us online today or call us at 281-505-8177.  Also, to understand your divorce options sign up for Divorce Options in Texas either online or in person in our Woodlands location or Houston location.  More information can be found online at www.divorcestrategiesgroup.com.

4 Tips to Divorce Financial Planning for Women

4 Tips to Divorce Financial Planning for Women

Of all the worries and concerns to think about when going through a divorce, financial planning may not be at the top of your list. It is likely you are working, raising kids, and paying the bills. Many newly divorced women feel the demands never end. Creating a new financial plan is important because you have lost the extra income of your spouse. It is also especially important if your spouse managed your investments and longevity planning. Outsourcing your financial planning makes sense when you are short on time but still need to make sure you manage your money well as you age. We encourage women to consider financial planning for several reasons, but most of all for the woman’s wellbeing and peace of mind. Here are a few tips to get started.

  • Planning at the Beginning

Your financial life after divorce starts as soon as you sign legal paperwork agreeing to a settlement with your ex-spouse. You need to make sure you know what you are signing, because it will have a big impact on your financial future. We recommend meeting with a financial planner to review the settlement before you agree to it. Financial planners can find opportunities you might have missed such as tax breaks or being able to retire earlier than you expected. This process with allow you to understand all your options before you sign the settlement agreement.

  • Planning for Longevity

Women generally have a longer lifespan than men. Financial planning in divorce will create a consistent cashflow strategy and budget. You and the financial planner will create a list of priorities you will need money for such as helping to finance your children’s education.

  • Planning for Financial Confidence

Some women going through a divorce assume they will have to live like a miser because they have an internalized fear. Financial planning gives you freedom by replacing fear with confidence. Investing money is difficult to do when you’re paralyzed by fear, but not investing means you could outlive the money you have now.

  • Planning for Peace of Mind

As financial planners, the goal we have for all our clients is to give them financial peace of mind. You will know what bills you need to pay every month and how much of your disposable income you can spend. You can spend your money in freedom because you know you have a plan for your budget, taxes, and investing. We can also help you adjust your financial plan if you experience new significant life changes.

Another common assumption women sometimes have during a divorce is they automatically own an asset the court has awarded to them. We will walk you through the steps you need to take before you can claim an asset as your own.

At Divorce Strategies Group, our main services to you is financial planning to help ensure you do not run out of money in your lifetime and to help you to take ownership of assets awarded to you in the divorce. We love the work we do because it empowers women to be financially independent for the rest of their lives regardless of circumstances. If you are going through a divorce and are in need of financial planning, please contact Divorce Strategies Group and schedule a consultation today.