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Confidence in Conflict: Three Methods to Resolving Conflict Without Losing Your Cool

May 11, 2022 By Melissa Provence, CDC, DCC

In coaching we often suggest clients that they “keep Amy in the backseat” when you’re in a conflict. We are referring to your Amygdala. A tiny almond shaped structure in our brains. Although small, it is mighty. The amygdala controls the fight or flight response in our bodies and brains. Often it acts instinctually and without warning. This is especially true when dealing with a High Conflict Personality (HPC) partner. Our brain unconsciously takes over and we often respond in ways we normally wouldn’t. When we feel lack of control or vulnerability it’s nearly impossible to have thoughtful, well considered conflict resolutions.

There are methods to keep “Amy” in the backseat. Here are three communication tactics that can help you regulate, respond, and rise above conflict.

Regulate:

In divorce cases we see several physical responses that happen when we are faced feeling attacked. I want to focus on two that I see most often.

Approaching conflict with aggression. Aggressive communication is when you state your needs and leave little room for your partner to share theirs. Examples of aggressive communication would be an attempt to dominate the conversation, using humiliation, critical language, and “you” statements in an attempt to avoid your responsibility in the situation and negate feeling insecure about yourself. This method of communication is often seeing with HPC’s.

Fawning is a response that is very common, especially with clients that have suffered past trauma or suffer from PTSD. Fawning is a maladaptive survival response. It is ones need to avoid conflict at any cost. When a client is in a fawning response they often exhibit people pleasing behaviors, deny their truth for the sake of ending the conflict, and feel that they are unworthy and undervalued.

Approaching conflict with either response can is a recipe for disaster. One of you will surely walk away from the conflict feeling “less than”, unheard, and unloved. We can regulate our own physical reactions to regulate our bodies response to threats. Start with a deep breath. Taking a moment to center yourself and regulate your breathing can instantly change the bodies stress response. Take a break from the conflict, find a quiet place, and spend five minutes focusing on your breath, inhaling, and exhaling slowly. You are allowed to excuse yourself from the conversation. The conflicts you are trying to resolve did not develop overnight and they do not have to be resolved in an instant. When you feel your heart rate begin to rise and the walls feel like they are closing in, simply tell your partner you need a moment to gather yourself and acknowledge you will touch back on the topic when you are in control of your thoughts and emotions. There is absolutely no reason These simple tactics can you help you prepare for the response phase of the argument and knock it down to a discussion.

Reason:

Reasonable, well thought out responses to conflict help us to protect our mental health, self-worth, and sanity.

Now that you have taken a moment to gather yourself, it’s time to gather your thoughts. I encourage clients to take time to look at things from their partners viewpoint. Try to understand the issue and why it is so important to them. At times, the real reason may be convoluted by finger pointing and “you never” statements. For example, my client is angry that her husband forgot it was their anniversary.

She took time and made an effort to make him his favorite meal and buy him a card. How dare he not get her a gift? Is the issue the gift? Is it possible that the gift was the issue on the surface of the problem but really, she feels uncared for, unloved, and possibly unworthy? In true conflict, we must dig deeper to find the issue because it’s rarely floating on the surface of our relationships. Changing our perspective in turn changes our insight.

What if your partner can’t articulate the deeper issue? I suggest questioning them with curiosity. What are you upset about? Can you tell me why you feel like that? and my personal favorite, “what was your expectation of me in that moment?” Try not to interrupt them and stay on the actual issue at hand. Curious questioning does a few things. It gives your partner acknowledgement that you are open to listening and a willingness to let them articulate how they really feel. This can lead to a deeper understanding of their perspective, the opportunity to form a more informed opinion for yourself, and hopefully a resolution in the conflict itself.

How we respond to our partner can make or break the outcome of the conversation. You have the choice to respond in a non-confrontational manner once your partner has finished speaking. “I had no idea you felt that way, do you mind if I address this from my perspective?” or “I would like to avoid continuing to argue about this topic, how do we suggest we fix it?” The goal is to identify the issue, take responsibility only for our actions (if there is any), and stop the conflict cycle in its tracks.

Rise above:

“But Melissa, this just makes it seem like I’m being a pushover! By keeping my cool and not showing a reaction, the other person doesn’t know how much they have affected me with their words or actions.” This is precisely why these methods work. HCP’s are fueled by the ability to incite hurt, confusion, and lack of control on their target. If you have been with your partner for a while, they know exactly what buttons to push to get a reaction from you. They will rely on that pattern to gaslight, stonewall, and trigger you to get their desired outcome. How many times have you ended a conflict and come away questioning yourself, your involvement, and wondering if you really are at fault for the problem?

Let’s change that! By regulating your body’s reactions, thoroughly considering your responses, and responding without malice, you have taken all the control back and on your terms. You weren’t goaded into angry reactions and remorseful words that can’t be taken back. You maintained your dignity, bolstered your self-worth, and you can leave the conversation feeling good about who you are at your core.

This is not something you can learn overnight. High conflict relationships are volatile, and these methods must be practiced over time. After all, you are fighting your amygdala, its natural response, and it takes time to unlearn unhealthy communication. This is why so many of my clients continue with coaching even after divorce, particularly with co- parenting after divorce. These methods work and can be applied to any kind of conflict that needs resolution.

At Divorce Strategies Group, we offer mediation and coaching services for clients thinking about divorce, in the midst of divorce, and even co-parent coaching. If you can relate to this article, I’d love to talk to you. Complimentary Discovery Session’s can be booked directly through our website.

* If you are currently in a relationship and experiencing domestic violence, this article is not applicable. Please call/chat/text with an advocate by calling 800-799-SAFE or visit thehotline.org.

What is a Divorce Coach and How Can they Help You?

May 6, 2022 By Melissa Provence, CDC, DCC

[Are you waking up at 3:00 AM, feeling overwhelmed and panicked by the uncertainty of your future?

Questions and worries run through your mind? “Can I afford to get divorced?” “How do I tell my spouse our marriage it’s over?” “What about our kids?” “How do I tell them?” “How will I survive?” “Do I have to share my retirement savings?” “Do I need to lawyer up?” “What lawyer do I hire?”

The questioning can be endless and in a attempt to find answers, you start Googling. Taking the first steps in a divorce can be terrifying and overwhelming. In researching, something pops up about “Divorce Coaching.” Like almost everything else related to divorce, this is a new term for you.

What is a Divorce Coach?

A Divorce Coach is a trained mental health professional who shepherds you through your divorce. Divorce Coaches have unique expertise in divorce, co-parenting, parenting planning, child development, the impact of divorce on children, and all other issues related to divorce. Divorce Coaching is not therapy. Instead, coaches specialize in helping you emotionally cope with divorce before, during and after the process.

Is Divorce Coaching Right for Me?

For most people, the prospect of a divorce is an overwhelming life crisis. You need to make big decisions at a time when you are emotionally overloaded. The demands and decisions can be confusing. Divorce can require the time and energy of a full-time job (when a lot of women already have full time jobs and are full time moms). In the process, it can also be exhausting to get through each day especially when you are meeting with your legal team or financial advisors to discuss divorce related issues. You don’t know what steps you need to take, how you can figure it all out, or how long it will take. If this sounds familiar, then a Divorce Coach can help.

How Can a Coach Help?

A Divorce Coach can help you understand one of the first and most important decisions you will have to make. You will need to decide which of the divorce process options available to you will work best for your family: a do-it-yourself divorce, mediation, collaborative law divorce, or litigation. The process you choose will dramatically affect your outcomes and the process.

A Divorce Coach will walk the path with you, through the legal process you have chosen, to provide support and guidance when needed. Divorce coaches also offer post-divorce support, addressing issues like co-parenting, setting up a spending plan, and claiming your new life.

One of the first and most painful things you will have to do is talk to your children about the upcoming changes in your family. A Divorce Coach will help you (and often your spouse) structure and plan for this, telling your children what they need to know. The Coach will help you respond to their questions and concerns in age-appropriate ways.

A Divorce Coach will help you build or strengthen your skills to cope with your emotions, especially at meetings with professionals and your spouse. In addition, your Coach can help you develop and hold you accountable for implementing much needed self-care practices. This is critical as they can help you feel more grounded and help you cope during this time of life changes.

A Divorce Coach will help you begin to envision your life post-divorce, as a single parent and perhaps going back to work. The Coach will help you set goals and keep you accountable for them. This type of planning may influence your divorce negotiations. For example, if you need re-training to enter the workforce, this can be discussed as part of your divorce settlement.

Coaching will help you develop skills for the negotiations, which usually come after the information-gathering stage. With the help of your Coach, you will be clear about what is important to you in the final resolution. Identifying what matters most to you and where you can compromise is critical in divorce negotiations, and a Coach can help you do this with confidence.

Your Coach will help you understand and think through the many decisions you will be asked to make. A coach can help you feel brave, confident, and articulate in expressing what matters to you without being hijacked by emotions. This makes the process more efficient and cost-effective!

A Divorce Coach can help you build a new kind of parenting partnership relationship with your soon-to-be-ex-spouse. A Coach can work with you to establish good communication, boundaries, and strategies for dealing with issues that inevitably arise.

A Divorce Coach provides a safe space to emotionally let go, vent, breathe and heal.

How Do I Find a Divorce Coach?

At Divorce Strategies Group we offer complimentary Discovery Sessions to discuss you and your situation. This introductory call with Divorce Coach Melissa Provence allows us to learn about you and pinpoint your immediate needs. Let’s talk!

Retaining Your Assets in Divorce

June 28, 2021 By Denise French, CVA, MAFF, CDFA, CRPC

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.

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.

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.

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.

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.

Health Plans – Open Enrollment & Divorce

October 18, 2020 By Denise French, CVA, MAFF, CDFA, CRPC

If you work for a company which offers health insurance you probably already know about open enrollment. Updates you choose during this time period will determine your health, dental and vision insurance for the upcoming year and your tax savings in deductible plans like Health Savings Accounts (HSA’s). While the timing of open enrollment can vary with different employers, open enrollment is generally the period between November and mid-December. During this time you are able to make changes to your health insurance plans without a major life change. You can choose to renew your participation in your company’s current insurance plans, switch to a different one, and make changes to participants on your plan for the upcoming year. Even though it can be tempting to select the plan you had last year so you don’t have to put in much effort, I’d encourage you to pause for a moment and consider if that’s really the best option from a benefits, tax, and budgetary viewpoint.

It Is important to remember if you are still in the midst of divorce, you will likely need to add your current spouse on your health coverage during open enrollment elections for the new year. If you are under temporary orders (which you likely are) do NOT remove your current spouse from your health coverage right now for the next year. You can remove your spouse from your health insurance coverage in the new year after your divorce is final as that will count as a major life change.

While you will keep your spouse on your current coverage, it’s important to look at your coverage options and make sure you have the right one for you. After you divorce is final in the new year (or the end of this year), you will remove your spouse from your coverage and this will be your plan for the rest of the year. Are the deductibles proper for you? Are you eligible and participating in the HSA? Is this the right plan considering minor children you will have on your plan? This and other issues are important to consider.

1. Evaluate Life Changes

The amount of coverage you need plays a big role here, especially if you previously covered dependents and/or your spouse and no longer need to or vice versa. Some other life changes in addition to divorce could make a difference in the plan you choose during open enrollment include births, deaths and medical issues.

2. Review Beneficiaries

Open enrollment time is a good opportunity to revisit the beneficiaries on your accounts. For example, if you have group life insurance, you may still have your ex-spouse as the beneficiary. Once the divorce is final you will need to remove your ex-spouse from the beneficiary designation unless you want your ex-spouse to be the beneficiary, and in that case you will need to re-assign that person as the beneficiary after the divorce is final. Your ex-spouse will be skipped over on a life insurance policy payout unless they are specifically designated in a divorce decree and/or you rename them as beneficiary on the policy after the divorce is final.

We encourage you NOT to list minor children as beneficiaries on an anything. Minor’s cannot receive payouts without a court appearance and a guardian. Guess who will be the guardian for your children if you pass while they are minors? It will be your co-parent or ex-spouse unless they predecease you. If you want to leave the proceeds to your children you will want to create a testamentary trust (included in your will usually and what I have personally) or a revocable or an irrevocable trust. All of these involve a trip to an estate planning attorneys office which we highly recommend after the divorce is final.

For now, while the divorce is still pending, list your spouse as beneficiary. You are likely under temporary orders to do so. After the divorce is final it’s time to do some estate planning and likely change the beneficiary.

3. Understand the Benefits of the Plans You Select versus Your Needs

This is a great time to make sure you’re getting the coverage you need and you’re maxing out the tax savings from it. Take the time to review what’s included in your plans, any tax credits or benefits you’re eligible for, and options outside of your employer-provided plans. That way, you know you’ll actually use everything you’re paying for. The reality is, it comes down to saving money and being tax-efficient, especially with an HSA.

Another big issue we see with divorcing couples is the deductible and the corresponding out of pocket costs. You may have a fight on your hands (and undue stress from such a fight for you and your children) if your spouse is living paycheck to paycheck and you opt for a plan with a huge deductible. Paying hundreds of dollars to meet the deductible for a simple sick visit to the pediatrician may not go well for an ex-spouse on a limited income or at least be an issue to address while you are in divorce proceedings. Conversely, if there is a large surgery to pay for or a medical issue to be dealt with which is known for the upcoming year, it’s wise to perform a cost analysis on how much it will cost you to have this covered at a higher percent even with a large deductible versus a lower percent of coverage with a lower deductible.

Medical costs can be an enormous part of the annual budget. The good news is you have coverage and choices, the bad news is sometimes those choices, especially in the midst of a divorce, can be overwhelming. To make sure you’re getting the biggest benefit, tax savings, and coverage you and your family actually need, talk to a trained consultant who can guide you through the process.

If you’d like me to help you with health care selections during open enrollment season or any other financial related issues, I’ve opened up more Divorce Strategy Sessions on my calendar in late October and early November for those who are not current clients and want some extra help with financial related issues. In my Divorce Strategy Sessions, we will discuss your needs, your options and your budget so you can make the best choices for you and your future!! Click here to learn more about Strategy Calls and schedule yours today!

Dividing Annuity Assets in Divorce

September 29, 2020 By Denise French, CVA, MAFF, CDFA, CRPC

Dividing community property, or property jointly owned by a married couple, can often be a complicated process, with your financial options dictated by potential tax implications. While some things may be easy to divide, others are not. Some belongings are sentimental, while others — such as annuities — involve complicated financial calculations. Annuities not only involve moving ownership from one person to the other or joint title to single title, they often also involve moving or potentially deleting critical living benefits, guarantees and/or death benefits as well as surrender penalties on top of potential tax liabilities. That is a lot! Annuities in divorce are complex to say the least. We will attempt to unravel the complexities of annuities as they relate to divorce or at least guide you on what questions to ask.

Annuity Phase

While there are multiple types of annuities (fixed, fixed index, variable, immediate and deferred) all types of annuities are typically in either the accumulation phase or the distribution phase. The different phases will determine how value and divide the annuity in a divorce situation.

Accumulation Phase

If an annuity is in the accumulation phase, it is growing. The annuity may be growing by a simple fixed rate – aka a fixed annuity or by a variety of factors in the fixed index or variable space. The key take-away is there is only growth in this phase. Income has not yet started. This is a critical factor in divorce negotiations. In the accumulation phase the annuity can have three main parts – the actual cash value, the guaranteed benefit amount and the death benefit.

Cash Value

This is the actual cash value. This is real money and should be the value on the marital inventory. This value may have a surrender charge affiliated with it which should also be reflected on the marital inventory. If you do not see a surrender charge on the statement, it is wise to call the carrier and confirm no surrender fee exists. Also, if the contract is still under surrender charge penalties, ask the carrier if they will waive the surrender charge in the case of a divorce where the account is divided between the spouses. We have found quite often they do not waive any fees even though the division is pursuant to a divorce.

Guaranteed Value or Living Benefit Amount

In the accumulation phase, this is the living benefit amount. Many contracts offer a certain amount of guaranteed growth for future income. For example, some annuities may guarantee 7% growth, compounded annually with possibly even a high-water mark (meaning the annuity will capture the highest day of market gains in the annuity contract that year plus add the 7% guaranteed growth on top of this value). Sound too good to be true? What is the catch? This amount is not real money – it cannot be withdrawal in a lump sum. It is the value for which a future income stream is derived. In our same example, let’s say the contract grows by 7% guaranteed compounded annually, and when the client is age 65 a 5% income stream can be taken, guaranteed for life off the 7% compounded number. (In some cases, the income stream will also double for long term care needs for a certain amount of time.) In divorce, the guaranteed amount is often erased if the annuity is divided. This can cost the overall estate hundreds of thousands of dollars.

Know if there is a living benefit and if so, what happens if the annuity is divided between the spouses? The living benefit number is often quite higher than the actual account value, but this is not the number to be listed on the marital inventory. It is a phantom number used to derive a set amount of income at a future date. However, because there is an account value it is the actual cash value which is listed on the estate spreadsheet. The annuities are designed to deplete the cash value over time when the income begins if you live long enough, so this number is not listed on the inventory when the annuity is still in the accumulation phase.

Death Benefit

Sometimes annuities have stand alone death benefits or death benefits attached to the living benefits. This means a certain amount is guaranteed at the death of the annuitant. In some cases, the death benefit is the reason an annuity is sold as life insurance was not an option or was too expensive. It is important to know if an enhanced death benefit exists and if so, know this and other relevant facts. Who is the annuitant? What is the death benefit exactly? What happens in the case of divorce if the contract is divided or moved to the non-annuitant spouse? Now that the couples are divorcing, is the death benefit still relevant or should other options be considered? The death benefit should be on the latest annuity contract statement. However, it is not listed as an asset on the marital inventory as it will only be pain in the event of the annuitant’s death.

Income Phase

If an annuity is in the income phase, it is in distribution. The distribution may be a systematic withdrawal stream on a guaranteed basis, a systematic withdrawal on a non-guaranteed basis or annuitized. This set of facts is vital to know in the case of a divorce.

Systematic Withdrawal – Guaranteed Basis

This should be the most common situation with an annuity. The income from the living benefit has been triggered. In the example above, the 5% income stream at age 65 has begun off the 7% compounded annual growth the annuity provided. If this is the case, the annuity may not be divisible without significantly hurting the amount of income the annuity provides on a guaranteed basis. Contact the carrier to determine how, if at all, the annuity can be divided, and the income stream kept intact. The income stream however may be divisible. The division of this works much like a pension on the estate spreadsheet where a net present value of the future income stream is calculated, and this is the number on the marital inventory.

You can also forego a net present value calculation of the income on the marital inventory and split the income 50/50. We recommend contacting the annuity carrier to determine if division can occur at the carrier level so there is little, if any, interaction between the parties. You will also want to ask the annuity carrier what happens if the annuitant dies. The wife may not receive any payout if the annuity is based only on the husband’s life and he dies or vice versa. Some payouts are based on joint life and some are on single life which were determined at the income stream’s inception. It is vital to understand what happens in the event of one spouse’s death.

Systematic Withdrawal – Nonguaranteed Basis

If this is the case, you can likely divide this annuity. It may not be attached to a living benefit guarantee. This is the least likely to exists and rarely seen, but it is a possibility. It is important to call the carrier and determine your options if this set of facts exists with your annuity. The issue will be mainly surrender charge penalties when this annuity is divided if it is still in the penalty period. We would also ask if there are any issues with the annuitant – is it joint annuitant or single annuitant and will this be possible if you change to the spouse who wants the asset or if you divide the contract in half.

Annuitized

If this is the case, the annuity cash value no longer exists – it is only an income stream. Older contracts typically have this. Most newer contracts do not require annuitization because the contract corpus is gone – it belongs to the annuity company. The valuation of this is now just like the valuation of a pension plan. The carrier may have the income based on joint life or single life. They may divide the income in half but when one spouse dies, the income stream may cease for all. The carrier must be contacted to determine what happens at the death of the owner and/or the death of the annuitant. These facts are important to know as they relate to the income stream after one spouse dies. If you do not want to divide the income, one can calculate a Net Present Value of the future income stream as one would a pension and this number should be indicated on the marital inventory as an asset to be offset with other assets.

Owners and Annuitants

Aside from the issues we stated above in valuing and dividing annuities in the accumulation and the income phases, the named owner and named annuitant could alter the course of the annuity division. It is vital to know who the owner is and who the annuitant is (they may not be the same). These set of facts may determine what happens to the contract when this is divided to the non-owner and/or non-annuitant. Some contracts are jointly owned the with joint annuitants or jointly owned with single annuitants – and each carrier can handle dividing these differently. A simple call to the carrier and a discussion with a member of client services advanced team should straighten out these issues, we just want you to know what to ask for.

Summary

We highly encourage you to reach out to a professional who not only understands annuities, but also understands divorce laws in your area. A Certified Divorce Financial Analyst is the perfect person to have on your team if you or your spouse own an annuity and you are walking through a divorce. We at Divorce Strategies Group understand annuities and divorce finance and can help as well. Contact us for your 30-minute free consultation today.