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Divorce Strategies Group

Divorce Strategies Group

Denise French

  • Divorce Mediation
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    • Forensic Accounting
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  • Work With Us
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    • Pay Now
  • About Us
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    • Business Valuation Services
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    • Denise French
    • Shelli Dodson

financialplanner

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

January 11, 2022 By Denise French, CVA, MAFF, CDFA, CRPC

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.

Filed Under: Divorce Finance Tagged With: assets, divorce, divorcefinance, estateplanning, financialplanner, financialplanning, mediation, tax2022, taxes

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.

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.

Filed Under: Divorce Finance, Dividing Property Tagged With: #divorcesupport, CDFA, divorce, divorcesupportgroup, estateplanning, financialplanner, financialplanning, graydivorce, retirement

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