A. Divorce Preparation – Assessing Your Financial Condition
B. Splitting Individual Retirement Accounts During Divorce
C. Financial Help For Women
D. Your Money. Money Talks to Have Before Marriage
E. From Money To Emotions: Get Over Your Divorce
F. Divorced Spouce Wanting Off Mortgage Caught In Catch-22
G. Love Doesn’t Always Last, So Have A Financial Plan Ready
H. Taking Sides in a Divorce – Chasing Profit
I. The Dance of Marriage: Who Does What
J. It Takes a lot of work to be ready to retire. Don’t forget these things.
A. Divorce Preparation – Assessing Your Financial Condition
By David Kane, CPA
Aug 31, 2009, Mon, 31 Aug 2009
One of the situations that we see in many family situations is where one spouse is the primary caretaker of the financial obligations for the family. That person may have been in charge of paying the bills, setting up the investment accounts, making investment decisions (stocks, bonds, real estate, mutual funds, etc.), buying and maintaining insurances (health, life, disability, long-term care), managing the credit cards, and filing taxes during the marriage.
As you consider the impact of a divorce, we understand that if you have not been involved with these activities that they can be daunting to you and can cause a considerable amount of stress when dealing with these issues for the first time.
No matter what your situation, your divorce attorney, divorce financial planner or the domestic relations court is going to need this financial information. Some topics will apply to you and others will not. Take the time to investigate and list out your financial assets and liabilities. This inventory will help you and/or your advisors assess your financial condition and will provide a basis to make recommendations that best fit your overall divorce financial strategy.
It is important to identify all of your assets and liabilities. The court is looking to split your assets and liabilities in a fair and equitable allocation between you and your former spouse. It is in your best interest to be up front and honest – by that, we mean do not hide assets, income sources, or liabilities. You have the potential to be found in contempt of court and could have some very negative financial penalties imposed on you through the settlement process.
Below is a listing of some of the financial areas that you will need to identify and value:
- Real Estate (Primary Residence, Vacation Timeshare, Etc.)
- Bank Accounts (Savings, Checking, Etc.)
- Retirement Accounts (IRA, 401k, 403B, SEP IRA, Etc.)
- Investment Accounts (Brokerage)
- Physical Securities (Stocks, Bonds, Etc)
- Life Insurance Policies
- Business Interest(s) (Partnership, LLCs, S-Corps, C-Corps, Sole)
- Other Personal Property (Auto, Artwork, Antiques, Etc.)
- Secured Debts (Mortgages, Auto Loans, Etc.)
- Unsecured Debts (Credit Cards, Personal Loans, Etc.)
If you are unsure of how to gather this information, or are concerned that you will have a difficult locating all of the pertinent facts, you may consider hiring a professional financial expert such as a forensic accountant, certified financial planner, or certified public accountant to guide you through this process.
In the interest of getting a fair settlement, it is imperative that you get a clear financial snapshot of all assets and liabilities. This will provide the foundation to putting together a sound financial divorce strategy and will hopefully put you in a good position to start your new independent financial life.
B. Splitting Individual Retirement Accounts During Divorce
By David Kane, CPA
Aug 28, 2009, Fri, 28 Aug 2009 00:05
An area where many individuals get into tax trouble is when splitting their Qualified Retirement Accounts (QRPs) and Individual Retirement Accounts (IRAs). Once you have come to the revelation that your assets must be split you may be tempted to start the process by making pre-divorce transfers prior to receiving an official judgment, decree or court order. This is especially tempting in community property states. Sometimes couples think they can save professional fees (legal and/or financial) by prematurely starting the process of dividing retirement assets. This can be a costly mistake. The same can be said for making post-divorce transfers.
The importance of this is best illustrated with an example.
Pre-Divorce IRA Distribution Example
Let’s assume that spouse A has $100,000 in an Individual Retirement Account (IRA) and spouse A and spouse B agree to split the IRA 50/50. Spouse A takes a distribution in the amount of $50,000 and then writes a check to spouse B for $50,000 and spouse B rolls-over the amount into his own IRA within the 60 day time limit. At the time that the distribution occurred, spouse A had not received a judgment, decree or court order requiring the distribution. This type of scenario would produce a very negative tax situation for spouse A and spouse B would receive a cash windfall of $50,000.
From a tax perspective, the initial amount withdrawn of $50,000 would be considered a fully taxable distribution to spouse A. Spouse A would be liable for the income taxes associated with this distribution. If spouse A is in the 25% tax bracket, the potential liability to spouse A would be $12,500. Also, if spouse A is under the age of 59 ½ at the time of withdrawal, an additional tax of 10% would be levied for a premature withdrawal which would equate to an additional $5,000 of taxes. Spouse A could end up with a tax bill for $17,500, give up $50,000 in retirement funds, and spouse B would receive $50,000 tax free. Technically, the rollover to spouse B’s IRA would not qualify. Spouse B would probably not complain in this situation, but it would be an inequitable solution.
As you can see, a simple transaction with good intentions could turn out to be very inequitable to one spouse.
C. FINANCIAL HELP FOR WOMEN
5 effective strategies
Radically Improve Your Finances and Your Life
By Robert Pagliarini
In a divorce, a woman’s life is turned upside down — nearly everything about her existence changes. But for the man, sometimes the most he has to change is his phone number and address.
Women who had left jobs to raise families are at a significant disadvantage and find it difficult as they try to re-enter the workforce they left years earlier.
I don’t have marriage advice, but if you do a few simple things in the other eight hours, you can survive a divorce and get back on your feet as quickly as possible.
I’ve been thinking a lot about my own experience growing up in a single-parent home (my mom raised five kids after my father left), because a good friend of mine and her two young boys were just abandoned. One day they were a family, and the next day her husband was leaving her for another woman. She is now struggling to survive.
Not only is she trying to deal with the emotions of the situation, but she has to raise her two boys and find a way to pay the mortgage.
So, what must women do to protect themselves and their family in case a marriage ends in divorce? I’m glad you asked …
1. Stay connected socially
Your social network is your lifeline in a divorce. You must have a network of friends you can call on for help — a person you can stay with while you and your family get back on your feet, or someone to look after your children while you interview. If you go to church/temple, consider getting involved in small groups so you can extend and deepen your support network.
2. Stay connected professionally
Don’t quit your network if you quit your job. Make sure your professional network grows, or at the very least remains stable. A really efficient way to stay connected is to set up a meeting with two or three others in your network once or twice a month. You should also communicate at least once a month with every person in your professional network. Phone calls are best, but you can also ping them with a short e-mail or note.
3. Keep up your skills
Mothers, and new mothers especially, have very little “free time,” but keeping up your skills is critical. Invest the other eight hours to keep your licenses and/or credentials up to date. You could also take a night class at your local community college. This furthers your knowledge and gives you a chance to network with professors (who are usually practitioners in your field by day) and other students.
4. Know your finances
This is a biggie, gals. Don’t leave it to your husband to handle everything. Schedule a “financial date” with your husband once a month to review credit-card statements, investment accounts and your budget. There are several easy programs you can use to get a quick snapshot of your financial health, but my favorite is Mint.com.
5. Create a side business
One of the best ways to protect your family and earn some extra money is to start a side business in the other eight hours. You could turn your hobby into a moneymaking business, start a blog or invent something. For a starting point, check out the Top 10 Cre8tor Channels from my book, “The Other 8 Hours: Maximize Your Free Time to Create New Wealth & Purpose” (see: www.other8hours.com/book/cre8tor-channels).
I’m passionate about this topic because it hits close to home and, unfortunately, it affects a lot of homes. Most research shows that 45 percent to 50 percent of marriages end in divorce, and that 84 percent of single parents are women.
Protect yourself and the women in your life by sharing this message.
Robert Pagliarini is a CBS MoneyWatch columnist and the author of “The Other 8 Hours: Maximize Your Free Time to Create New Wealth & Purpose” and the national best-seller “The Six Day Financial Makeover.”
D. Your Money
Money Talks to Have Before Marriage
By Ron Lieber, New York Times
Published: October 23, 2009
Divorce tends to be emotionally gut-wrenching for the people who go through it (not to mention those around them). But most couples don’t realize that divorce can also be among the most ruinous financial moves anyone can make.
Sure, you could bet big and lose on a single stock or money manager. Or your small business could go bankrupt, taking your life savings with it. But divorce and the costs that often come with it — from legal bills to the sudden need for an additional residence — affect far more people.
The risk that any marriage will end in divorce is about 45 percent, according to David Popenoe, a professor of sociology emeritus at Rutgers University. The chances fall to about 40 percent for first marriages and decline further for college-educated couples, people from intact families and couples who share the same religion.
Given the various financial complications, I’ve long wanted to devote a series of columns to divorce and money. This week, I’ll start with a topic that could save some marriages if more people made it a priority. It’s crucial to air and resolve financial disagreements beforehand.
“It’s almost impossible to be hooked up to somebody who has the same balance of spender and saver as you, or expansiveness versus conservativeness or financial circumstances,” says Gregory A. Kuhlman, a New York City psychologist who runs marriage success training programs with his wife, Patricia Schell Kuhlman.
He adds that the mix gets even more volatile with second marriages, when couples may have children, ingrained financial habits and savings or other assets that necessitate the discussion of a prenuptial agreement. “Success in marriage is only partly attributable to compatibility. It’s about how you manage those differences and whether you have a style for doing so that is successful.”
What follows is a list of four financial issues that ought to be near the top of the discussion list before getting married. Please add to the list in the comments of the online version of this article.
ANCESTRY When Lisa J. B. Peterson started her Boston-based financial planning firm, Lantern Financial, she knew she wanted to focus her practice on young professionals. She quickly realized that many of them could use premarital financial counseling and built a program called Harmoney around their needs.
One of the first things she asks clients about is what she refers to as their financial ancestry. “It’s looking back at your own personal past,” she says. “How did your parents deal with money, how does that impact how you deal with it, and how might that impact the couple’s relationship?”
Because so many of our money behaviors are learned, she asks couples to share their earliest money memories — whether their father hid money from their mother or how either parent fretted over the funds available. This can be a particularly intense discussion for people whose parents were divorced, and the stories are sometimes accompanied by tears. “Money is so emotional, and people forget that,” Ms. Peterson says. “You think that it’s just numbers.”
CREDIT While it’s about the least romantic subject imaginable, your credit history holds a chunk of your permanent financial record. It follows naturally from the ancestry conversation, and Lantern Financial pulls credit reports and scores for its clients.
Molly Milinazzo and Scott Donovan, an engaged couple who live in the Dorchester section of Boston and are both 24 years old, were relieved to discover that their scores were within about 15 points of one another when they went through the Harmoney program in May. “A lot of people end up surprised, and it’s best to keep those kinds of surprises at bay,” Ms. Milinazzo says.
Full disclosure on the credit front is useful for two reasons. First, a credit report is, in part, a catalog of past mistakes and overall habits — loan payments you missed or department store credit cards you didn’t really need. That in itself is a good starting point for a discussion about what you’ve learned (or still need to learn) about handling money.
There’s an immediate practical side to this, too. If there are errors or low credit scores that a couple can improve, there may still be time to make the fixes so that the couple can get the best rates on a loan for their first home a year or two later.
CONTROL Figuring out who will pay the bills each month may not seem to be an important conversation or assignment. But it gets tricky when both people want to take it on. “People understand that in a relationship, money is control,” says Jeff Kostis, a financial planner in Vernon Hills, Ill., who walks engaged couples and newlyweds through a checklist of questions. “If you’re not paying the bills, you don’t know where the money is going, and you feel like ‘He doesn’t want me to go out with my friends’ or ‘She doesn’t want me to play in the fantasy football pool.’ ”
For two people who have both been on their own for a while and don’t want to give up doing the monthly financial chores their own way, Mr. Kostis suggests, at a minimum, regular household meetings complete with Quicken or other spreadsheets so that the person writing the checks can keep the other one up to speed. With more stubborn couples, he might suggest handing the controls back and forth at the beginning of each year.
Mr. Kuhlman, who explains the counseling approach he and his wife take with clients at stayhitched.com, says it shouldn’t be surprising that control issues come up constantly when talking about money. “It’s concrete, you can see it,” he says. “It’s not ephemeral or less measurable, like affection.”
A few things that he suggests couples discuss early on: If one person is making most or all of the money, does that person get to make most or all of the financial decisions? If you’re the car aficionado or have researched all of the local school options for the children, do you get to make the decisions about those things? “These are the kinds of things that don’t come out when you’re dating,” he says.
AFFLUENCE Here’s another question that tends not to come up during courtship: Just how rich do we want to be one day? Mr. Kuhlman refers to this more politely as the “desired level of affluence.” “Are our career paths going to be something that pulls us together? Or, more often, are they things that will tend to pull us apart, where we’ll really have to be proactive to make sure it’s under control?” he says.
Mr. Kostis might put it a bit more bluntly, say to a spouse of an aspiring investment banker or corporate lawyer: Are you O.K. with acting essentially as a single parent, with your partner working 80 hours a week until the age of 80? “Not that there is a right or wrong answer,” he says. “It’s just about understanding, going into the marriage, what that would really mean.”
He adds that people in the financial advice business often joke that they spend half their time talking about money and the other half acting as marriage counselor. “But it’s the same communication style,” he says. “You’re giving people permission to be honest without having someone jump down their throat for giving the answer that they really want to give.”
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E. From Money To Emotions: Get Over Your Divorce – NBC Today –http://today.msnbc.msn.com/id/20363199/page/2/
F. Divorced Spouce Wanting Off Mortgage Caught In Catch-22 – Chicago Tribune –http://www.chicagotribune.com/news/ct-home-0430-benny-kass-mortgage-20100429,0,2123555.story
G. Love Doesn’t Always Last, So Have A Financial Plan Ready –http://www.chicagotribune.com/features/family/sc-fam-0325-women-divorce-20100325,0,7031870.story
H. Taking Sides in a Divorce – Chasing Profit – Binyamin Applebaum, NY Times –http://www.nytimes.com/2010/12/05/business/05divorce.html?_r=1&scp=1&sq=taking%20sides%20in%20a%20divorce&st=cse
I. The Dance of Marriage: Who Does What? – Katherine Rosman, Wall Street Journal –http://online.wsj.com/article/SB10001424052748703796504576168920912187638.html?KEYWORDS=The+dance+of+marriage
J. It takes a lot of work to be ready to retire. Don’t forget these things. Rodney Brooks, The Washington Post, October 15, 2015 – https://www.washingtonpost.com/business/get-there/it-takes-a-lot-of-work-to-be-ready-to-retire-dont-forget-these-things/2016/10/14/b896e4c2-8fb9-11e6-9c85-ac42097b8cc0_story.html?hpid=hp_hp-cards_hp-card-business:homepage/card