Keith

When separating from your spouse or getting a divorce, one of the biggest questions my clients have is about child support and paying for the expenses of the children.  In Texas, at least, child support is pretty easy to calculate based on the non-custodial parent’s income and how many children they need to support.  In addition to child support, many couples identify certain agreed upon extra-curricular activities they intend to enroll the kids in, while splitting the cost.   While this is a common practice, it gets people to thinking about future expenses as well.   For example, what about a car when the child turns 16, or a wedding, or a prom dress?   Some people even want it written in the divorce decree about who will pay for college and how much.

I strive to steer my clients toward making agreements that benefit everyone in the family, while at the same time are very similar to what a judge would order if the case ever made it to court.   In my experience, the rule of thumb is those obligations to the children end at 18 years old, or whenever they get out of high school, whichever is last.   Generally, a judge is not going to order that one spouse or the other pay for college expenses, even if those expenses are incurred while the child is under 18 in the form of contributions to a college savings plan, like a 529 account.

The next thought to keep in mind is this.  The more items you identify such as braces, clothes, special event expenses, etc., the more you are undermining the idea of child support to begin with.   In other words, if the custodial spouse is asking for all of these different expenses to be split, then what is the child support actually for?  

Whenever, you are going through a divorce, it is generally best to have an attorney review your specific situation.   It may cost more in the short term, but this can you help protect yourself from unforeseen issues in the future.   If your estate is more complex, then you may want to enlist a financial advisor who specializes in divorce.   An advisor who has the CDFA™ or Certified Divorce Financial Advisor™ designation may be able to help.

Keith Powell, Certified Financial Planner® and Certified Divorce Financial Analyst​​™​
www.austindivorceplanners.com     kpowell@austindivorceplanners.com     512-963-6883

Securities offered through SCF Securities, Inc. • Member FINRA/SIPC • 155 E. Shaw Ave., Suite 102, Fresno, CA 93710 • 800.955.2517 • 559.456.6109 FAX. Investment advisory services offered through SCF Investment Advisors Inc. SCF Securities, Inc. and Austin Divorce Planners are independently owned and operated.  The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.  To determine what is appropriate for you, consult a qualified professional. 

1. Not enough cash
   1. Expenses go way up as soon as the divorce process starts.
      1. Legal fees
      1. court costs
      1. therapist bills
      1. supporting two households
      1. and many others

• Set aside funds that you will need during your divorce. Divorce Attorneys don’t like to take checks from joint accounts since the other spouse has the right to cancel that check.

• Not enough preparation. 
  • Divorce is one of the most difficult life transitions that you will go through. Be prepared.  Read books on the subject, consult with a financial professional to determine the feasibility of the process.

• The timing of your divorce is important.  There are benefits to being over the 10 year, 20 year, and 30 year thresholds with regards to either social security or spousal support in Texas.

• Get your ducks in a row before you announce your plans.  Get a new or newer car.  Get all of your checkups for both you and your kids.  Get any dental work done that you have been putting off.

• Records 

1. Make copies of all the important financial records for the last year.  Further if you suspect your spouse is siphoning off money to an unknown destination like a girlfriend or off-shore account.  This would include, but is not limited to bank accounts, credit cards, brokerage accounts, 401k, pensions, life insurance, deeds, trusts.  Think of it this way.  If has a $ sign associated with it, in any way, then make a copy of the statements.

• Make copies of any document that would help you prove your separate property, or dis-prove someone else’s.  It’s up to the party claiming separate property to prove it.

• Make copies of your spouse’s business records. This could be helpful in determining their true income, or show you where they are hiding assets.

• Overlooking assets. Don’t overlook any assets—half of everything is yours! Even if you don’t want an asset, it can be used to trade for something you do want.

1. Inventory safe deposit boxes; track down bank and brokerage accounts; review pay stubs, retirement plans, and insurance policies.

•  If your spouse’s business generates a lot of cash, engage a forensic accountant to look for telltale signs of additional income. Don’t overlook hobbies or side businesses that might have expensive equipment or generate income

• Ignoring tax consequences. 

1. Should you take monthly alimony or a lump sum? Should you take the brokerage account or the retirement plan? Should you keep the house or sell it now? Who should pay the mortgage until it sells? Don’t ignore the hidden tax costs of divorce in making these decisions.

• Your situation may require some calculation by an accountant to determine if you are really getting the best deal. And, if there’s a chance that 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.

• Ignorance is bliss. During divorce, ignorance is certainly not bliss—instead, it can be very, very expensive.

1. Don’t be a passive observer of your own divorce. Doing as much as you can by yourself will 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 will help you to reach a better settlement than “letting the attorneys handle it.” You will have less conflict and litigation after the divorce, better compliance from your ex, and better sharing of information about the children. Your attorney may give you legal advice, but all of the decisions are ultimately up to you.

• Mixing money and emotion. 

1. During this trying time, it’s easy to confuse your feelings with the facts. Try to be as dispassionate and businesslike as possible.

• View your attorney as a paid professional rather than a friend or confidante. When your grief is overwhelming, go home or to a friend’s house, not to your attorney, who is billing you at his normal hourly rate.

• Make property division decisions based on your own long-term best interest, not out of revenge. It won’t make you happy to declare war on your ex. Make an effort to bring the divorce to a successful conclusion with as little rancor as possible. A nasty divorce benefits only the attorneys.

• Not fighting for what’s yours. 

1. Women tend to be supportive and sensitive to the needs of others, to build bridges, and to “make nice.” These tendencies often get in the way during divorce. Divorce is about survival, not making friends.

• You have to insist on getting what you need and deserve. Even if you hope that you will eventually be able to reconcile with your ex, don’t bend over backwards to make it happen.

• Stand up for yourself and get your share. If you reconcile, that’s fine. If you don’t, you’ll still be able to take care of yourself financially.

• Not taking control. 

1. Going through a divorce can sometimes make you feel like the captain of a leaky boat on stormy seas—there seems to be a new crisis at every turn. Use this time of upheaval to start taking control of your life.

• Vow never to worry in the dark—if you can’t sleep, turn on the light, pick up a pencil and paper, and write down your worries. Then, you can go back to sleep and deal with them first thing in the morning. Also, try to get a lump-sum whenever possible so you control the cash.

• Listen to your attorney, but make your own decisions. This is your divorce—so take control of the process!

1. Not being ready for the worst. 

1. During divorce, prepare yourself mentally for the worst that can happen. How will you cope if your children get sick? If you have to move in with your parents? If the divorce lasts for years and you lose all of your money? If your ex remarries within two weeks, moves to Tahiti, and/or refuses to pay any support? Plan for the worst so what actually happens will seem easy by comparison.

• Don’t panic and let your fears rule your life. Face them, and take control.

1. Not developing a career. 

1. Many women put their careers aside to concentrate on their families. After divorce, you will probably need to figure out a way to support yourself and your children.

• Divorce is an excellent time to get some career counseling at the local job center, university, or community college.

• Prepare for the expense of tuition and books while you get your career on track.

• Remember: there’s nothing like new knowledge and a fulfilling career to bolster your self-esteem.

1. Not getting good professional advice. Right now, you need all the help you can get!

1. 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 isn’t the most inexpensive.

• Engage a forensic accountant if you think there might be hidden assets.

• Find a good therapist to help you emotionally.

• Hire a divorce financial professional to help determine the best settlement options for you. Don’t skimp now on matters that will affect the rest of your life.

Getting Your Financial Life Back On Track After Divorce

Stash cash
Divorce is a financial drain. After divorce, you will need time to rebuild financial resources. Begin now to squirrel away funds that will be available for emergencies, vacations, etc. Those funds will see you through tough times, and nothing rebuilds security like that good green poultice “cash.”

Separate money and emotion
As you work through your grief and anger and mourn lost dreams, don’t let money issues cloud your perspective. Life may not be fair, but don’t descend into depression with each check you write or re- ignite your anger if your support check comes late. Accept your financial situation, know your legal remedies, and pursue them with dogged detachment.

Focus on finances
It’s hard to be optimistic about a shaky financial future.  If you are disoriented financially, this is the right time to get a grip on your financial life. Sharpen your pencil and get busy creating new financial plans for your future. Once you know where you are going, you can look forward to the future rather than back to the past.

Get your career in gear
If your career opportunities are not what you would like, get off your duff and make some changes. You are beginning a new life, and it’s time to move ahead rather than wallowing in the past. Take some courses, prepare a resume, explore the opportunities in the marketplace. Turn around, fact the future, and barge ahead. You’ll be surprised what you can do.

Tie up loose ends
Get your financial house in order. Rewrite your will, change the beneficiaries on your insurance policies, review your retirement plan documents, clean out your financial closet and get rid of worn out investments. Straighten your files and square things away. You can’t move ahead if you are tripping over your financial shoelaces.

If this is your first holiday season since your separation, then now is the time to start thinking about what the holidays are going to look like this year.   One thing is for sure, they are going to look a lot different then all of the years past.   Here’s a few tips to help everyone get through this stressful season that is compounded this year now that Mom & Dad live in two different places.

1) Plan Ahead and Plan Soon.

As I write this, Halloween is just around the corner. (4 days)  I hope that you have already figured out who is going where and who is going with who if you have young kids.   It’s probably best to stick with the parent who has the kids that night, but if there are going to be other wishes, make sure to communicate with your soon-to-be ex-spouse early about plans for the evening.  Once you have Halloween figured out, it’s a good time to talk about Thanksgiving, Christmas, Hanuka, Kwanzaa or whatever else your family celebrates.  Remember this one thing: As upset as you are with your spouse, the holidays are about the children.  DO NOT use this time to show the world what a terrible person they are, but instead remember that this season is about the kids.

2) Don’t Spend the Holidays alone.

If your kids happen to be with your spouse, make sure you plan something fun to do with friends.  Now is the time to do all the things that you haven’t been able to do.  Think of things that you have always wanted to do and do them.   However, I wouldn’t do the same thing that you are used to doing with your spouse, just without them.  That will bring up too many memories.  It’s time to start making new memories.

Reach out to family that you haven’t seen in a while. Check in with your church friends that you’ve been neglecting.  Plan a spa day with the girls or a sporting event with the guys.  Take advantage of this time and don’t leave your mind idle.

3) Make This Time More About Others and Less About Yourself.
 A great way to get into the giving spirit is to give to your community.  Find a shelter that needs volunteers or a soup kitchen that needs help cooking.   After all, this is the season for giving and nothing takes your mind off of your problems more than helping out those less fortunate.  One thing I like to do is volunteer with “Meals on Wheels.”  It’s an organization that delivers hot meals to those who might not otherwise eat.   It’s easy because you simply pick up the meals and use your GPS to drive them around to mostly elderly folks on a fixed income.  The smiles you get in return by delivering a hot meal to a hungry soul will make your problems melt away.

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Keith Powell, Certified Financial Planner® and Divorce Analyst​​™​
www.austindivorceplanners.com     kpowell@austindivorceplanners.com     512-963-6883

“Securities offered through SCF Securities, Inc. • Member FINRA/SIPC • 155 E. Shaw Ave., Suite 102, Fresno, CA 93710 • 800.955.2517 • 559.456.6109 FAX. Investment advisory services offered through SCF Investment Advisors Inc. SCF Securities, Inc. and Austin Divorce Planners are independently owned and operated.”

Divorce is commonly seen as one of the most stressful experiences one will ever go through.  Along with all of that stress, you are also making financial decisions that will most likely affect the rest of your life and perhaps the lives of your children as well.  For that reason, it’s a good idea to get the advice of a Certified Divorce Financial Analyst™ or some other financial professional during your divorce process. 

Adjusting to a new financial reality after Divorce

When going through this life transition, it’s quite challenging to adjust to your new “financial reality.”   Your income is cut in half, but it’s not likely that your outgoing cash expenditures will be cut in half.   It may take a few months for you to adjust to your ‘new’ standard of living, but it’s important to spend within your means and adjust your cash flow out to meet your cash flow in.  You’ll want to make sure that you have plenty of money saved up for your retirement since the previous ‘retirement plan’ that you had is no longer valid.  If you received any liquid assets as a part of the divorce settlement, try not to dip into those assets much after the first few months.

It’s important that you meet with a financial advisor as soon as you can, in order to put a new plan in place.  The sooner you can regain your sense of financial security, the sooner you’ll be on your way to discover all that your new life has to offer you.

Revisiting your is estate plan is beneficial and should be considered anytime you have a significant change in your life.

Keith Powell, Certified Financial Planner® and Certified Divorce Financial Analyst​​™​
www.austindivorceplanners.com     kpowell@austindivorceplanners.com     512-963-6883

Securities offered through SCF Securities, Inc. • Member FINRA/SIPC • 155 E. Shaw Ave., Suite 102, Fresno, CA 93710 • 800.955.2517 • 559.456.6109 FAX. Investment advisory services offered through SCF Investment Advisors Inc. SCF Securities, Inc. and Austin Divorce Planners are independently owned and operated.  The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.  To determine what is appropriate for you, consult a qualified professional. 

Divorce is commonly seen as one of the most stressful experiences one will ever go through.  Along with all of that stress, you are also making financial decisions that will most likely affect the rest of your life and perhaps the lives of your children as well.  For that reason, it’s a good idea to get the advice of a Certified Divorce Financial Analyst™ or some other financial professional during your divorce process. 

Valuing a Pension

While pensions are not that prevalent these days, they are still common for School Teachers and Government Employees.   Every participant who is enrolled in a pension gets a statement showing them what dollar amount they could access if they cashed in their pension.  This dollar value is NOT the value of the pension.   It’s simply their walk-away value.   A professional pension valuation would need to be done in order to calculate what the actual value, in today’s dollars, is.   To do this, we need a few bits of information.   The hire date, the marriage date, the separation date, and the last day of employment, if employment has been terminated.   That information will tell us how much, if any, is community property and how much, if any, is separate property.   We would also need to know when the employee is entitled to start receiving monthly payments and what would those monthly payments be and is there a cost of living adjustment.

Next, we would need to know what growth value we are going to use to calculate the present value.   In other words, we are calculating how much money one would need to have invested today, at the given growth percentage, to create a pool of money that would generate the same stream of payments at some point in the future.   The most commonly used return percentage would be the 20-year treasury.  The smaller that number then the larger the valuation will come out to be, but it is usually significantly more than the figure on the employee’s statement.  Failure to accurately calculate the true value of the pension can have a significant effect on the asset settlement.  It may be a good idea to have a financial professional involved in your divorce so that these issues are not overlooked.

Keith Powell, Certified Financial Planner® and Certified Divorce Financial Analyst​​™​
www.austindivorceplanners.com     kpowell@austindivorceplanners.com     512-963-6883

Securities offered through SCF Securities, Inc. • Member FINRA/SIPC • 155 E. Shaw Ave., Suite 102, Fresno, CA 93710 • 800.955.2517 • 559.456.6109 FAX. Investment advisory services offered through SCF Investment Advisors Inc. SCF Securities, Inc. and Austin Divorce Planners are independently owned and operated.  The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.  To determine what is appropriate for you, consult a qualified professional. 

Divorce is commonly seen as one of the most stressful experiences one will ever go through.  Along with all of that stress, you are also making financial decisions that will most likely affect the rest of your life and perhaps the lives of your children as well.  For that reason, it’s a good idea to get the advice of a Certified Divorce Financial Analyst™ or some other financial professional during your divorce process. 

Handling of the Term Life Insurance

In a 2018 Insurance Barometer Study, by Life Happens and LIMRA, ONLY 59% of Americans have some form of Life Insurance.  That’s a sad statistic considering everyone could benefit from some form of Life Insurance, even if it’s Term Insurance.    “Term Insurance” is the kind of insurance that only last for a certain ‘term’ or period of time.   10-year term and 20-year term are some of the common terms that I see.   In some cases, a couple going through a divorce might already have a term policy that they purchased when the kids were born.   Usually consisting of just enough insurance to get them through college if something were to happen to one of the parents, most likely the high-income earner.   Because term policies don’t have any cash value, I’ve seen them completely ignored during the divorce settlement and if they are addressed, the decree might say that the insured is ‘required’ to keep their spouse as the beneficiary.  However, a piece of paper that requires someone do something doesn’t actually keep them from doing it.   The high-income spouse might remarry down the road and five years from now find themselves in an insurance review with their new spouse where they find out the old spouse is still listed as the beneficiary.  Forgetting why that was the case, or that they are ‘required’ to leave it that way, they change the beneficiary, and nobody finds about it until policy holder passes away.

In a collaborative divorce, the spouses can request that the insurance company change the ownership of the policy to the beneficiary, thereby making the beneficiary the one in charge of who the beneficiary will actually be.  Something they will most likely never change.  The trick is that this request must be made while the parties are still married.

Keith Powell, Certified Financial Planner® and Certified Divorce Financial Analyst​​™​
www.austindivorceplanners.com     kpowell@austindivorceplanners.com     512-963-6883

Securities offered through SCF Securities, Inc. • Member FINRA/SIPC • 155 E. Shaw Ave., Suite 102, Fresno, CA 93710 • 800.955.2517 • 559.456.6109 FAX. Investment advisory services offered through SCF Investment Advisors Inc. SCF Securities, Inc. and Austin Divorce Planners are independently owned and operated.  The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.  To determine what is appropriate for you, consult a qualified professional.   

Divorce is commonly seen as one of the most stressful experiences one will ever go through.  Along with all of that stress, you are also making financial decisions that will most likely affect the rest of your life and perhaps the lives of your children as well.  For that reason, it’s a good idea to get the advice of a Certified Divorce Financial Analyst™ or some other financial professional during your divorce process. 

Dividing Assets One at a Time

I see this all of the time, especially when there is an engineer in the mix.  One of the spouses will put together a complex spreadsheet on how they are going to divide each bank account in half, divide the college funds in half, divide the retirement accounts in half, and then either one spouse will buy the other spouse out of the house, or they will elect to sell the house and divide the proceeds in half.

This is not how we look at it.  I like to look at the couples overall financial picture.  Add up all of the assets and liabilities and figure out what constitutes the marital estate.  Their Net Worth if you will.  From there, we decide what kind of division is fair and then we try to award accounts in their entirety as much as we can.  Ending with one large assets that is divided at the end to make up the difference. 

For example, if one spouse get’s the matrimonial home, the bank accounts, and the nicer car, then the other spouse might get the vacation home, the brokerage accounts and the not as nice car.   After those divisions are made, we can balance the final division out by using the large 401k account allocated to BOTH parties and shoot for the division percentage we are looking for.

Keith Powell, Certified Financial Planner® and Certified Divorce Financial Analyst​​™​
www.austindivorceplanners.com     kpowell@austindivorceplanners.com     512-963-6883

Securities offered through SCF Securities, Inc. • Member FINRA/SIPC • 155 E. Shaw Ave., Suite 102, Fresno, CA 93710 • 800.955.2517 • 559.456.6109 FAX. Investment advisory services offered through SCF Investment Advisors Inc. SCF Securities, Inc. and Austin Divorce Planners are independently owned and operated.  The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.  To determine what is appropriate for you, consult a qualified professional.