The other day, I was speaking with someone and a lot of emotions around the financial decisions of her divorce came up. There was a lot of fear, uncertainty, and a deep desire to “do it right.” What’s more, her soon-to-be ex-husband managed the money while she stayed at home with their children, so she’s uncomfortable making financial decisions for herself now.
She’s researched, but it’s left her even more confused. Where does she start? What’s important? Can she stay in her house? She doesn’t want the process to be litigious, but she wants to feel confident that she’s making the right decisions and doing the right thing.
I see that with a lot of couples who come to me. One person has managed the money throughout the life of the relationship and then, when a divorce or dissolution happens, the other partner has to quickly learn a lot of information to make big financial decisions.
There’s a lot of late nights spent...
When you are generally in good health, you don’t need to see a cardiologist. Your family doctor can handle your needs. However, when you have a serious heart problem, you see a specialist because they have the training and experience to provide you with the best advice. It’s the same thing when it comes to your finances. When everything is fairly status quo, working with a traditional financial advisor is great. However, when you’re going through a divorce or have recently come out on the other side, you need financial advice from a specialist.
People think their attorneys should know these things to get them the best settlement. The reality of the situation is: the attorney doesn’t necessarily know any better. It isn’t because they’re trying to harm you, many of them truly don’t know any better because they’re not numbers people; that’s not their specialty. You wouldn’t seek out an attorney for medical advice, would...
In general, there is a lot of confusion around different types of retirement accounts. Some people refer to all retirement accounts as pensions or all retirement accounts as 401Ks. Referring to retirement accounts by the wrong account type becomes problematic in divorce cases because the accounts don't all have the same rules, and they need to be correctly identified. If you are not sure which type(s) of accounts you are negotiating, contact a Certified Divorce Financial Analyst (CDFA).
This post is referring specifically to how to divide a 401K in a divorce. A 401K is an employer-sponsored retirement account that is governed by ERISA. The division of a 401K in a divorce is different from how some other retirement accounts get divided. You can see some of my other posts regarding how to divide other types of retirement accounts below.
Divorce can be one of the most stressful changes in your life. It’s common for just one party in a marriage to be responsible for all the finances. Even if both parties are aware of the day-to-day finances, it’s even more common for only one party to handle all the investments.
The combination of learning about your investments for the first time and watching the value of those investments decline in a volatile stock market can be overwhelming. How does a declining stock market impact your divorce settlement agreement? And as you look beyond the divorce, what do those declines mean for your longer-term financial future?
If you have not been involved with your investments or even if you could use a refresher, I encourage you to start by sitting down with a Certified Divorce Financial Analyst (CDFA) to review each of your assets. When you do this review, I want you to understand the following about each asset:
(1) What type of asset is it?
(2) How is the...
Worried about splitting assets in divorce? Worry over financial decisions is normal on an average day but when going through a divorce, it can be paralyzing. The fear around these issues is completely warranted. You only have one chance to get it right and your divorce could quite possibly be the largest financial transaction of your life - not to mention the fact that you are likely overwhelmed by emotions related to all the changes happening in your life.
One way to handle the financial fears is to take control over your situation. Did you know that you don't have to divide your assets 50-50 right down the middle when you get a divorce? In fact, you may not even want to! If it's not simply 50-50 then how do you split assets in a divorce?
One way to have greater control over how assets are divided in a divorce is to consider alternatives to the traditional litigation process. An important benefit of...
Divorce is difficult and emotional. It’s not something that people decide on a whim. It’s important to do your research and explore all your options to create a secure financial future for yourself. Hiring a Certified Divorce Financial Analyst (CDFA) before you begin your divorce process is a smart choice as it can help ease some of your stress.
A CDFA can help alleviate the fear of the unknown. S/he will prepare a financial plan for you based on various scenarios, giving you a greater sense of confidence (or at least a reality check) when it comes to your financial future.
Let's face it. Many of us could use a little help when it comes to understanding our finances. We are usually somewhat aware of the day-to-day finances but what about the other components? Retirement accounts, stock-based compensation, home...
Divorces have a reputation for being messy and pitting couples at each other’s throats. Much of the controversy surrounding divorces stem from the allocation of assets and other financial concerns. You can reduce the associated stress when you use a Financial Neutral in collaborative divorce cases.
A collaborative divorce is a divorce process where each party is represented by an attorney that has been trained in the collaborative process but rather than taking a specific position, the parties and their attorneys work together to come up with solutions that are in everyone’s best interests. There is an agreement not to go into litigation. If the collaborative divorce doesn’t work out, then the parties can choose to go for litigation but are required to hire new attorneys that were not involved in the initial collaborative agreement. That’s a big incentive for everyone to keep moving forward toward an agreement.
As part of...
Have you ever wondered if your husband or wife is hiding assets? Do you want to know how to find hidden assets? Read on.
It’s an unfortunate truth but it’s common for individuals to hide assets during a divorce. While we may still want to think better of the person we married, it’s important to be diligent and do your research.
Take a look at all savings, checking, brokerage, trust accounts, and any other accounts used by either spouse during the marriage. This can be tough if a person deals with a lot of cash transactions. Hiring a Certified Divorce Financial Analyst (CDFA) to do a lifestyle analysis is a smart decision. They can comb through all sources of income and expenses and find things that don’t add up.
A CDFA will usually review at least 3 years of returns, which provides a fair amount of insight into one’s financial picture. Often, tax returns can reflect...
Dealing with a divorce is a stress beyond compare for many people. When you add to that the emotional stress of complicated financial issues that arise during this time, means it is crucial to enlist professional help to assure your money questions are addressed during the divorce. One person who can take a weight off your shoulders is a Certified Divorce Financial Analyst (CDFA).
Consider that nearly one million couples will divorce annually in the United States and during that time they will be faced with some of the most important financial decisions of their lives; this could be especially true for women who have not been involved in the family finances up until this point. Your divorce attorney will handle the legal aspects of the divorce, but you may find you will reap a great reward from working with a Certified Divorce Financial Analyst.
A CDFA is an experienced financial professional who helps...
Unfortunately, going through a divorce leads many people completely cash-strapped. While not ideal, if you have not built up enough liquid savings, you might be considering a withdrawal from a 401K. Here is an important tip you need to know about a 401K in divorce. This only works if you are awarded all or part of your spouse's 401K. It does not work on your own.
When you file the Qualified Domestic Relations Order (QDRO) to have all or part of your former spouse’s 401K distributed to you, you have an opportunity to take cash out of the account without paying the IRS’s 10% penalty (on funds withdrawn before age 59.5). To take advantage of this, when dividing a 401K in divorce, have the portion you need, paid directly from the account to you.
Related post: QDRO: I need a what??
Related post: Should I leave my Ex's retirement as is?
It does not need to be the full amount that you are receiving. Do not roll it into an IRA and...