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1 Personal Financial Planning for Divorce FPA MA-November 19, 2010 Jeffrey H. Rattiner, CPA, CFP®, MBA, RFC Rattiners Financial Planning Fast Track® –

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Presentation on theme: "1 Personal Financial Planning for Divorce FPA MA-November 19, 2010 Jeffrey H. Rattiner, CPA, CFP®, MBA, RFC Rattiners Financial Planning Fast Track® –"— Presentation transcript:

1 1 Personal Financial Planning for Divorce FPA MA-November 19, 2010 Jeffrey H. Rattiner, CPA, CFP®, MBA, RFC Rattiners Financial Planning Fast Track® – CFP® education JR Financial Group, Inc. – Financial and Tax Planning 6410 South Quebec Street, Centennial, CO N. Scottsdale Rd.; Ste 355; Scottsdale, AZ Tel: (720) ; Fax: (720)

2 2 Jeffrey H. Rattiner, CPA, CFP ®, MBA, RFC Mr. Rattiner is president and chief executive office (CEO) of Rattiners Financial Planning Fast Track®, Inc. and The JR Financial Group, Inc. which is a multi-purpose holding company with offices in the Denver and Phoenix metro areas serving consumers and the financial services industry.

3 3 Rattiner runs the nationally acclaimed Financial Planning Fast Track® which is a boot camp for financial advisors to take them through the education requirements mandated by the CFP Board of Standards within 7 months. His 22+ years of preparation experience demonstrates his long- time commitment to help advisors successfully complete the CFP ® Certification Examination. Rattiner teaches the following classes: Personal Financial Planning Insurance Planning Investment Planning Income Tax Planning Retirement Planning Estate Planning CFP Examination Review Course Rattiner was also rewarded the 1997 Distinguished Faculty Member- Teacher of the Year by Community College of Denver. Training

4 4 Writing Personal Financial Planning for Divorce: Real World Solutions – John Wiley & Sons Rattiners Review for the CFP Certification Examination - Fast Track – (3 nd ed.) John Wiley & Sons Rattiners Financial Planners Bible: The Advisors Advisor – John Wiley & Sons Financial Planning Answer Book – CCH/Aspen Getting Started as a Financial Planner (2 nd ed.) – Bloomberg Press Adding Personal Financial Planning to Your Practice-American Management Association Personal Financial Planning Library for Harcourt Professional Publishing. Co-authored Practicing Financial Planning textbook He has been a columnist for Financial Planning Magazine and Financial Advisor Magazine.

5 5 Background u Bachelor of Business Administration (BBA) with an emphasis in Marketing Management from Bernard M. Baruch College of the City University of New York u Master of Business Administration (MBA) in Certified Public Accounting from Hofstra University u Certified Financial Planner education from New York University u Certified Financial Planner (CFP) Certificant with the CFP Board of Standards in Denver, Colorado u Certified Public Accountant in New York, Colorado, and Arizona u Insurance Broker

6 6 TABLE OF CONTENTS Chapter 1: WHAT IS MARRIAGE?slide # 7 Chapter 2: MINIMIZING THE DAMAGE slide # 17 Chapter 3: PAYING FOR DIVORCEslide # 20 Chapter 4: PLAN OF ATTACKslide # 31 Chapter 5: ALIMONY AND CHILD SUPPORT ISSUESslide # 40 Chapter 6: INCOME TAXES slide # 52 Chapter 7: RETIREMENT PLANS slide # 75 Chapter 8: VALUATION ISSUES slide # 90 Chapter 9: REDESIGNING YOUR PERSONAL FINANCIAL PLAN AFTER THE DIVORCE slide # 100 Chapter 10: AFTERWARDS: THE 25 STEPS TO FUTURE SUCCESS slide # 154 Chapter 11: PLANNING FOR SAME SEX COUPLE DIVORCE slide # 162

7 7 Chapter 1: The Unthinkable My wife and I were happy for twenty years. Then we met. -- Rodney Dangerfield

8 8 Chapter 1: What is Marriage? Financial Contract Business Deal

9 9 What is Divorce? Emotional Nightmare Irrational Process

10 10 Objectives of Divorce Minimize Damage 50/50 Split of Assets to start with Stay Focused on the End Result Be Prepared

11 11

12 12 Kinds of Divorce at a Glance Kind of DivorceHow It WorksHassle and Expense SummarySpouses, who haven't been married long and don't have children or many assets or debts, file together Relatively simple paperwork; lawyer usually not necessary; often only one filing fee DefaultOne spouse files for divorce, the other doesn't respondRelatively simple paperwork; lawyer may or may not be necessary MediatedTrained, neutral mediator helps spouses work out settlement agreement without court fight Not cheap - except compared to a contested divorce; can help spouses communicate CollaborativeEach spouse hires lawyer, but everyone agrees to settle out of court using negotiation and four-way meetings Can take longer than mediation, but cheaper, nicer, and quicker than contested case ArbitratedSpouses hire private judge to hear evidence and decide contested issues outside of court faster and slightly less expensive than trial; can be more civil than court trial and provides greater privacy ContestedSouses hire lawyers and fight out issues at trialExpensive, stressful for everyone (especially children), guaranteed to ruin chances of civil relationship in future

13 13 Representation Educating Yourself Should You Go It Alone Attorneys

14 14 Blocking Out the Competition Playing Offense

15 15 Becoming Too Passive What happens when you dont take the initiative?

16 16 RATTINERS PLANNING TIPS 1. BE COMFORTABLE WITH YOUR DECISION TOPURSUE THE DIVORCE (REGRDLESS OF WHO INITIATED IT.) 2. The divorce process is a business decision. Keep emotions in check and pursue it as you would any other business deal. 3. Get a handle on your finances. Start with a budget so you can determine the assets, debt and income issues that need to be addressed. 4. Trial, permanent and legal separation are geared towards the same thing, but demonstrate different ways of getting there. This goes back to answering the question, is divorce right for you? 5. There are many different types of ways to approach divorce. Select the method that gives you the least amount of discomfort. A method that helps maintain your health is primary. If it is also easier and cheaper for both spouses to run, that is a major plus. In addition, it offers you the best chance of a complete and overall recovery in the shortest amount of time. 6. The person you divorce is not the same person you married. 7. Dont sweat the small stuff. Pick and choose your battles carefully. Look at the big picture. Not everything is a major battle or a huge catastrophe. 8. Dont be a part of the blame game. Take it from a CPA, two wrongs dont make a right. 9. Work with and attorney always. Dont go through the motions without any counsel walking you through the process. Even if your ex asks you not to work with one, you owe it to yourself and your ex to become as educated as possible. 10. Rely on a close family member or friend to bounce ideas off. 11. Dont be too hasty. Step back from the situation, try to look in from the outside and act rationally. 12. Remember, its ultimately all about the children! Dont make waves with your children by trying to get revenge on your ex. 13. Look at various scenarios including a best case and worst case picture. This will provide you with some boundaries as to what to expect. 14. No matter how bad it seems now, just remember my mothers saying, this too shall pass.

17 17 Chapter 2: Minimizing the Damage The secret of a happy marriage remains a secret. --Henny Youngman

18 18 Chapter 2: MINIMIZING THE DAMAGE In a lose-lose situation, the objective is to try and get out of the marriage with as little damage as possible. Damage includes financial and emotional issues – Pick your battles – Stay focused Staying out of court Negotiating the deal

19 19 Rattiner Damage Control Tips Taking Care of yourself – Its all about me! Protecting Your Mail Protecting Your Computer Open Your Own Credit card and Bank Account Close Joint Credit Accounts Protect Your Separate Property Filing a Tax Return Temporary Support Agreements Innocent Spouse Rule Re-enter the Workforce

20 20 Chapter 3: Paying for Divorce Marriage is grand…divorce is about 100 grand.

21 21 Chapter 3: PAYING FOR DIVORCE Costs Involved What Should You Pay for in the Divorce? How Long Will these Expenses Go On? Creating a Budget Litigation Budget Analyzing Your Income Keep Your Income Separate Going Solo Solo Assets Separate Property Joint Assets Before Divorce Papers Have Been Filed After Divorce Papers Have Been Filed What is Truly Important How to Pay for It: Prevent Paying for Your Exs Legal Fees Your Monthly Budget Income Allocation for You and Your Ex Your Balance Sheet

22 22 Costs Involved: What Should You Pay For & For How Long? Everyday life New Temporary Costs – legal fees, valuation experts, mediators, therapists, arbitrators Pay as you incur

23 23 Creating a Budget Monthly Budget – the 3 Cs Litigation Budget

24 24 Analyzing Your Income Include income from all sources

25 25 Keep Your Income Separate Dont Commingle!

26 26 Separate Property Keep separate! Solo Assets – Those assets in Your Name Only, such as retirement plans

27 27 Joint Assets Before You File – use anyway you want After you File – you are legally prohibited from doing anything that would harm your jointly owned interests or spouses separately owned property

28 28 What is Truly Important Have sufficient assets to feed and shelter each spouse until the divorce is final Divorced spouses find out too late that there are cheaper ways to go about this process

29 29 How to Pay for It: Prevent Paying for Your Exs Legal Fees The bigger wage earned generally loses here Begin liquidating jointly owned assets Put your attorney fees on a credit card Take out a joint loan to pay bills Use retirement assets Sell assets, such as rental real estate THE BOTTOM LINE: IT ALL ENDS UP IN THE ATTORNEYS POCKETS!

30 30 Rattiners Planning Tips 1. Many costs show up for the first time during the divorce process. Take an accounting of what each one represents before you act on it. 2. Try to shorten the divorce process, where possible. The longer it goes, the more expensive it becomes 3. When figuring out how much each spouse needs during the divorce process, the first thing you should do is to create a budget. 4. Lawyers will provide you with a litigation budget if you request one. 5. Once the divorce process is underway, keep your income separate from that of your ex. 6. As long as separate property is not commingled, it should remain separate property after the divorce. 7. Joint assets should be taken care of in a fiduciary capacity by each spouse during the divorce process. 8. Your responsibility for using and caring for joint assets differ before and after divorce papers have been filed. 9. Taking out a mortgage, home equity line of credit, liquidating assets in a joint account, credit cards, and retirement accounts are all sources for paying legal fees during the divorce 10. Dont forget the tax angles of your expenses, since this will truly determine what you have to spend during the divorce.

31 31 Chapter 4: Plan of Attack: Let the Games Begin Love is the quest, marriage the conquest and divorce... the inquest.

32 32 Chapter 4: PLAN OF ATTACK Taking Your Ex Out MOBSTER Litigation Anything Other Than Litigation Mediation The Mediator The Mediation Process Collaborative Divorce Arbitration The Prelims – Gathering the Evidence Discovery Releases Interrogatories Depositions Subpoenas Working Discoverys Usefulness Going After Hidden Assets Personal Fault Issues

33 33 Taking Your Ex Out I KNOW WHAT YOURE THINKING!

34 MOBSTER Speak to me after this session for a direct contact!

35 35 Litigation Avoid at all costs!

36 36 Anything Other Than Litigation Mediation Collaborative Divorce Arbitration

37 37 Going After Hidden Assets Discovery Interrogatories Subpoenas

38 38 Checklist for Hiring a Mediator 1. What is your style of mediation? 2. Do you have a specialty? 3. Do you see couples separately and/or together? 4. How do you charge and what are your fees? 5. How many mediations have you performed? Is this your full time job? 6. What kind of background or training have you had? Are you a judge? 7. How do you work with spouses who each have their own attorney? Are attorneys part of the process or do you refer legal issues to them directly? 8. What do you do if you see the mediation process breaking down? 9. Do you work with and refer spouses to other professionals, such as CPAs, CFPs, attorneys, therapists, etc.? 10. How is confidentiality handled? 11. Are you willing to testify in court, if need be?

39 39 Rattiners Planning Tips 1. It never pays to take your ex out. Be smart about the entire divorce process. Look at the big picture. 2. Avoid litigation at all cost. It is too expensive, too demanding and will not enable you to get the result you are trying to achieve. You cant control the ultimate outcome. 3. Mediation is a better bet if you and your ex can agree to it. Having an independent person be the referee allows for a more equitable settlement. Remember, youll never be happy with the final outcome, but it will help minimize the damage and hopefully provide you with a settlement you both can live with. 4. Hire a former judge as the mediator. That person has the experience necessary to understand the issues, close the gap and wrap up the case. You always want to employ a no nonsense approach to be implemented by a no nonsense judge. 5. Make sure you understand the mediation process before moving forward. It puts both spouses on the same playing field looking for similarities between the parties rather than differences. 6. Collaborative divorce is another good option because the whole goal is to avoid going to trial. You need both sides to be open, honest and cooperate with each other. And you need both attorneys to feel the same way. 7. Arbitration is usually a winner take all scenario. If binding, you lose your right to challenge the decision. If non-binding, youre probably not going to get from it what you should. 8. Discovery is a necessary step because it helps gather all the information you need to make the right decisions about the final outcome of the case. If you have your doubts about things, it forces the other spouse to act. 9. To go after hidden assets, make sure it is a worthwhile investment. It can be expensive if you get other people involved and not worth the cost. 10. Trying to prove personal fault issues are not really necessary in the grand scheme of things. It doesnt get you closer to your ultimate goal of settling the case and moving on with life.

40 40 Chapter 5: Alimony and Child Support Issues The definition of alimony: The screwing you get for the screwing you got!

41 41 Chapter 5: ALIMONY AND CHILD SUPPORT ISSUES Alimony (Maintenance and/or Spousal Support) Calculation and Length of Alimony Can the Payee Spouse Receive an Extension for Alimony Payments? Remarriage Initial Payment of Alimony Modification of Alimony Payment Hiring a Vocational Expert Deductibility Alimony Requirements

42 42 Alimony (Maintenance and/or Spousal Support) Definition - Alimony is designed to help the spouse with the lesser earnings potential gain the necessary training to re-enter or advance in the workforce Temporary award – Concerned with the future needs of that spouse Factors Involved – Length of marriage, each spouses age, vocational skills of each spouse, standard of living during the marriage, conduct of each spouse, who will maintain the household for the children, liabilities of each spouse, previous sacrifice of of ones earning potential

43 43 Calculation and Length of Alimony Each spouses ability to earn income Past earnings and projected future earnings Can both spouses support themselves individually – then maybe no alimony is awarded Your age

44 44 Hiring a Vocational Expert Absolutely necessary for the at-home spouse

45 45 Alimony Requirements Payments must be made under a divorce or separation instrument. Payments must be made in cash. No designation of the payment from one spouse to the other is considered to be alimony. If separated under a decree of divorce or separate maintenance, the spouses cannot live in the same household. Payments must end at the death of the payee spouse. Payments can not be considered child support. You and your ex cannot file a joint tax return with each other.

46 46 Alimony Recapture (Too Much Alimony Paid Too Soon) If the spread of payments is greater than $15,000 per years 1 and 2, or years 2 and 3, with payments going downward, alimony recapture may be an issue

47 47 Nick pays his ex-spouse, Carla, $60,000 alimony during the first year, $35,000 during the second year, and $12,000 during the third year. Calculate the amount of alimony recapture. Example: Recapture of Alimony Note. Do not enter less than -0- on any line. 1.Alimony paid in 2nd year1.$35,000 2.Alimony paid in 3rd year2.$12,000_ 3.Floor3.$15,000_ 4.Add lines 2 and 34._27,000_ 5.Subtract line 4 from line 1 5. $8,000 6.Alimony paid in 1st year6. 60,000_ 7.Adjusted alimony paid in 2nd year (line 1 less line 5)…………7.27,000_ 8.Alimony paid in 3rd year8.12,000_ 9.Add lines 7 and 89.39,000_ 10.Divide line 9 by ,500_ 11.Floor11.$15, Add lines 10 and ,500_ 13.Subtract line 12 from line , Recaptured alimony. Add lines 5 and 13*14.$33,500 *If you deducted alimony paid, report this amount as income on Form line 11. If you reported alimony received, deduct this amount on Form 1040, line 31a. IRS Publication 504

48 48 Child Support Many states have a state calculator to help you figure out the amount yourselves Modification can occur

49 49 Alimony and Child Support – Tax Summary Chart Deductible by PayorTaxable to Payee AlimonyYesYes Child Support No No

50 50 ALIMONY AND ITEMIZED DEDUCTIONS IF you must pay all of the…AND your home is … THEN you can deduct and your spouse must include as alimony… AND you can claim as an itemized deduction… Mortgage payment (principal and interest) Jointly ownedHalf of the total payments Half of the interest as interest expense (if the home is a qualified home) Real estate taxes and home insurance Held as tenants in common Half of the total payments Half of the real estate taxes and none of the home insurance Real estate taxes and home insurance Held as tenants by the entirety or in joint tenancy None of the payments All of the real estate taxes and none of the home insurance Source: Adapted from IRS Publication 504 Divorced or Separated Individuals (2007) p.12

51 51 Rattiner Planning Tips 1. Alimony is deductible for the payor spouse and taxable to the payee spouse. 2. Child support is neither taxable nor deductible by either spouse. 3. Alimony is generally not awarded for short term marriages which have durations of less than five years. 4. Make sure you call in a vocational expert to help assess the at home spouses ability to earn income after the divorce. 5. If spouses agree to a lump sum award of an alimony payment, it cannot be altered in the future. 6. Regular monthly payments of alimony can be modified by the courts in the future. 7. Alimony payments always end at the death of the spouse and usually at remarriage. 8. If you front load alimony to the tune of greater than $15,000 between years one and two or between years two and three, some of the alimony may need to be recaptured. 9. Child support payments can always be modified. 10. Awarding temporary alimony may not always be a good idea because it can be used as a precedent for awarding permanent alimony.

52 52 Chapter 6: Divorce Can be Taxing (Income Tax Section) Marriage is the only war in which you sleep with the enemy.

53 53 Chapter 6: INCOME TAXES Divorce Can Be taxing Property Settlements (IRC Section 1041) Exceptions to IRC Section 1041 Purchases Between Spouses Transfers in Trust Passive Activity Loss Property Deferred Tax Liability Recordkeeping Requirements Gift Tax Issues Property Basis Filing Status

54 54 Divorce Can Be taxing There are many things to consider. Attorneys are probably not the best source for this type of information

55 55 Property Settlements (IRC Section 1041) Transfers between spouses pursuant to a divorce are done income tax free

56 56 Purchases Between Spouses Original basis and holding period accompanies the transaction. Property basis is the original basis from the transferor spouse

57 57 Deferred Tax Liability You may have future tax issues when you sell property. Many times attorneys dont facto in the net effect. Examples include depreciation recapture, capital gains, primary residence sale, and future tax rates

58 58 Filing Status (S/H) Single (M/J) Married Filing Jointly (M/S) Married Filing Separately (H/H) Head of Household (Q/W)Qualifying Widow

59 59 Exemptions Have the divorce decree state clearly who is entitled to the dependent exemption Youll always get a deduction for yourself

60 60 Is there any way for the dependency exemption to be awarded to the non custodial parent? The answer is yes if all of the following apply: 1. The parents a.Are divorced or legally separated under a decree of divorce or separate maintenance b. Are separated under a written separation agreement, or c. Lived apart at all times during the last six months of the year 2. The child is in the custody of one or both parents for more than half of the year 3. The divorce decree or separation agreement provides the noncustodial parent can claim the child as a dependent or the custodial parent signs a written declaration (Form 8332) that he or she will not claim the child.

61 61 Form 8332: Release of Claim to Exemption for Child of Divorced or Separated Parents Custodial parent needs to sign Can be released for one or more years

62 62 Sale of Principal Residence Residency Requirements - Must live in the house for two of the last five years $250,000 – single $500,000 – married filing jointly

63 63 Co-Owning the House NOOOOOOOOOOOOO!

64 64 Remarriage You can use the new spouses time in the house to meet residency requirements

65 65 Single Spouse selling the house after the Divorce Sales Price$600,000 Cost$200,000 Gain on Sale$400,000 Exclusion$250,000 Taxable Amount$150,000 Tax 20% $30,000

66 66 Married Filing Joint Taxpayers Selling the House During the Divorce Process If you are not officially divorced, you are still considered married and can thus continue to file married filing jointly. In that case, the couple can still take the $500,000 exclusion. In the next example, look what happens if the spouses sell the house while still legally married and filing jointly. Sales Price$600,000 Cost$200,000 Gain on Sale$400,000 Exclusion$400,000 (can go as high as $500,000) Taxable Amount$0 Tax Liability$0

67 67 Exception to the Two Year Rule An exception exists to the two year rule if the house is sold due to unforeseen circumstances. In these cases you can pro rate the gain on the house.

68 68 Unforeseen circumstances include moving for any of the following reasons: job change health issues divorce

69 69 John and Jane Smith purchased a house for $300,000. Six months later they were legally divorced. Jane, who is now single, and is the sole owner of the house, decides to sell the house for $400,000 after the sixth month. How much of the gain would be taxable to Jane? Step 1: Sales Price $400,000 Cost$300,000 Profit$100,000 Step 2: $250,000 single exclusion x 6/24 = $62,500 can be excluded from the sale of the house Step 3: Profit$100,000 Excluded Gain $62,500 Taxable Gain $37,500 Note1: The 6/24 represents living in the house for 6 months out of 24 months (2 year requirement). Note 2: If Jane sold the house at the end of 2 years (instead of six months), then the entire gain (up to $250,000) would have been excluded from capital gains tax. IRS Publication 523.

70 70 Tax Deductibility of Divorce Costs Deductible if: In connection with the collection or refund of any tax For the production or collection of income (i.e., alimony) Aggressive position, but probably doable. Itemized bill from the attorney specifying investment and/or tax advice Where: Schedule A: Itemized Deduction, Miscellaneous 2%

71 71 Like Kind Exchanges Under IRC Section 1031 Like kind does not mean identical. It means similar Sell property first Identify up to 3 properties to purchase within 45 days Close on any of the 3 within 180 days (both from the date of escrow) Can be multiple properties What happens if that doesnt work? – reverse like kind exchange

72 72 Nonstatutory Stock Options (NSO) NSOs do not meet specific IRC requirements for special tax treatment. Who is entitled? Employees and Independent Contractors Difficult to value because of future market valuations Restricted Stock Options – Section 83(b) Election

73 73 Tax Credits Regarding Children Child Tax Credit Dependent tax Credit Adoption Expenses Credit Education Tax Credits American Opportunity Credit Lifetime Learning Credit

74 74 Rattiners Tax Planning Tips 1. A transfer of property between spouses pursuant to a divorce does not create a taxable event for either spouse. 2. The recipient spouse keeps the same tax basis for property transferred from the transferor spouse. 3. Filing status is determined as of the last day of the calendar year (December 31st) 4. Filing married filing separate keeps the liability issue separate between the spouses. 5. Head of household should be used as a filing status for a divorced spouse who maintains a household for dependent children. 6. If you are planning on selling your house as the recipient spouse, you may want to do it during the divorce process in order to take advantage of the $500,000 exclusion. 7. Divorce qualifies as unforeseen circumstance. That means if you sell the house within a two year period, you may be able to exclude part of the capital gain. 8. You dont have to worry about the capital gain exclusion from a home sale where you transfer the sale to the other spouse as part of the divorce. 9. If you retain a rental property from the divorce and wish to exchange it for another more expense property, you can do it under IRC Section 1031 and defer the capital gain. 10. If you claim a child under the age of 17 as your dependent, you may qualify for the $1,000 per year child tax credit.

75 75 Chapter 7: Retirement Plans: (Rules, Types and Valuation) The secret to successful investing for retirement is to keep your first spouse!!!

76 76 Chapter 7: RETIREMENT PLANS 8 Critical Elements To Think About What the employee spouse is entitled to due to vesting schedules and other issues Type of retirement plans to divide QDROs Valuation of retirement benefits How much of the valuation are you entitled to receive? Whether to accept the retirement benefits or an equivalent amount of other assets Protection of your retirement benefits if your spouse remarries or dies Discovery of overlooked or hidden assets

77 77 Vesting Rules Qualified Plans Defined Benefit: 5 year cliff 3-7 year graded Defined Contribution Plans 3 year cliff 2-6 year graded Personal Retirement and Nonqualified Plans Immediate vesting

78 78 Types of Retirement Plans Qualified Plans Defined Benefit Defined Contribution – includes 401(k) plans hybrid - 403(b) plans Personal Retirement Plans SEPS SIMPLEs IRAS Nonqualified Plans Deferred Compensation Supplemental Executive Retirement Plans

79 79 Qualified Plans Defined Benefit Plans Defined Contribution Plans

80 80 Personal Retirement Plans IRAs SEPs SIMPLEs

81 81 Nonqualified Plans Deferred Compensation Rabbi Trusts 457 Plans

82 82 Qualified Domestic Relations Orders (QDROs) Method of dividing up retirement assets

83 83 Inquiries to the Plan Administrator Participant's account or benefit statements from the date of the marriage Summary plan description Current QDRO procedures Distribution policy and forms

84 84 Valuation of Retirement Plans Defined Benefit Plans – employer master plan Methods for Dividing a Pension Buyout method (immediate offset method with other assets) Wait and see method – split at date of retirement Reserved jurisdiction method – ask the court to wait and value later because of too many unknown variables; i.e. stock options, bonuses to be paid on dependent factors, and other sources of compensation that cant be determined until later on)

85 85 Valuation of Retirement Plans Defined Contribution Plans Personal Retirement Plans Participant knows the value in each of these accounts

86 86 Using Retirement Assets to Balance Out Equity Very effective tool

87 87 Overlooked Plans Past plans Frozen plans

88 88 Rattiners Retirement Plan Mistakes Checklist 1.Has the attorney identified all past and present retirement plans?YesNo 2.Does the attorney understand the differences among all the types of retirement plans that you or your ex possesses (i.e. qualified vs. personal vs. nonqualified plans and/or corporate vs. government plans)?YesNo 3.Was a QDRO obtained during the divorce process and not afterwards?YesNo 4.Has your attorney stepped up to the plate and either prepared the QDRO or is on top of someone else preparing the QDRO?YesNo 5.Has an outside party been hired to help value the retirement accounts?YesNo 6.Does the value of the retirement plans ask for accrued benefits as opposed to vested benefits?YesNo 7.Does the value of the retirement plans include all the activity within the retirement account, such as gains and losses, interest and dividends received?YesNo 8.Has the attorney noted what will happen if the parties die during the process?YesNo 9.Has the attorney acknowledged and completed the issues necessary for continuation of medical care coverage for the non-participant spouse?YesNo 10.Did you walk away from the divorce comfortable with the approach used by the attorney and others as to the way the calculations were made in the division of retirement plan assets?YesNo

89 89 Name of AssetCurrent ValueRate of Return (%)Date Full Benefits Begin Defined Benefit Plans: Company Ret Plan-Yours Company Ret Plan-Ex: Defined Contribution Plans: Company Ret Plan-Yours Company Ret Plan-Ex: Personal Retirement Plans: IRA #1 - Yours IRA #2 - Yours IRA #1 – Ex: IRA #2 – Ex: SEP – Yours SEP – Ex: SIMPLE-Yours SIMPLE – Ex: Nonqualified Plans: Yours: Ex: Other: Yours Ex: Valuation of Retirement Plan Assets

90 90 Chapter 8: Valuation Issues: (Property Division and Business Concerns) I was married by a judge. I should have asked for a jury. -- George Burns

91 91 Chapter 8: VALUATION ISSUES Valuation issues are always tricky and seldom accurate! And they certainly dont measure what will happen in the future (i.e. the economy or your profession) when you are valuing assets to pay for future debt!

92 92 Property Division Common Law Community Property

93 93 Common Law Equitable distribution 41 states plus Alaska

94 94 Community Property Equal Distribution 9 states plus Alaska TWIN CLAN W Texas Wisconsin Idaho Nevada California Louisiana Arizona New Mexico Washington State

95 95 Closely Held Business Valuation To consider if the business is marital property, youll need to address these issues: Was the business established before or after the marriage? Did it grow substantially during the marriage? If the business did grow, was it due to the fact that your ex was a stay-at-home spouse who did not work full-time in the business? Was separate property from either spouse invested in the business? Was it a joint business run by both spouses?

96 96 Business Valuation Documents Needed 1. Last five years of individual tax returns and documents (Form 1040) 2. Last five years of business tax returns and documents [Form 1120S (S Corporations); 1120 (C Corporations); 1065 (partnerships, limited liability companies, limited liability partnerships)] 3. K-1s for 1065 or 1120S 4. Income (Profit and Loss) statement 5. Balance sheet 6. Listing of shareholders or partners who own a piece of the company 7. Capital accounts of the partners if the business is a partnership 8. Retained earnings statement 9. List of cash accounts and any investments 10. List of aged accounts receivable (money due the business) 11. List of aged accounts payable (money the business owes others) 12. Business plan and projections 13. Key officers compensation 14. Key officers life insurance 15. List of existing contracts 16. List of partnership agreements in affect

97 97 Valuation Report The business valuation report should include Full description of the business Method of valuation Name and qualifications of the evaluator Names of relevant documents that were reviewed Full explanation for the rationale for the evaluation Date the business was valued Reason for the valuation Relevant industry standards

98 98 Professional Practices - States that consider professional practices part of the marital estate at this time include: Arizona California Colorado Connecticut Indiana Kentucky Maryland Michigan Montana Nevada New Jersey New Mexico New York North Carolina Ohio Oregon Virginia Washington

99 99 Key Stock Option Questions 1. Is the stock option part of marital property? In other words, was it earned and received during the marriage? 2. How is the option valued? 3. When is the option valued? 4. What are the tax consequences when the option is exercised?

100 100 Chapter 9: Redesigning Your Personal Financial Plan After the Divorce Americans divorce so much we are called the land of the free, and we get married so often that we are called home of the brave.

101 101 Chapter 9: REDESIGNING YOUR PERSONAL FINANCIAL PLAN AFTER THE DIVORCE You are ready for Stage 2 of Your Life. You will need to re-examine all the prior aspects of your life and then start anew.

102 102 The New and Improved Game of Life Start with a budget Save 10% of your gross income Establish an emergency fund of 3-6 months of gross living expenses Purchase essential insurances Revise your legal documents All of this can be accomplished through a financial plan

103 103 Planning for Lifes Uncertainties Job change/unemployed Revise your cash flow Remarriage Protecting the kids from a prior marriage – QTIP plan Withdrawing money from your retirement accounts. Develop a retirement needs analysis Ownership designations on invested assets and disposition of closely held business interests Changed tax filing status Constant monitoring of life events

104 104 GOING THROUGH THE PERSONAL FINANCIAL PLANNING PROCESS 1. Gather all Necessary Data 2. Objectives need to be set 3. Process all the information into meaningful financial statements 4. Develop recommendations 5. Implement those recommendations 6. Monitor your situation annually

105 105 LIFE CYCLE ANALYSIS Based on following the previous discussion of the personal financial process that you need to follow very closely, and where you want to end up, the following chart shows you what you should be doing at the appropriate time in our life.

106 106 Ages 20-29; and 30-39: Have an emergency fund equal to six months of gross living expenses Make sure you always have adequate and continuous insurance coverage for life, disability, health, homeowners, automobile, and umbrella. Be careful if moving between jobs and short changing your pension benefits or other deferred compensation arrangements. Roll over any retirement benefits into an IRA or to your next 401(k). Minimize your income tax bite buy maxing out your deductions. Contribute regularly to your 401(k) and/or IRA, and any other retirement fund. Purchase a home with a 15 year mortgage so that by the time you retire, your housing costs will be under control. Write a will. Discuss retirement plan benefits with your human resource personnel.

107 107 Ages 40-49: contribute regularly to your 401(k) and/or IRA, and any other retirement fund. Check your social security statement annually to ensure that all your wages have been credited correctly. If not, contact them immediately. Analyze personal assets, and work out a plan for funding an adequate retirement income. Actively manage your IRA and other retirement funds with appropriate emphasis on capital gains oriented investments. Review your will every three years or when moving to another state. Review it with an experienced attorney.

108 108 Ages 50-59: contribute regularly to your 401(k) and/or IRA, and any other retirement fund. Check your social security statement annually to ensure that all your wages have been credited correctly. If not, contact them immediately. Analyze personal assets, and work out a plan for funding an adequate retirement income. Review your retirement income an expense projection staking inflation into consideration. Confirm the beneficiary designations on life insurance policies, annuities and retirement plans. Join AARP (American Association of retired Persons). Review your will every three years or when moving to another state. Review it with an experienced attorney.

109 109 Ages Discuss early retirement offers with a financial planner Collect the documents necessary to process social security benefits Determine whether it makes sense to sell your primary residence and take the tax consequences into effect. Prepare detailed cash flow projections from estimated year of retirement until age 90, taking inflation into consideration. Practice living for a month under your new retirement income Determine the status and duration of ongoing loans and mortgage commitments. Determine which activities will keep you active during retirement. Consider different retirement locations Inquire about possible retirement entitlements from previous employers Consider long-term care insurance

110 110 Ages 65+ Live and enjoy life! Take care of your health Be active, if health permits

111 Cash Flow Management: It All Begins Here Tips Improving Your Cash Flow for Organize Yourself Better. Dedication. Leave home with Less Cash. Kill the credit cards. Give yourself and family members weekly spending money – an allowance Set Saving as a priority expense. Refinance your debt during times of lower interest rates. Give yourself Incentives for a job well done.

112 Budgeting: Be Smart When establishing your budget, keep the following purposes in mind: Set a forecasted amount for each revenue and expense item Identify variances between actual and budgeted numbers Define possible problems in spending patterns Identify opportunities to overcome these problems, and Help you realistically plan to improve your spending patterns

113 113 Consider the following tips when developing your budget: Design a budget form that is suitable to you. Forecast your income. Summarize past expenses. Estimate future expenses.

114 Debt Management: A Difficult Task Dont overextend!

115 115 Rules of thumb in assessing whether a home mortgage will be offered to a prospective borrower. Monthly housing costs (including principal, interest, taxes, fees and insurance) should be no more than 28% of the prospective borrowers gross income. Total monthly payment on all debts should be no more than 36% of gross monthly income. According to the underwriting guidelines for the Federal National Mortgage Association (Fannie Mae), this includes: monthly housing expense (including taxes and interest) monthly payments on installment/revolving credit monthly mortgage payments on non-income producing property) monthly alimony, child support, or maintenance payments

116 116 Debt Management Tips Dont go crazy. Shop Around. Review credit card bills. It happens. Credit card companies do make errors.

117 Insurance Planning Essentials: Protecting Your Financial Assets Rattiners Rule: If you cant afford to replace the loss or if it would kill you to write the check to replace the loss, then you need insurance!

118 118 Types of Insurance Life Insurance Disability Insurance Health Insurance Homeowners Insurance Automobile Insurance Umbrella (Liability) Insurance Long Term Care Insurance

119 119 Life Insurance Rule of Thumb – Needs analysis should equate to roughly 7 times gross salary

120 120 Disability Insurance You have no one else to depend on. 60% of gross salary

121 121 Health Insurance Get as much as you can afford!

122 122 Homeowners Insurance Purchase an HO3 and HO15 or HO5 Purchase riders

123 123 Automobile Insurance Liability and uninsured/underinsured coverage should be identical Collision and Comp – Use Rattiners Rule

124 124 Umbrella (Liability) Insurance Dont underestimate!

125 125 Long Term Care Insurance Ask your kids if they are up to the challenge!

126 Investment Planning – Investing for a Secure Financial Future The Uncomfortable Realities About Saving and Investing. Know why you are investing Invest for growth Diversify across investments Diversify within investments. Take control over your investments

127 127 Investment Parameters Risk Tolerance Time Horizon Liquidity Marketability Tax Consequences Diversification

128 128 Asset Allocation: Brinson Hood Beebower Study 94% of the volatility of the portfolio return is due to the asset class selected 4% is due to security selection 2% is due to market timing

129 129 Investment Types Cash/Cash Equivalents Fixed Income Equities Hard Assets: Real Estate, Gold, Precious Metals Collectibles

130 130 Tips For Investing In Bonds Seek expertise when necessary Keep an eye on price volatility Ladder maturities Compare interest rates Dont chase yield Diversify Keep maturities relatively short Use mutual funds for investing in unusual bonds Consider the tax effects

131 131 Types of Stocks Blue Chip Income vs. Growth Cyclical Interest Sensitive Defensive

132 132 Tips for Investing in Stocks 1. Never buy stocks indiscriminately 2. Select a promising industry 3. Diversify 4. Buy low and sell high 5. Stay abreast of market trends 6. Use stop-loss orders to protect against loss 7. Buy value 8. Buy low P/E high dividend stocks 9. Buy stocks in companies with strong dividend payment records 10. Finally, rely on your own experience and judgment.

133 133 Hard Assets: Real Estate, Gold, Precious Metals An inflation hedge

134 134 Real Estate: Direct vs. Indirect Ownership Dont overload here

135 135 Collectibles Dont bank on this!

136 Retirement Planning: How Long Will Your Money Last Running Out of Money is Your Biggest Challenge Retirement Needs Analysis – The 3 Step Process Step 1: What will be your shortfall at retirement? Step 2: What will be the lump sum needed at retirement? Step 3: How much do you need to save today on an annual basis to arrive at the lump sum needed at retirement?

137 137 Common Retirement Planning Mistakes Not taking advantage of contributing towards your retirement plan, such as a 401(k) or 403(b) plan Neglecting to prepare retirement income and expense projections during your working years Expecting social security to cover all your needs at retirement Accepting an early retirement offer from your employer without thinking it through Failing to take out required Minimum Distributions (RMDs) after age 70 ½

138 Estate Planning Common Issues to Think About Minimizing the problems and expenses of probate and avoiding family conflict Providing your new spouse with too much responsibility and flexibility Providing for the conservation of your estate and its effective management afterwards Minimizing taxes at the time of death Avoiding leaving the children too much too soon Provide for adequate liquidity to cover taxes and other expenses without a forced sale of assets Providing for estate management in the event of incapacity Organizing all your important papers affecting your estate plan – the death folder

139 139 How Much Will You Leave Behind for Your Heirs? The concept of zeroing out

140 140 Letter of Instructions Plans out exactly what should be done

141 141 Qualified Terminal Interest Property (QTIP) Trusts Protects the kids from a prior marriage

142 142 FINANCIAL PLANNING SUMMARY WORKSHEETS Debt Solvency Worksheet – 10 Basic Questions Take this quick 10 question survey to help you manage your debt. 1.Is more than 20 percent of your take-home salary used for credit card payments?YesNo 2. Are you charging more each month than you are paying off?YesNo 3.Have you received calls from credit card companies because of paying bills late?YesNo 4. Do you charge things impulsively?YesNo 5. Are you approaching the limit on your charge cards?YesNo 6.Do you find yourself paying only the minimum payments on your charge cards? YesNo 7.Have you defaulted on a mortgage or rent payment more than once?YesNo 8. Are you uncertain about how much money you owe?YesNo 9.Are you using the cash advance on one credit card to pay off another card?YesNo 10. Is the balance in your savings account shrinking? YesNo

143 143 INSURANCE POINTERS When reviewing your clients life insurance policy: a)separate long-term needs from short-term needs b)recalculate needs regularly c)review ratings of existing carriers d)review reasons why current insurance was purchased e)determine how original needs have changed and identify new needs f)review beneficiary designations g)review policy riders and options h)review each policys features i)compare clients current health if debating whether to switch policies j)if its a term policy, evaluate conversion and renewability features and feasibility k)if its a permanent cash value policy, evaluate the true cost of insurance with the value received l)determine it makes sense to gift one of the clients life insurance policies m)determine whether it makes sense to name a charity as a revocable or irrevocable beneficiary and establish a wealth replacement trust n)determine whether it makes sense to establish a charitable trust to own the life insurance on the client o)evaluate the effect of current life insurance ownership on its value in the estate p)determine if any incidents of ownership exist for insurance that is intended to be outside the estate q)determine if beneficiary designations of any policies owned outside the estate will cause inclusion within the estate

144 When reviewing your clients health and disability policies: a)Inquire whether your client opted for the best type of medical coverage based on their family situation. b)Determine the monthly disability needed c)Determine whether sufficient coverage exists under the clients current policy, or was the existing coverage purchased many years ago when the client was earning a lower salary. d)Determine whether the policy provides a definition of own occupation e)Determine whether the policy noncancellable and guaranteed renewable f)Determine whether a provision for residual and partial disability exists g)Determine whether a guaranteed insurability rider or COLA rider have been added h) Determine whether the elimination period is appropriate

145 When reviewing long-term care insurance: a)Identify qualification triggers for benefit eligibility. The use of ADLs and/or physician referral is preferred. b)Compare existing policy triggers to current products. Consider replacement of policies requiring prior hospitalization. c)Determine levels of care provided. Avoid policies that do not cover all levels of inpatient care. Evaluate clients needs regarding home care versus inpatient care. d)Review elimination period and relate to other resources for coverage. e)Review benefit level relative to current costs and other available income. f)Review benefit period relative to family history of client. g)Compare premium histories of guaranteed renewable policies.

146 When reviewing homeowners insurance coverage: a)Ensure whether coverage is adequate to replace dwelling only. The replacement cost and the value may be two very different numbers. b)Is the proper form of insurance in place? A homeowners policy on a property currently being rented out is not acceptable. c)Determine the last time the client reviewed the cost of the coverage. d)Determine whether the client have replacement cost coverage or actual cash value (ACV) coverage. e)Determine whether the policy contain an inflation-adjustment rider. f)Determine whether personal property coverage is adequate based on assets owned. g) Determine whether replacement cost protection on personal property exists h)Determine whether your client understand the limitations on high value items i)Determine whether your client has floaters for all high value personal property j)Determine whether an HO 15 rider exists. k)Determine if disaster coverage is necessary and appropriate.

147 When reviewing your clients liability coverage: a)Determine whether current policies include adequate coverage for the client b)Determine whether current coverage is enough to qualify the client to obtain an umbrella policy. c)With the clients current circumstances, determine whether the clients umbrella policy sufficient and cost-efficient. d)Determine whether the client has any high-risk assets, such as a swimming pool, that would warrant additional or special coverage

148 When reviewing your clients auto policy: a) Consider whether state-mandated levels are met and whether they are adequate. b) Consider the deductible relative to other assets. c)Determine whether it would be appropriate to remove collision coverage on older vehicles d)Determine whether all owned vehicles are included on the policy

149 149 7.When reviewing business insurance: a) determine whether coverage is appropriate. b)determine whether insurance agents have been performing an adequate job of discovering all of the pertinent exposures

150 150 Investment Pointers 1. Summarize all of your investments 2. Determine how your investment are allocated, in total, amount the three investment categories: stock, fixed income and cash. 3. Factor in your objectives when designing the right allocation of your investments 4. Put savings first. Save on a regular basis. 5. Constantly monitor your portfolio. Dont be rash in making changes. 6. Substance over form. Make sure the investment merits outweigh everything else. 7. Taxes should be a secondary reason to invest. 8. Dont time the market, Long term buy and hold will usually work best. 9. Use mutual funds as your primary investment vehicle. 10. Dont chase returns. Keep with your long term strategy and dont deviate from your long-term objectives.

151 151 Retirement Pointers 1.If the clients savings program will not result in a sufficient amount to fund his or her retirement lifestyle, there are basically four courses of action: a)save more, b)earn more (a higher investment return on the retirement savings fund), c)retire later, or d)retire in a more modest lifestyle. 2. Wherever possible, the client should be saving through a tax-deferred vehicle such as a qualified plan, or personal retirement plan, such as an IRA, SEP or SIMPLE. 3.In determining the clients retirement savings need, use appropriate assumptions for investment rate of return, inflation rate, years till retirement and years during retirement. 4.Retirement plan funds should be maintained in tax-deferred accounts to maximize the benefits of tax deferral. Urge the client to consider alternate sources of funds needed during the pre-retirement period, so that retirement plan balances will not be eroded. 5.Review beneficiary designations on all retirement plan accounts to ensure that they are consistent with the clients goals. 6. Keep retirement planning in view as short-term decisions are being made regarding the use of income and assets. 7.Review the clients retirement projections periodically; revise the analysis periodically, and in the event of material changes in the clients situation (change of employment, divorce/marriage, death of spouse) 8.As the client approaches retirement, plan on incorporating the stretch (multi-general) IRA to enable the retirement funds to grow tax deferred as long as possible. 9.Fully analyze any projections made by other professionals when projecting a pension maximization or other recommendation. 10.Monitor the clients investment return; compare to assumptions that were used to build the retirement fund. If the clients investments are not realizing the expected return, the client may need to shift the investment allocation or modify the retirement lifestyle. 11. Monitor the clients expenses compared to projections; modifications in lifestyle may be necessary.

152 152 Estate Planning Pointers 1.In considering any gift or estate strategy, analyze the basis aspects of any particular property being planned for use in the strategy. 2.Where spousal transfers are involved, always check the citizenship of the transferee spouse. 3.Where necessary, be willing to pay a small tax to achieve an important personal objective. 4.Recommend a will even in situations where the plan in place will avoid probate completely. 5.Encourage the use of a durable power of attorney and the medical proxies available under state law. 6.Strongly recommend filing a will and other estate documents for safekeeping with the appropriate court. 7.Among retirees consider all charitable giving techniques that would enhance current income. 8.Review all indications of domicile and try to consolidate domicile as much as possible. 9.Avoid presenting clients with probate and revocable trusts as an either-or proposition. 10.Use joint ownership arrangements sparingly as an estate planning technique. 11.Estimate estate liquidity needs and identify sources of liquidity. 12.If life insurance is to be purchased as a source of liquidity, avoid even initial ownership by the insured. 13.Discourage clients from using joint, mutual or reciprocal wills, and/or joint trusts. 14.Compile a family tree for the client, clarifying relationships and identify critical dates (e.g., marriages, births, deaths, gifts, etc.). 15.Construct a net worth statement for the client, extrapolating from that the degree of planning appropriate. 16.Identify items that would be classified as income in respect of a decedent in a prospective gross estate, and attempt to determine how best to handle those items. 17.Make sure the client understands the planning limits imposed by spousal rights in community property states and common law states. 18.Determine and present to the client the estate plan that the client currently has (even if it is all intestacy). 19.Dont allow the generation-skipping transfer tax to discourage clients from making transfers to grandchildren or others until the exemption is fully utilized. 20.Consider carefully what plans are in place for the disposition of pension plan benefits and whether different dispositions should be explored. 21.Assess the adequacy of provisions for minors and dependents, and make recommendations as needed. 22.Where there is a closely held business interest, determine definitively how the succession in interest is to be achieved, whether by a buy-sell agreement or through another technique. 23.Survey the postmortem elections that might be available to the particular estate and adopt strategies that will preserve the availability of these elections.

153 153 Guidelines for Preparing a Will 10 Item will preparation Checklist The following items should be included in a will: 1. Statement that the document is a will. 2. Statement revoking all previous wills. 3. Your full name and location of principal residence. 4. Specific transfers of property to the named beneficiaries. 5. Instructions for dividing the balance of the property. 6. Identify trusts, including the names of selected trustees and successor trustees. 7. Names of guardians and alternate guardians for minor children or special needs relatives. 8. Designation of what monies are to be used to pay death taxes. 9. Names of the executor and back-up executor. 10. Signature and date. The will should be signed in the presence of all of the witnesses.

154 154 Chapter 10: Afterwards: The 25 Steps to Future Success Did You Know? In a recent poll, American men and women were asked if they would marry the same person if they had it to do all over again. 80% of the men responded that they would marry the same woman. 50% of the women responded that they would marry the same man.

155 155 Chapter 10: AFTERWARDS: THE 25 STEPS TO FUTURE SUCCESS An ex-spouse is like an inflamed appendix, they cause a lot of pain and suffering, but after it's removed you find you didn't need it anyway! RECAP: SO WHAT DID YOU REALLY GET FOR $100,000+…?

156 156 Financial Planning Responsibilities That Need to Be Followed Up 1.Read the Divorce Decree Hopefully One Last Time 2.Obtain Certified Copies of the Divorce 3.Make New Deeds for Real Estate 4.Transfer Car Title 5.Update Insurance Coverage and Beneficiary Information

157 157 Financial Planning Responsibilities That Need to Be Followed Up 6.Update Your Retirement Plan Beneficiary Designations 7. Update Your Retirement Plan Accounts 8. Update Your Estate Planning Documents, including Wills, Trusts and Powers of Attorney 9. Confirm that All Bank Accounts, Brokerage Accounts, and Stock Certificates are Separated into Your Own Name 10.Confirm that All Credit Cards, Other Obligations, and Possessions are Separated by Having Your Ex Removed from the Accounts 11. Keep Meticulous Records 12. Remove Personal Assets 13. Name, Address and Work Related Changes

158 158 Other Critical Issues That Need Your Follow-up 14. Your Children 15. Moving Away 16. Modifying Child Support 17. Your Kids and Post Divorce Syndrome 18. Modifying Spousal Support 19. Dating Again: Having Your Kids Cope 20. Cohabitation Agreements 21. Prenuptial Agreement 22. Getting Married Yet Again (Remarriage) 23. Mix and Match with the New Extended Family: Your version of The Brady Bunch 24. Support Groups and Persons 25. The Bottom Line: Take Care of Yourself

159 159 Rattiners Planning Tips 1. When its time to recap the events, you will have learned much from the process. It would have been easier, cheaper and healthier to work out the differences and the divorce during the process with minimal input from the lawyers. 2. Chapter two of your life states that youve been through the worst already and now its your time to take care of yourself going forward. Remember, if you dont no one else will, and theres a lot of people counting on you. 3. Read the divorce decree carefully. If you dont agree with the conclusions, you need to correct it ASAP. Once the ink dries, its too late. 4. Obtain certified copies of the divorce decree because there are many documents and many instances where it is a necessity. Most entities youll need to deal with wont accept unofficial legal copies. 5. Change the deed on real estate to your own name so you can apply for financing to buy your spouse out of his or her share of the housing interest. No tax liability is included in this transaction. 6. Transfer the car titles to the spouse who ends up with the car. Make sure you have all documentation for paperwork regarding paid off loans or other liens. 7. Update all your insurance policy beneficiary designations. Remember, insurance passes by contract of law and that will always supersede a will. If you dont change them, then the person you want to get the benefits may not be legally entitled to them. 8. Go on COBRA health insurance if you are the non-working spouse who is in between jobs. Coverage can be extended for up to 36 months. 9. Update your retirement plan beneficiary designations. Look at the list you prepared for the court disclosing all the different types of retirement plans so you dont forget any during the process. 10. Make sure you have completed a QDRO to actually split the money from a qualified retirement plan. The spouse who is likely to benefit from receiving those monies needs to be the one to pursue this along. IRAs dont need to complete QDROs.

160 Updating your will and other estate planning documents is important. The most current will is the one that is relied upon because it supersedes all previous wills. You need to make sure that it states that you are not married. Also change your health care proxies and powers of attorney so your ex cant control any of your decisions going forward. 12. Confirm that all bank and brokerage accounts have been separated into your name only. Pass along a certified copy of the divorce decree to show that joint ownership is not to be applied in any circumstance 13. Make sure your ex is off any joint credit cards. Debts that he or she rings up could be your responsibility if you dont follow through. Again, a copy of the certified divorce decree should be filed. 14. Keep meticulous records of all transactions involving the ex spouse. You may need them in court later on. 15. Remove all personal assets from your prior residence before the divorce becomes final. After that, it could turn into a he said, she said contest as to what belongs to whom. 16. Update various organizations relating to name, address and work related changes including notifying the IRS of an address change. 17. Its always about the kids. Need I say more? 18. If you are moving away, you better have good reasoning to do so. The noncustodial parent will take exception to that and make your life a living misery. 19. If you need to modify child support, perhaps start by discussing it with your ex. If that doesnt work, go to mediation or back to court only as a last resort.

161 Your children may never ultimately accept the divorce. It is your role to help them through the process, no matter how long it takes, so they can gain closure on the issue. Be persistent. 21. You can try to modify spousal support. Good luck. 22. After the divorce you need to be focusing on your new life. Dating is a starting point. How you work it in with your kids is the tricky issue. Dont involve the kids early in the process. Only involve them when it becomes serious. One year is probably a good time frame before introducing he kids to your new love interest. 23. If you are living with this new person, have all your issues tied to writing to prevent any future misunderstandings either while alive or at death before marriage through the use of a cohabitation agreement. 24. Prenuptial agreements are a necessity. It sets the expectations from the beginning so everyone knows the deal ahead of time. You always must manage the other sides expectations both before and after the process, if there is an afterwards. 25.Remarriage is tricky business. Make sure your kids and even your ex is ready for it. Protect yourself before it happens. 26. The Brady Bunch may have been shown on TV in the 1970s but it exists more today than during any prior time period. Blending the families will be a constant challenge, so setting the ground rules in advance, managing expectations, and retaining important traditions and values will help go a long way. 27. Support groups and individual counseling can help you get over the hump regarding the divorce and put you in a better place to succeed the next time around. 28. When push comes to shove, you need to protect yourself and take care of your main asset – you! Nothing else matters if you cant walk away from this grueling process happy, healthy and focused.

162 162 Chapter 11: Planning for Same Sex Couple Divorces Love may be blind, but marriage is a real eye-opener!

163 163 Chapter 11: Planning for Same Sex Couple Divorce Issues Specific for Same Sex Couples Domestic partnership agreement/cohabitation agreement Last Will and testament Income Tax Issues Estate Planning Issues

164 164 The Personal Financial Planning Process Step 1: First obtain copies of all of your and your partners financial information – assets, liabilities and income. You may have to focus on just compiling yours and then exchange it with your ex-partner since you likely have no legal access to their financial records.

165 165 Step 2: Compile your financial information into a net worth statement. On the left-hand side of the page list all of your assets. On the right-hand side of the page list all of your liabilities. These should be assets and liabilities held in your name alone, your ex-partners name alone and joint held. Indicate whether you came in to the relationship with this asset or liability. If possible indicate any additions or six attractions that have occurred during your relationship for each asset or liability.

166 166 Step 3: Gather information regarding the income both you and your partner were making at the time of your long-term commitment. Also, list changes to income for either party, changes to pursuit or attainment of education or career advancements that were made to benefit the partnership. And list the income each of you were making at the time of dissolution, plus a note regarding earning potential.

167 167 Rattiners Divorce Summary The best option is to stay married, when possible. If not, then you need to be smart, practical and shrewd about getting divorced. Its an occurrence, that if not done right, can have devastating financial and emotional repercussions for the rest of your life! Your own personal financial planning for divorce can never be more important or have a bigger impact than now! All of the information shared today can be found in detail in my latest book published by John Wiley and Sons.

168 168 Parting Thoughts! If Love is Blind and Marriage is an Institution, then Marriage is an Institution for the Blind. Sir, if you were my husband, I would poison your drink. --Madam, if you were my wife, I would drink it. - A conversation between Lady Astor and Winston Churchill Men marry women with the hope they will never change. Women marry men with the hope they will change. Invariably they are both disappointed. - Albert Einstein "I bought my ex a gift for her birthday, but she didn't use it so I'm not going to get her another." "What did you get her?" A cemetery plot!" We were very happily married for eight months. Unfortunately, we were married for ten years!

169 169 The Lesson! A cop tries to pull over a guy for speeding who tries to outrun him. Finally the guy gives up and pulls over. The now ticked-off cop walks up and yells at the guy, Hey, what's the big idea?" The guy responds, Well officer, I have a very good reason for not stopping sooner. The cop replies, if you can give me a reason that I have never heard before in all my 30 years on the force, I will not issue you a ticket! The guy responds, "Last week my wife ran off with a cop and I was afraid he was trying to catch me to give her back!" "Off you go," said the officer.

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