Presentation on theme: "Personal Financial Planning for Divorce FPA MA-November 19, 2010"— Presentation transcript:
1Personal Financial Planning for Divorce FPA MA-November 19, 2010 Jeffrey H. Rattiner, CPA, CFP®, MBA, RFC Rattiner’s Financial Planning Fast Track® – CFP® educationJR Financial Group, Inc. – Financial and Tax Planning6410 South Quebec Street, Centennial, CO14850 N. Scottsdale Rd.; Ste 355; Scottsdale, AZ 85254Tel: (720) ; Fax: (720)
2Jeffrey H. Rattiner, CPA, CFP®, MBA, RFC Mr. Rattiner is president and chief executive office (CEO) of Rattiner’s 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.
3TrainingRattiner 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.
4WritingPersonal Financial Planning for Divorce: Real World Solutions – John Wiley & Sons“Rattiner’s Review for the CFP Certification Examination - Fast Track” – (3nd ed.) John Wiley & Sons“Rattiner’s Financial Planner’s Bible: The Advisor’s Advisor” – John Wiley & Sons“Financial Planning Answer Book” – CCH/Aspen“Getting Started as a Financial Planner” (2nd 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” textbookHe has been a columnist for Financial Planning Magazine and Financial Advisor Magazine.
5BackgroundBachelor of Business Administration (BBA) with an emphasis in Marketing Management from Bernard M. Baruch College of the City University of New YorkMaster of Business Administration (MBA) in Certified Public Accounting from Hofstra UniversityCertified Financial Planner education from New York UniversityCertified Financial Planner (CFP) Certificant with the CFP Board of Standards in Denver, ColoradoCertified Public Accountant in New York, Colorado, and ArizonaInsurance Broker
6TABLE OF CONTENTS Chapter 1: WHAT IS MARRIAGE? slide # 7 Chapter 2: MINIMIZING THE DAMAGE slide # 17Chapter 3: PAYING FOR DIVORCE slide # 20Chapter 4: PLAN OF ATTACK slide # 31Chapter 5: ALIMONY AND CHILD SUPPORT ISSUES slide # 40Chapter 6: INCOME TAXES slide # 52Chapter 7: RETIREMENT PLANS slide # 75Chapter 8: VALUATION ISSUES slide # 90Chapter 9: REDESIGNING YOUR PERSONAL FINANCIALPLAN AFTER THE DIVORCE slide # 100Chapter 10: AFTERWARDS: THE 25 STEPS TO FUTURESUCCESS slide # 154Chapter 11: PLANNING FOR SAME SEX COUPLE DIVORCE slide # 162
7Chapter 1: The Unthinkable My wife and I were happy for twenty years. Then we met. -- Rodney Dangerfield
8Chapter 1: What is Marriage? Financial ContractBusiness Deal
9What is Divorce?Emotional NightmareIrrational Process
10Objectives of Divorce Minimize Damage 50/50 Split of Assets to start withStay Focused on the End ResultBe Prepared
12Kinds of Divorce at a Glance Kind of DivorceHow It WorksHassle and ExpenseSummarySpouses, who haven't been married long and don't have children or many assets or debts, file togetherRelatively simple paperwork; lawyer usually not necessary; often only one filing feeDefaultOne spouse files for divorce, the other doesn't respondRelatively simple paperwork; lawyer may or may not be necessaryMediatedTrained, neutral mediator helps spouses work out settlement agreement without court fightNot cheap - except compared to a contested divorce; can help spouses communicateCollaborativeEach spouse hires lawyer, but everyone agrees to settle out of court using negotiation and four-way meetingsCan take longer than mediation, but cheaper, nicer, and quicker than contested caseArbitratedSpouses hire private judge to hear evidence and decide contested issues outside of courtfaster and slightly less expensive than trial; can be more civil than court trial and provides greater privacyContestedSouses hire lawyers and fight out issues at trialExpensive, stressful for everyone (especially children), guaranteed to ruin chances of civil relationship in future
13RepresentationEducating YourselfShould You Go It AloneAttorneys
15Becoming Too PassiveWhat happens when you don’t take the initiative?
16RATTINER’S PLANNING TIPS BE COMFORTABLE WITH YOUR DECISION TOPURSUE THE DIVORCE (REGRDLESS OF WHO INITIATED IT.)The divorce process is a business decision. Keep emotions in check and pursue it as you would any other business deal.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.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?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.The person you divorce is not the same person you married.Don’t 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.Don’t be a part of the blame game. Take it from a CPA, two wrongs don’t make a right.Work with and attorney always. Don’t 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.Rely on a close family member or friend to bounce ideas off.Don’t be too hasty. Step back from the situation, try to look in from the outside and act rationally.Remember, it’s ultimately all about the children! Don’t make waves with your children by trying to get revenge on your ex.Look at various scenarios including a best case and worst case picture. This will provide you with some boundaries as to what to expect.No matter how bad it seems now, just remember my mother’s saying, “this too shall pass.”
17Chapter 2: Minimizing the Damage The secret of a happy marriage remains a secret. --Henny Youngman
18Chapter 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 focusedStaying out of courtNegotiating the deal
19Rattiner Damage Control Tips Taking Care of yourself – It’s all about me!Protecting Your MailProtecting Your ComputerOpen Your Own Credit card and Bank AccountClose Joint Credit AccountsProtect Your Separate PropertyFiling a Tax ReturnTemporary Support AgreementsInnocent Spouse RuleRe-enter the Workforce
20Chapter 3: Paying for Divorce Marriage is grand…divorce is about 100 grand.
21Chapter 3: PAYING FOR DIVORCE Costs InvolvedWhat Should You Pay for in the Divorce?How Long Will these Expenses Go On?Creating a BudgetLitigation BudgetAnalyzing Your IncomeKeep Your Income SeparateGoing SoloSolo AssetsSeparate PropertyJoint AssetsBefore Divorce Papers Have Been FiledAfter Divorce Papers Have Been FiledWhat is Truly ImportantHow to Pay for It: Prevent Paying for Your Ex’s Legal FeesYour Monthly BudgetIncome Allocation for You and Your ExYour Balance Sheet
22Costs Involved: What Should You Pay For & For How Long? Everyday lifeNew Temporary Costs – legal fees, valuation experts, mediators, therapists, arbitratorsPay as you incur
23Creating a BudgetMonthly Budget – the 3 C’sLitigation Budget
24Analyzing Your IncomeInclude income from all sources
26Separate Property Keep separate! Solo Assets – Those assets in Your Name Only, such as retirement plans
27Joint 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 spouse’s separately owned property
28What is Truly Important Have sufficient assets to feed and shelter each spouse until the divorce is finalDivorced spouses find out too late that there are cheaper ways to go about this process
29How to Pay for It: Prevent Paying for Your Ex’s Legal Fees The bigger wage earned generally loses hereBegin liquidating jointly owned assetsPut your attorney fees on a credit cardTake out a joint loan to pay billsUse retirement assetsSell assets, such as rental real estateTHE BOTTOM LINE: IT ALL ENDS UP IN THE ATTORNEY’S POCKETS!
30Rattiner’s Planning Tips 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.Try to shorten the divorce process, where possible. The longer it goes, the more expensive it becomesWhen figuring out how much each spouse needs during the divorce process, the first thing you should do is to create a budget.Lawyers will provide you with a litigation budget if you request one.Once the divorce process is underway, keep your income separate from that of your ex.As long as separate property is not commingled, it should remain separate property after the divorce.Joint assets should be taken care of in a fiduciary capacity by each spouse during the divorce process.Your responsibility for using and caring for joint assets differ before and after divorce papers have been filed.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 divorceDon’t forget the tax angles of your expenses, since this will truly determine what you have to spend during the divorce.
31Chapter 4: Plan of Attack: Let the Games Begin Love is the quest, marriage the conquest and divorce... the inquest.
32Chapter 4: PLAN OF ATTACK Taking Your Ex Out1-800-MOBSTERLitigationAnything Other Than LitigationMediationThe MediatorThe Mediation ProcessCollaborative DivorceArbitrationThe Prelims – Gathering the EvidenceDiscoveryReleasesInterrogatoriesDepositionsSubpoenasWorking Discovery’s UsefulnessGoing After Hidden AssetsPersonal Fault Issues
36Anything Other Than Litigation MediationCollaborative DivorceArbitration
37Going After Hidden Assets DiscoveryInterrogatoriesSubpoenas
38Checklist for Hiring a Mediator What is your style of mediation?Do you have a specialty?Do you see couples separately and/or together?How do you charge and what are your fees?How many mediations have you performed? Is this your full time job?What kind of background or training have you had? Are you a judge?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?What do you do if you see the mediation process breaking down?Do you work with and refer spouses to other professionals, such as CPAs, CFPs, attorneys, therapists, etc.?How is confidentiality handled?Are you willing to testify in court, if need be?
39Rattiner’s Planning Tips It never pays to take your ex out. Be smart about the entire divorce process. Look at the big picture.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 can’t control the ultimate outcome.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, you’ll 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.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.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.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.Arbitration is usually a winner take all scenario. If binding, you lose your right to challenge the decision. If non-binding, you’re probably not going to get from it what you should.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.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.Trying to prove personal fault issues are not really necessary in the grand scheme of things. It doesn’t get you closer to your ultimate goal of settling the case and moving on with life.
40Chapter 5: Alimony and Child Support Issues The definition of alimony: The screwing you get for the screwing you got!
41Chapter 5: ALIMONY AND CHILD SUPPORT ISSUES Alimony (Maintenance and/or Spousal Support)Calculation and Length of AlimonyCan the Payee Spouse Receive an Extension for Alimony Payments? RemarriageInitial Payment of AlimonyModification of Alimony PaymentHiring a Vocational ExpertDeductibilityAlimony Requirements
42Alimony (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 workforceTemporary award – Concerned with the future needs of that spouseFactors Involved – Length of marriage, each spouse’s 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 one’s earning potential
43Calculation and Length of Alimony Each spouse’s ability to earn incomePast earnings and projected future earningsCan both spouse’s support themselves individually – then maybe no alimony is awardedYour age
44Hiring a Vocational Expert Absolutely necessary for the at-home spouse
45Alimony RequirementsPayments 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.
46Alimony 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
47Example: Recapture of Alimony 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 AlimonyNote. Do not enter less than -0- on any line.1. Alimony paid in 2nd year 1.$35,0002. Alimony paid in 3rd year 2.$12,000_3. Floor 3.$15,000_4. Add lines 2 and _27,000_5. Subtract line 4 from line $8,0006. Alimony paid in 1st year ,000_7. Adjusted alimony paid in 2nd year(line 1 less line 5)………… 7.27,000_8. Alimony paid in 3rd year 8.12,000_9. Add lines 7 and ,000_10. Divide line 9 by ,500_11. Floor $15,00012. Add lines 10 and ,500_13. Subtract line 12 from line ,50014. Recaptured alimony. Add lines 5 and *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
48Child SupportMany states have a state calculator to help you figure out the amount yourselvesModification can occur
49Alimony and Child Support – Tax Summary Chart Deductible by Payor Taxable to PayeeAlimony Yes YesChild Support No No
50ALIMONY 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 paymentsHalf of the interest as interest expense (if the home is a qualified home)Real estate taxes and home insuranceHeld as tenants in commonHalf of the real estate taxes and none of the home insuranceHeld as tenants by the entirety or in joint tenancyNone of the paymentsAll of the real estate taxes and none of the home insuranceSource: Adapted from IRS Publication 504 Divorced or Separated Individuals (2007) p.12
51Rattiner Planning Tips Alimony is deductible for the payor spouse and taxable to the payee spouse.Child support is neither taxable nor deductible by either spouse.Alimony is generally not awarded for short term marriages which have durations of less than five years.Make sure you call in a vocational expert to help assess the at home spouse’s ability to earn income after the divorce.If spouses agree to a lump sum award of an alimony payment, it cannot be altered in the future.Regular monthly payments of alimony can be modified by the courts in the future.Alimony payments always end at the death of the spouse and usually at remarriage.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.Child support payments can always be modified.Awarding temporary alimony may not always be a good idea because it can be used as a precedent for awarding permanent alimony.
52Chapter 6: Divorce Can be Taxing (Income Tax Section) Marriage is the only war in which you sleep with the enemy.
53Chapter 6: INCOME TAXES Divorce Can Be taxing Property Settlements (IRC Section 1041)Exceptions to IRC Section 1041Purchases Between SpousesTransfers in TrustPassive Activity Loss PropertyDeferred Tax LiabilityRecordkeeping RequirementsGift Tax IssuesProperty BasisFiling Status
54Divorce Can Be taxingThere are many things to consider. Attorneys are probably not the best source for this type of information
55Property Settlements (IRC Section 1041) Transfers between spouses pursuant to a divorce are done income tax free
56Purchases Between Spouses Original basis and holding period accompanies the transaction. Property basis is the original basis from the transferor spouse
57Deferred Tax Liability You may have future tax issues when you sell property. Many times attorneys don’t facto in the net effect. Examples include depreciation recapture, capital gains, primary residence sale, and future tax rates
58Filing Status (S/H) Single (M/J) Married Filing Jointly (M/S) Married Filing Separately(H/H) Head of Household(Q/W)Qualifying Widow
59ExemptionsHave the divorce decree state clearly who is entitled to the dependent exemptionYou’ll always get a deduction for yourself
60Is 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 parentsa. Are divorced or legally separated under a decree of divorce or separate maintenanceb. Are separated under a written separation agreement, orc. Lived apart at all times during the last six months of the year2. The child is in the custody of one or both parents for more than half of the year3. 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.
61Form 8332: Release of Claim to Exemption for Child of Divorced or Separated Parents Custodial parent needs to signCan be released for one or more years
62Sale 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
64RemarriageYou can use the new spouse’s time in the house to meet residency requirements
65Single Spouse selling the house after the Divorce Sales Price $600,000Cost $200,000Gain on Sale $400,000Exclusion $250,000Taxable Amount $150,000Tax 20% $30,000
66Married 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 $600,000Cost $200,000Gain on Sale $400,000Exclusion $400,000 (can go as high as $500,000)Taxable Amount $0Tax Liability $0
67Exception 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.
68Unforeseen circumstances include moving for any of the following reasons: job changehealth issuesdivorce
69John and Jane Smith purchased a house for $300,000 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 $400,000Cost $300,000Profit $100,000Step 2:$250,000 single exclusion x 6/24 = $62,500 can be excluded from the sale of the houseStep 3:Excluded Gain $62,500Taxable Gain $37,500Note1: 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.
70Tax Deductibility of Divorce Costs Deductible if:In connection with the collection or refund of any taxFor the production or collection of income (i.e., alimony)Aggressive position, but probably doable.Itemized bill from the attorney specifying investment and/or tax adviceWhere: Schedule A: Itemized Deduction, Miscellaneous 2%
71Like Kind Exchanges Under IRC Section 1031 Like kind does not mean “identical”. It means “similar”Sell property firstIdentify up to 3 properties to purchase within 45 daysClose on any of the 3 within 180 days (both from the date of escrow)Can be multiple propertiesWhat happens if that doesn’t work? – reverse like kind exchange
72Nonstatutory Stock Options (NSO) NSOs do not meet specific IRC requirements for special tax treatment.Who is entitled? Employees and Independent ContractorsDifficult to value because of future market valuationsRestricted Stock Options – Section 83(b) Election
74Rattiner’s Tax Planning Tips A transfer of property between spouses pursuant to a divorce does not create a taxable event for either spouse.The recipient spouse keeps the same tax basis for property transferred from the transferor spouse.Filing status is determined as of the last day of the calendar year (December 31st)Filing married filing separate keeps the liability issue separate between the spouses.Head of household should be used as a filing status for a divorced spouse who maintains a household for dependent children.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.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.You don’t 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.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.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.
75Chapter 7: Retirement Plans: (Rules, Types and Valuation) The secret to successful investing for retirement is to keep your first spouse!!!
76Chapter 7: RETIREMENT PLANS 8 Critical Elements To Think AboutWhat the employee spouse is entitled to due to vesting schedules and other issuesType of retirement plans to divideQDROsValuation of retirement benefitsHow much of the valuation are you entitled to receive?Whether to accept the retirement benefits or an equivalent amount of other assetsProtection of your retirement benefits if your spouse remarries or diesDiscovery of overlooked or hidden assets
77Vesting Rules Qualified Plans Defined Benefit: 5 year cliff 3-7 year gradedDefined Contribution Plans3 year cliff2-6 year gradedPersonal Retirement and Nonqualified PlansImmediate vesting
82Qualified Domestic Relations Orders (QDROs) Method of dividing up retirement assets
83Inquiries to the Plan Administrator Participant's account or benefit statements from the date of the marriageSummary plan descriptionCurrent QDRO proceduresDistribution policy and forms
84Valuation of Retirement Plans Defined Benefit Plans – employer master planMethods for Dividing a PensionBuyout method (immediate offset method with other assets)Wait and see method – split at date of retirementReserved 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 can’t be determined until later on)
85Valuation of Retirement Plans Defined Contribution PlansPersonal Retirement PlansParticipant knows the value in each of these accounts
86Using Retirement Assets to Balance Out Equity Very effective tool
88Rattiner’s Retirement Plan Mistakes Checklist Has the attorney identified all past and present retirement plans? Yes NoDoes the attorney understand the differences among all the types ofretirement plans that you or your ex possesses (i.e. qualified vs. personalvs. nonqualified plans and/or corporate vs. government plans)? Yes NoWas a QDRO obtained during the divorce process and not afterwards? Yes NoHas your attorney stepped up to the plate and either prepared the QDROor is on top of someone else preparing the QDRO? Yes NoHas an outside party been hired to help value the retirement accounts? Yes NoDoes the value of the retirement plans ask for accrued benefits as opposedto vested benefits? Yes NoDoes the value of the retirement plans include all the activity within theretirement account, such as gains and losses, interest and dividendsreceived? Yes NoHas the attorney noted what will happen if the parties die during theprocess? Yes NoHas the attorney acknowledged and completed the issues necessary forcontinuation of medical care coverage for the non-participant spouse? Yes NoDid you walk away from the divorce comfortable with the approach used bythe attorney and others as to the way the calculations were made in thedivision of retirement plan assets? Yes No
89Valuation of Retirement Plan Assets Date Full Benefits Begin Name of AssetCurrent ValueRate of Return (%)Date Full Benefits BeginDefined Benefit Plans:Company Ret Plan-YoursCompany Ret Plan-Ex:Defined Contribution Plans:Personal Retirement Plans:IRA #1 - YoursIRA #2 - YoursIRA #1 – Ex:IRA #2 – Ex:SEP – YoursSEP – Ex:SIMPLE-YoursSIMPLE – Ex:Nonqualified Plans:Yours:Ex:Other:Yours
90Chapter 8: Valuation Issues: (Property Division and Business Concerns) I was married by a judge. I should have asked for a jury. -- George Burns
91Chapter 8: VALUATION ISSUES Valuation issues are always tricky and seldom accurate!And they certainly don’t measure what will happen in the future (i.e. the economy or your profession) when you are valuing assets to pay for future debt!
93Common LawEquitable distribution41 states plus Alaska
94Community Property Equal Distribution 9 states plus Alaska TWIN CLAN W TexasWisconsinIdahoNevadaCaliforniaLouisianaArizonaNew MexicoWashington State
95Closely Held Business Valuation To consider if the business is marital property, you’ll 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?
96Business Valuation Documents Needed Last five years of individual tax returns and documents (Form 1040)Last five years of business tax returns and documents [Form 1120S (S Corporations); 1120 (C Corporations); 1065 (partnerships, limited liability companies, limited liability partnerships)]K-1s for 1065 or 1120SIncome (Profit and Loss) statementBalance sheetListing of shareholders or partners who own a piece of the companyCapital accounts of the partners if the business is a partnershipRetained earnings statementList of cash accounts and any investmentsList of aged accounts receivable (money due the business)List of aged accounts payable (money the business owes others)Business plan and projectionsKey officers compensationKey officers life insuranceList of existing contractsList of partnership agreements in affect
97Valuation Report The business valuation report should include Full description of the businessMethod of valuationName and qualifications of the evaluatorNames of relevant documents that were reviewedFull explanation for the rationale for the evaluationDate the business was valuedReason for the valuationRelevant industry standards
98Professional Practices - States that consider professional practices part of the marital estate at this time include:ArizonaCaliforniaColoradoConnecticutIndianaKentuckyMarylandMichiganMontanaNevadaNew JerseyNew MexicoNew YorkNorth CarolinaOhioOregonVirginiaWashington
99Key Stock Option Questions Is the stock option part of marital property? In other words, was it earned and received during the marriage?How is the option valued?When is the option valued?What are the tax consequences when the option is exercised?
100Chapter 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.
101Chapter 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.
102The New and Improved Game of Life Start with a budgetSave 10% of your gross incomeEstablish an emergency fund of 3-6 months of gross living expensesPurchase essential insurancesRevise your legal documentsAll of this can be accomplished through a financial plan
103Planning for Life’s Uncertainties Job change/unemployedRevise your cash flowRemarriageProtecting the kids from a prior marriage – QTIP planWithdrawing money from your retirement accounts. Develop a retirement needs analysisOwnership designations on invested assets and disposition of closely held business interestsChanged tax filing statusConstant monitoring of life events
104GOING THROUGH THE PERSONAL FINANCIAL PLANNING PROCESS Gather all Necessary DataObjectives need to be setProcess all the information into meaningful financial statementsDevelop recommendationsImplement those recommendationsMonitor your situation annually
105LIFE CYCLE ANALYSISBased 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.
106Ages ; and 30-39:Have an emergency fund equal to six months of gross living expensesMake 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.
107Ages 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.
108Ages 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.
109Ages 60-64 Discuss early retirement offers with a financial planner Collect the documents necessary to process social security benefitsDetermine 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 incomeDetermine the status and duration of ongoing loans and mortgage commitments.Determine which activities will keep you active during retirement.Consider different retirement locationsInquire about possible retirement entitlements from previous employersConsider long-term care insurance
110Ages 65+ Live and enjoy life! Take care of your health Be active, if health permits
1111. Cash Flow Management: It All Begins Here Tips Improving Your Cash Flow forOrganize Yourself Better.Dedication.Leave home with Less Cash.Kill the credit cards.Give yourself and family members weekly spending money – an allowanceSet “Saving” as a priority expense.Refinance your debt during times of lower interest rates.Give yourself “Incentives” for a job well done.
1122. Budgeting: Be SmartWhen establishing your budget, keep the following purposes in mind:Set a forecasted amount for each revenue and expense itemIdentify variances between actual and budgeted numbersDefine possible problems in spending patternsIdentify opportunities to overcome these problems, andHelp you realistically plan to improve your spending patterns
113Consider 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.
1143. Debt Management: A Difficult Task Don’t overextend!
115Rules 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 borrower’s 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 creditmonthly mortgage payments on non-income producing property)monthly alimony, child support, or maintenance payments
116Debt Management Tips Don’t go crazy. Shop Around. Review credit card bills. It happens. Credit card companies do make errors.
1174. Insurance Planning Essentials: Protecting Your Financial Assets Rattiner’s Rule: If you can’t afford to replace the loss or if it would kill you to write the check to replace the loss, then you need insurance!
118Types of Insurance Types of Insurance Life Insurance Disability InsuranceHealth InsuranceHomeowners InsuranceAutomobile InsuranceUmbrella (Liability) InsuranceLong Term Care Insurance
119Life InsuranceRule of Thumb – Needs analysis should equate to roughly 7 times gross salary
120Disability Insurance You have no one else to depend on. 60% of gross salary
125Long Term Care Insurance Ask your kids if they are up to the challenge!
1265. Investment Planning – Investing for a Secure Financial Future The Uncomfortable Realities About Saving and Investing.Know why you are investingInvest for growthDiversify across investmentsDiversify within investments.Take control over your investments
128Asset Allocation: Brinson Hood Beebower Study 94% of the volatility of the portfolio return is due to the asset class selected4% is due to security selection2% is due to market timing
129Investment Types Cash/Cash Equivalents Fixed Income Equities Hard Assets: Real Estate, Gold, Precious MetalsCollectibles
130Tips For Investing In Bonds Seek expertise when necessaryKeep an eye on price volatilityLadder maturitiesCompare interest ratesDon’t chase yieldDiversifyKeep maturities relatively shortUse mutual funds for investing in unusual bondsConsider the tax effects
131Types of Stocks Blue Chip Income vs. Growth Cyclical Interest SensitiveDefensive
132Tips for Investing in Stocks Never buy stocks indiscriminatelySelect a promising industryDiversifyBuy low and sell highStay abreast of market trendsUse stop-loss orders to protect against lossBuy valueBuy low P/E high dividend stocksBuy stocks in companies with strong dividend payment recordsFinally, rely on your own experience and judgment.
133Hard Assets: Real Estate, Gold, Precious Metals An inflation hedge
134Real Estate: Direct vs. Indirect Ownership Don’t overload here
1366. Retirement Planning: How Long Will Your Money Last Running Out of Money is Your Biggest ChallengeRetirement Needs Analysis – The 3 Step ProcessStep 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?
137Common Retirement Planning Mistakes Not taking advantage of contributing towards your retirement plan, such as a 401(k) or 403(b) planNeglecting to prepare retirement income and expense projections during your working yearsExpecting social security to cover all your needs at retirementAccepting an early retirement offer from your employer without thinking it throughFailing to take out required Minimum Distributions (RMDs) after age 70 ½
1387. Estate Planning Common Issues to Think About Minimizing the problems and expenses of probate and avoiding family conflictProviding your new spouse with too much responsibility and flexibilityProviding for the conservation of your estate and its effective management afterwardsMinimizing taxes at the time of deathAvoiding leaving the children too much too soonProvide for adequate liquidity to cover taxes and other expenses without a forced sale of assetsProviding for estate management in the event of incapacityOrganizing all your important papers affecting your estate plan – the death folder
139How Much Will You Leave Behind for Your Heirs? The concept of “zeroing out”
140Letter of Instructions Plans out exactly what should be done
141Qualified Terminal Interest Property (QTIP) Trusts Protects the kids from a prior marriage
142FINANCIAL PLANNING SUMMARY WORKSHEETS Debt Solvency Worksheet – 10 Basic QuestionsTake this quick 10 question survey to help you manage your debt.Is more than 20 percent of your take-home salary usedfor credit card payments? Yes No2. Are you charging more each month than you are paying off? Yes NoHave you received calls from credit card companies becauseof paying bills late? Yes No4. Do you charge things impulsively? Yes No5. Are you approaching the limit on your charge cards? Yes NoDo you find yourself paying only the minimum payments onyour charge cards? Yes NoHave you defaulted on a mortgage or rent payment morethan once? Yes No8. Are you uncertain about how much money you owe? Yes NoAre you using the cash advance on one credit card to payoff another card? Yes No10. Is the balance in your savings account shrinking? Yes No
143INSURANCE POINTERS When reviewing your client’s life insurance policy: a) separate long-term needs from short-term needsb) recalculate needs regularlyc) review ratings of existing carriersd) review reasons why current insurance was purchasede) determine how original needs have changed and identify new needsf) review beneficiary designationsg) review policy riders and optionsh) review each policy’s featuresi) compare client’s current health if debating whether to switch policiesj) if it’s a term policy, evaluate conversion and renewability features and feasibilityk) if it’s a permanent cash value policy, evaluate the true cost of insurance with the value receivedl) determine it makes sense to gift one of the client’s life insurance policiesm) determine whether it makes sense to name a charity as a revocable or irrevocable beneficiary and establish a wealth replacement trustn) determine whether it makes sense to establish a charitable trust to own the life insurance on the cliento) evaluate the effect of current life insurance ownership on its value in the estatep) determine if any incidents of ownership exist for insurance that is intended to be outside the estateq) determine if beneficiary designations of any policies owned outside the estate will cause inclusion within the estate
1442. When reviewing your client’s 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 neededc) Determine whether sufficient coverage exists under the client’s 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 renewablef) Determine whether a provision for residual and partial disability existsg) Determine whether a guaranteed insurability rider or COLA rider have been addedh) Determine whether the elimination period is appropriate
1453. 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 client’s 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.
1464. 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 existsh) Determine whether your client understand the limitations on high value itemsi) Determine whether your client has floaters for all high value personal propertyj) Determine whether an HO 15 rider exists.k) Determine if disaster coverage is necessary and appropriate.
1475. When reviewing your client’s liability coverage: a) Determine whether current policies include adequate coverage for the clientb) Determine whether current coverage is enough to qualify the client to obtain an umbrella policy.c) With the client’s current circumstances, determine whether the client’s 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
1486. When reviewing your client’s auto policy: a) Consider whether state-mandated levels aremet 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 vehiclesd) Determine whether all owned vehicles are included on the policy
1497. When reviewing business insurance: a) determine whether coverage isappropriate.b) determine whether insurance agents have been performing an adequate job of discovering all of the pertinent exposures
150Investment Pointers Summarize all of your investments Determine how your investment are allocated, in total, amount the three investment categories: stock, fixed income and cash.Factor in your objectives when designing the right allocation of your investmentsPut “savings” first. Save on a regular basis.Constantly monitor your portfolio. Don’t be rash in making changes.Substance over form. Make sure the investment merits outweigh everything else.Taxes should be a secondary reason to invest.Don’t time the market, Long term buy and hold will usually work best.Use mutual funds as your primary investment vehicle.Don’t chase returns. Keep with your long term strategy and don’t deviate from your long-term objectives.
151Retirement Pointers1. If the client’s 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, ord) retire in a more modest lifestyle.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 client’s 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 client’s goals.6. Keep retirement planning in view as short-term decisions are being made regarding the use of income and assets.7. Review the client’s retirement projections periodically; revise the analysis periodically, and in the event of material changes in the client’s 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 client’s investment return; compare to assumptions that were used to build the retirement fund. If the client’s investments are not realizing the expected return, the client may need to shift the investment allocation or modify the retirement lifestyle.11. Monitor the client’s expenses compared to projections; modifications in lifestyle may be necessary.
152Estate 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. Don’t 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.
153Guidelines for Preparing a Will 10 Item will preparation Checklist The following items should be included in a will:Statement that the document is a will.Statement revoking all previous wills.Your full name and location of principal residence.Specific transfers of property to the named beneficiaries.Instructions for dividing the balance of the property.Identify trusts, including the names of selected trustees and successor trustees.Names of guardians and alternate guardians for minor children or special needs relatives.Designation of what monies are to be used to pay death taxes.Names of the executor and back-up executor.Signature and date. The will should be signed in the presence of all of the witnesses.
154Chapter 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.
155Chapter 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+…?
156Financial Planning Responsibilities That Need to Be Followed Up 1. Read the Divorce Decree Hopefully One Last Time2. Obtain Certified Copies of the Divorce3. Make New Deeds for Real Estate4. Transfer Car Title5. Update Insurance Coverage and Beneficiary Information
157Financial Planning Responsibilities That Need to Be Followed Up 6. Update Your Retirement Plan Beneficiary Designations7. Update Your Retirement Plan Accounts8. Update Your Estate Planning Documents, including Wills, Trusts and Powers of Attorney9. Confirm that All Bank Accounts, Brokerage Accounts, and Stock Certificates are Separated into Your Own Name10. Confirm that All Credit Cards, Other Obligations, and Possessions are Separated by Having Your Ex Removed from the Accounts11. Keep Meticulous Records12. Remove Personal Assets13. Name, Address and Work Related Changes
158Other Critical Issues That Need Your Follow-up 14. Your Children15. Moving Away16. Modifying Child Support17. Your Kids and Post Divorce Syndrome18. Modifying Spousal Support19. Dating Again: Having Your Kids Cope20. Cohabitation Agreements21. Prenuptial Agreement22. Getting Married Yet Again (Remarriage)23. Mix and Match with the New Extended Family: Your version of The Brady Bunch24. Support Groups and Persons25. The Bottom Line: Take Care of Yourself
159Rattiner’s Planning Tips When it’s 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.Chapter two of your life states that you’ve been through the worst already and now it’s your time to take care of yourself going forward. Remember, if you don’t no one else will, and there’s a lot of people counting on you.Read the divorce decree carefully. If you don’t agree with the conclusions, you need to correct it ASAP. Once the ink dries, it’s too late.Obtain certified copies of the divorce decree because there are many documents and many instances where it is a necessity. Most entities you’ll need to deal with won’t accept unofficial legal copies.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.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.Update all your insurance policy beneficiary designations. Remember, insurance passes by contract of law and that will always supersede a will. If you don’t change them, then the person you want to get the benefits may not be legally entitled to them.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.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 don’t forget any during the process.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 don’t need to complete QDROs.
16011. 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 can’t 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 circumstance13. Make sure your ex is off any joint credit cards. Debts that he or she rings up could be your responsibility if you don’t 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. It’s 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 doesn’t work, go to mediation or back to court only as a last resort.
16120. Your children may never ultimately accept the divorce 20. 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. Don’t 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 side’s 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 can’t walk away from this grueling process happy, healthy and focused.
162Chapter 11: Planning for Same Sex Couple Divorces Love may be blind, but marriage is a real eye-opener!
163Chapter 11: Planning for Same Sex Couple Divorce Issues Specific for Same Sex CouplesDomestic partnership agreement/cohabitation agreementLast Will and testamentIncome Tax IssuesEstate Planning Issues
164The Personal Financial Planning Process Step 1:First obtain copies of all of your and your partner’s 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.
165Step 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-partner’s 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.
166Step 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.
167Rattiner’s 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. It’s 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.
168Parting 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 ChurchillMen 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!
169The 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.