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Steer Clear of Financial Advice from Friends and Family During Your Divorce
Imagine you are enjoying a wonderful evening at a five-star restaurant. You’d like to order a bottle of wine, but you’re not sure which one would best accompany your meal. Would you ask the bus boy or valet for their recommendation? Of course not! If you’re ordering wine at a five-star restaurant, you want the advice of the wine expert on staff. Naturally, you would turn to the sommelier.
The same logic applies to other aspects of daily life. If you have a problem with your car, you take it to a trusted mechanic. If you have a concern about your heart health, you consult a cardiologist, etc.
So, to whom should a woman turn when she has concerns about the financial aspects of her divorce?
The answer is simple: She should consult only with a professional divorce financial expert – someone who is specially trained to handle the multifaceted financial aspects of today’s complex divorce settlement agreements.
Unfortunately, that’s often easier said than done.
Why? Because when it comes to divorce, there’s no shortage of friends and family who are willing to lend their advice.
In fact, as I see it, divorcing women need to learn to make an important distinction. They need to learn: 1) where to get financial advice, and then, just as importantly, 2) where NOT to get financial advice. Quite frankly, the opinions and recommendations of friends and family can often be more detrimental than helpful. They all mean well, of course. But, this is definitely one of those instances where a little knowledge can be a dangerous thing.
To illustrate my point, here is my short list of people you should “tune out” if they start volunteering financial advice during your divorce:
1. Friends, family, or anyone who claims to have “been there” (or knows someone who has)
Lots of people have a divorce story to tell, and usually, they’re quite eager to share it. In reality, though, no two divorces are alike. Even relatively fundamental things like differences in geography can have a profound impact. Just because a friend of a friend who lives in Silicon Valley received a settlement that included half of her husband’s tech company doesn’t mean you will get the same deal in your east coast divorce. (See my earlier post for more details about the differences between Community Property and Equitable Distribution States.)
Likewise, even though your cousin kept her marital home , that doesn’t mean you should. And, discussion about your stock portfolio can lead to a veritable minefield of misinformation, as well. Uncle Joe, who helped you get on the right track with investing as a twenty-something, just isn’t the right person to help you understand how dividing your current portfolio will impact your long-term financial well-being.
As I mentioned earlier, all of these people are well-intentioned, and there’s no doubt that they can provide support for you in other ways during your divorce. But, when it comes to advice about your finances, please learn to say, “Thanks –but, no thanks.”
2. A financial professional who doesn’t specialize in divorce
A CPA can file your taxes or give you a snapshot of your current and past financial status. A typical financial adviser is hired to help you invest in stocks, bonds and mutual funds. But should you rely on financial professionals like these during your divorce? No, you shouldn’t.
Instead, you need someone with a skill set specific to divorce finances. A Certified Divorce Financial Analyst (CDFA) specializes in divorce finance and will carefully weigh each settlement proposal presented and project how it will affect your short- and long-term finances while calculating the tax implications for each scenario.
Keep this in mind: The US is home to more than 1 million accountants and some 320,000 financial advisors. But there are only about 3,500 CDFAs who are specifically trained in the financial aspects of divorce.
What’s more, many CDFAs have completed additional education and training. For example, in addition to being a CDFA, I have attended law school and have also completed dozens of advanced training courses in finance and divorce, including many of the same continuing education courses that are required for divorce and other attorneys (trust and estate, asset protection, etc.).
3. An attorney
Finding a firm that specializes in divorce/family law and dedicates at least 75 percent of its practice to divorce is a MUST.
But, these days, there are numerous critical financial tasks that are beyond the scope of even the finest divorce attorney’s expertise. For example, preparing financial affidavits and projecting the financial and tax implications of each divorce settlement option are now the purview of CDFAs.
Put another way, think of the CDFA as the financial leader of your divorce team. A CDFA is responsible for creating comprehensive financial analyses and projections so you and your divorce attorney can fully understand the short- and long-term financial and tax implications of each proposed divorce settlement offer. Then, your attorney can use that information to substantiate and justify his/her positions when negotiating with your husband’s attorney.
Without a doubt, if you’re going through a divorce, you’re going to get advice –whether you asked for it or not. The trick is to know which advice to heed and which advice to ignore. Get the specialized help you need by hiring a CDFA. They’re the professionals that can evaluate your financial circumstances before, during and after a divorce, while helping you plan for a secure financial future.
All content on this site/blog is for informational purposes only, and does not constitute legal advice. If you require legal advice, retain a lawyer licensed in your jurisdiction. The opinions expressed are solely those of the author, who is not an attorney.
How To Start Preparing Your Personal Finances for Divorce
“A journey of a thousand miles begins with a single step.”
When the Chinese philosopher Lao-tzu said that nearly 3,000 years ago, he certainly wasn’t talking specifically about divorce – and yet, his words of wisdom do apply.
Divorce is a journey, of sorts. And, even though the mere thought of divorcing your husband may seem completely overwhelming at first, you do have to engage in the process. You have to take the initiative. You have to begin with that all-important first step.
As a Divorce Financial Strategist(TM), my advice is that you start this “journey” by getting a handle on your personal finances. With just a few relatively simple steps, you can be on your way to establishing a firm financial foundation, one that will serve you well as you proceed through the divorce and long into the future, too.
For example, in order to start preparing your personal finances for divorce you need to:
1. Take inventory of all financial documents and records. Gather all your financial records, including bank account information, mortgage statements, credit card bills, wills, trusts, etc. (See more details in our Divorce Financial Checklist.) Once you have collected them, don’t keep these records in your home. Make copies, and take them to a trusted friend/family member, or use a safe deposit box that your husband can’t access.
2. Begin securing funds for legal and other professional fees. You’ll need resources to hire a qualified divorce team. If your husband controls all access to the family funds, he can make this difficult (if not impossible). Choking off the money supply is a common tactic, but there’s no reason you have to fall victim to this kind of financial squeeze. Be proactive instead. Make sure you have funds that are secure and available only to you.
3. Open new accounts in your name. Your divorce attorney may instruct you to withdraw up to half of your joint funds and deposit them in new accounts. (State laws will dictate what you can and cannot do.) Don’t use the bank where you have your joint accounts. Go to a different bank, and open a new checking and savings account in your name. Moving forward as a single woman will require that you establish good credit, so open a new credit card account in your name, as well. Keep in mind, though, that new federal regulations are making it harder than ever for women with little or no income to establish credit on their own. You’ll have to proceed with caution . . . just make sure you do proceed.
4. Get a copy of your credit report. While gathering your financial records (Step 1), be sure to get a copy of your credit report, too. Monitor it so you can keep tabs on your credit score. (See my post, How To Protect Your Credit Score During Your Divorce, for more tips.) Plus, if you keep a watchful eye on your credit report, you’ll also be the first to know of any unusual activity. Is your husband charging gifts for his girlfriend on your joint credit cards? Or is he dissipating marital assets in some other way?
5. Open a post office box. You need your mail delivered to a secure, locked box that only you can access. Make sure you use this address to receive correspondence from your divorce team, your new accounts, etc.
6. Change your will, medical directives/living will, etc. Most states won’ t allow you to completely disinherit your husband until after the divorce is final. But, you can take steps to prevent him from making medical decisions on your behalf or inheriting all of your assets should you die before the divorce settlement agreement is signed. Remember, you’ll also want to change beneficiaries on life insurance policies, IRAs, etc.
Once you have completed these initial steps, you will be on your way towards a new and secure financial future. Take it step by step, and you’ll start feeling less overwhelmed, more knowledgeable and better equipped to continue on your journey to a single life.
All content on this site/blog is for informational purposes only, and does not constitute legal advice. If you require legal advice, retain a lawyer licensed in your jurisdiction. The opinions expressed are solely those of the author, who is not an attorney.
How to Determine Alimony (also known as Maintenance in some states)
Professional business women who are the primary bread-winners in the home often wonder if they will need to pay alimony to their husband and if so, how much they will be required to pay.
That is a tough question because the laws vary greatly from state to state. In some states, there are very explicit guidelines that judges must use to determine the amount and duration of alimony. In others, they simply list “factors” that a judge should take into consideration when determining alimony. Also, be aware that some states will consider the fault of the party when determining alimony. For example, if the couple is divorcing because one of them has committed adultery, the court may consider that when determining whether alimony should be paid. That is one very good reason that you need to speak to a good divorce attorney if you plan to have sexual relations with someone other than your spouse before your divorce is finalized (this can possibly affect both alimony and child custody).
Here are some of the factors a judge might use to decide whether your spouse is eligible for alimony:
1. The standard of living established during the marriage (One of the primary purposes of alimony is to help the receiving spouse maintain a lifestyle after their divorce that is relatively comparable to their lifestyle before their divorce.)
2. Property awarded to each spouse (Alimony is usually determined after the property division has been decided.)
3. The duration of the marriage
4. The income and property of each spouse
5. The ability of the person to become self-supporting
6. Present and future earning potential of both spouses
7. Whether there are children living in the home
8. If there was lost or reduced earning capacity of the person who is asking for alimony/maintenance that resulted from delaying his or her career during the marriage
9. Tax consequences
10. Contributions and services of the spouse who is asking for alimony or maintenance
11. Whether either spouse has wasted marital assets
12. Actions taken by a spouse in contemplation of the divorce
13. Any other factor the Court determines is relevant
There is also something called Rehabilitative Alimony, which is often awarded in short-term marriages.
This type of alimony is usually awarded for only a few years and its purpose is to allow the receiving spouse to go back to school or to get job training so that they will quickly be able to support themselves financially.
It is really not possible to know whether you will be required to pay alimony until you consult with an experienced family law attorney and a qualified divorce financial analyst. If you are contemplating divorce, please call us at 917-602-6977 for a free, 20-minute, no-obligation consultation with one of our Divorce Financial Strategists™.
All content on this site/blog is for informational purposes only, and does not constitute legal advice. If you require legal advice, retain a lawyer licensed in your jurisdiction. The opinions expressed are solely those of the author, who is not an attorney.
Why Women Business Owners Should Consider Divorce-Proofing
Picture this scenario…
Mary and John have been married for many years. Mary stayed home and raised three children and helped John build his career. Mary went back to school without any financial help from John and then became a lawyer and built a successful law practice. John fell hard for his secretary and filed for divorce. John sued for half of the value of her law practice – and got it.
Oddly enough, the system of equitable distribution came about largely to protect women. Several years ago many states adopted this model to protect the dependent homemaker who raised children and helped her husband build his career only to find herself with little or nothing when the marriage ended. The idea was to make sure that the woman had an equitable share of the family’s assets even though her contribution was not financial.
The very rules meant to protect women are now working against them. This is why all women business owners should consider divorce-proofing their business or professional practice, even if they don’t anticipate a divorce.
Here at Bedrock Divorce Advisors, we have developed an easy two-step process. First, one of our Divorce Financial Strategists™ (a Certified Divorce Financial Analyst [CDFA™] with advanced training in asset protection and divorce financial planning strategies) will analyze potential risks you and your business might face in the event of a future divorce. Second, the Divorce Financial Strategist™ will recommend immediate steps you should take to guard against those risks. This two-step process will put you in the strongest possible financial position to deal with and recover from any possible future divorce.
While some may wonder why they need divorce-proofing if they are still single or happily married, we know from experience that divorce-proofing should be part of every woman business owner’s normal financial planning and risk management, regardless of her current marital status.
To find out how divorce-proofing can help you and your company, please call (917) 602-6977 or email us at info@bedrockdivorce.com to schedule a free, no-obligation 20 minute phone consultation.
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