The relationship between certified divorce financial analysts and family law attorneys can be complicated. Each are trained to reach the best possible outcome for their clients and both are regarded as experts in their fields. Despite the appearance of competition, we believe cooperation between attorneys and CDFAs can best serve divorcing spouses.
Attorneys who handle a large number of divorces are not in the business of ensuring that every financial stone has been turned over. Once the divorce is finalized it is up to the parties to make sure the division of assets and any payments agreed upon are made. If a divorce attorney with a hefty caseload sees the value in a certified divorce financial analyst, it is usually only as a post settlement referral.
Attorneys must recognize that their clients assume they are financial experts in addition to being experts in negotiation and divorce law. An attorney must decide if they can be all things to all people. It’s a struggle between being a subject matter expert or wearing many hats. Your clients want to know that you can handle their complicated financial situation but also want to know you can also deftly handle child custody, maintenance and property division too. Lawyers have proven themselves in the study of law, a discipline of staggering breadth and can benefit from bringing in a CDFA with the financial expertise they didn't gain in law school. The client benefits and the attorney has more time to spend on the legal ramifications of divorce without being sidelined with burdensome research.
Many attorneys and CDFAs believe that since they are working with the same clientele, there must be competition and it’s an all or nothing proposition. Either the client works with a divorce attorney OR chooses mediation and works with a CDFA, or other advisor. We believe the choices are not mutually exclusive - but complementary.
Money stresses are often a major contributor to divorce and the financial implications post divorce are best understood and explained by a CDFA with rigorous financial training. If necessary, a CDFA can testify to matters in court as a neutral expert, or may work on behalf of both parties or for one spouse. Contrast this with a paralegal who works at the direction of the lawyer. Your clients will appreciate that you understand the consequences of financial projections and trust your expert opinion to bring in a professional.
While CPAs do an excellent job of estimating tax ramifications today, they are not accustomed to making future projections – like where their clients will live post-divorce or what future housing will cost. CDFAs look at the lost income effects, investment vehicles, and events that trigger taxes as well as the percentage of assets that clients plan to use for living expenses that triggers a taxable event. CDFAs, unlike CPAs, are client facing and expected to be able to distill financial speak into digestible pieces.
Having a working relationship with a CDFA frees up attorneys to focus their time on the legal issues of their divorce cases without learning or relearning financial issues regarding divorce, ie tax implications, cash-flow, etc. Additionally, CDFAs can prevent their clients from signing a marital settlement agreement that might hurt them in the future.
If an attorney makes a financial mistake, they could face a claim of malpractice. Ensure against this by hiring a CDFA since they are certified in all the financial nuances of divorce, including taxation and pension valuation. By working together as a team, the lawyers are able to shift some of their malpractice liability to the CDFA who must maintain professional liability insurance coverage.
The Divorce Resource Centre of Colorado is led by Deb Johnson, a Certified Divorce Financial Analyst and Suzanne Chamber- Yates, a certified divorce coach and Collaborative Divorce Facilitator. Both are professional mediators who have worked with many attorneys in the Denver Metro area.
If you are interested in continuing the conversation of how a CDFA can assist your legal practice, let's schedule a time to talk. You can reach us directly at deb@drcofcolorado.com and schambersyates@drcofcolorado.com
Selling a home while going through a divorce is unique and not every realtor has specialized knowledge. That's why you may want to hire a realtor who is credentialed in this area. Consider all of the factors that could contribute to financial disaster. First, the marital home is usually the couple’s largest asset. Second, many couples, even if they are not divorcing because of money, are not immune from a financial battle over what will happen to the home. Third, selling a home is already an emotional process and in the case of divorcing spouses, compounded by the emotional and physical separation of divorce. Finally, divorce has an effect on the open communication a realtor needs to facilitate a sale that benefits both parties.
Thankfully, there are certifications you can look for when selecting a relator. One of the most highly respected is CDRE or Certified Divorce Real Estate Agent, bestowed upon agents who complete the Ilumni Institute’s rigorous 5 day certification program. A second certification, offered by Carol Wilson is a Certified Real Estate Divorce Specialist designation. A Realtor uses CREDS or REDS after their name to signify they have completed this coursework.
Questions to Ask a Realtor who Specializes in Divorce
No matter what designation your realtor has, you should ask each agent specific questions about their references, number of homes sold, and experience selling homes during divorce proceedings.
It’s also a good idea to ask hypothetical questions about potential conflicts that might arise and ask how they would handle the situation. For example, what if your soon to be ex spouse wants to spend money to make improvements before the sale but you prefer to sell the home as is? Ask the realtor how he/she would handle this dilemma and evaluate whether they could help come to a solution that both of you can live with.
Realtors who specialize in divorce understand can explain legal jargon and tax issues. CREDS, REDS, or CDRE designated agents are trained in the legal and tax aspects of the divorce process as it relates to real estate. They learn obscure legal rulings, regulations and tax implications. This specific training allows them to help their divorcing clients take advantage of tax laws that are specific to selling a house in the divorce.
A successful home sale during divorce requires more than proficiency in legal and tax implications. After all, the sale is just as much emotional as it is strategic. This is where an agent’s soft skills are tested. If possible, schedule an in person meeting to assess the realtor’s communication skills. E-mails and phone calls only reveal snippets of how the realtor will be able to address your unique situation.
Look for an agent who is fair, level-headed, listens and is good at negotiation. While you could read reviews, any realtor who is worth talking to should be willing to share references from other divorcing couples who they have helped.
Even if your income was relatively consistent before the divorce, there is a good chance that the divorce is going to have financial repercussions.
Post divorce you may need to pay attorney or mediation fees, child support, spousal support, divide up savings and investments, etc. It is possible that you will end up with considerably less money after the divorce or more financial obligations – like taking care of children on your own. A realtor who specializes in divorce is aware of these possibilities and will help you determine what you can afford and if the mortgage payment would be sustainable.
To recap, the sale of your marital home warrants due diligence. Divorcing couples should take the time to interview and select a credentialed agent who is experienced, well regarded, and has the soft skills necessary to negotiate the sale. Despite the need to “wash your hands” of the home, the sale should not be rushed without considering these factors. A realtor who is CREDS or CDRE certified is in the best position to understand your emotional and financial needs.
A few common objections to seeking out a therapist include,
Let’s face it. Many of us are not self-aware and often our friends and family don’t want to, for good reason, involve themselves in our lives, Not that you were soliciting their advice anyways, but even if you were, how candid or helpful do you think they will be? They may be struggling with problems that you’re unaware of and unable to offer support even if they wanted to.
So you’re the do-it-yourself kind of person and you’ve never met a problem that you didn’t tackle yourself? The human brain is a complicated beast and your happiness is not a weekend warrior kind of project. How well can we really understand everything going on in our brains, especially when we are stressed with a divorce?
Want proof that we’re not as self-aware as we think we are? As stated by Dr. Tasha Eurich in this article, 95 percent of people believe they are self-aware. In reality, only 10 percent to 15 percent actually merit the “self-aware” badge.
Furthermore, how long have you been trying to heal yourself? Are you giving yourself enough time and grace? What steps are you taking to get to a better mental space?
Talking about your thoughts and feelings with a supportive, trained professional has been shown to aid in healing. Having someone who listens and can help you understand why you’re making the choices you’re making and how to adopt new ways of reacting can be instrumental to get you from intention to fruition.
Therapy is not reserved just for those with diagnosed mental conditions. Comparing what is going on in your life with anyone else is an exercise in futility. If something is impeding your ability to live a happy fulfilling life, then it needs to be addressed. We rely on doctors to help us with our physical health so why would we think we can go it alone when it comes to our mental health?
This could stem from a bad experience with therapy, or a loss of trust if you’ve confided in a friend or family member. There is likely shame from a failed marriage and people’s typical response to a divorce announcement reinforces that it is something to feel bad about. Consider, the oft used, “I’m so sorry” or “That must be very difficult” when in reality, continuing in your marriage would have led to an even worse outcome that the filing of divorce.
Even though divorce is common, society has not fully embraced that it is not always an acrimonious battle. Consider how common it is when someone announces that they’re looking to file for divorce and someone responds, “You’ll need a lawyer. I know a great divorce attorney” or the person, similar to their approach with therapy, “I just need to figure some stuff out online or with a book. I can do a DIY divorce.” Of course there are instances where you should hire a divorce attorney or the division of assets is so simple a DIY divorce works, but there are also instances where mediation and therapy would be most beneficial.
The Divorce Resource Centre of Colorado has established relationships with therapists and can make a recommendation for one that may best fit your individual needs. We understand a holistic approach to divorce is one way to “change the way society divorces, one couple at a time.”
When faced with a divorce we look for answers in self help books, friends, family, exercise, mediation, and therapy. Any or all of these methods can be useful but what if you hire a life coach? Is there something stopping you from seeking the help of a life coach after your divorce?
Perhaps it is unclear what a life coach does. Besides that, do you specifically need one? Lastly, maybe you think it’s indulgent to hire a life coach. Let’s address each of these reasons in order.
A life coach is someone with experience who brings enthusiastic support, an objective perspective and insight to help you identify what is holding you back from living your best life. A coach helps you grow by examining your current situation, identifying limiting beliefs and potential challenges and devises a custom plan of action designed to get you where you want to be. Life coaches are not meant to help you overcome mental health challenges as they are not trained therapists. Instead a life coach can help you map out the steps you need to complete to take better control of your life. They are sometimes called mentors or in the case of December’s featured Power Partner, a “life choreographer”
Beyond the available methods listed to help people navigate their divorce and post divorce life, are you a good candidate for a life coach? Sure they can help people, but are you THAT person?
Here are a few signs that a life coach may be able to help you:
1. You are not sure where to begin to get your life back on track.
A life coach can help you get to the starting point where you can begin to map out the steps you need to take.
2. You have a vision of what you would like your life to look like but you are unclear of how to create a plan of action.
A coach can organize and clarify what you have envisioned so you can plot next steps.
3. You need accountability.
A life coach will remind you to stick to your plan and will check in with you often. Your success is their success.
4. You’ve tried the go it alone route and it causes you unnecessary stress and burnout.
A life coach provides that level of support you are not going to get, nor should you expect, from others in your life such as family and friends.
5. You think it’s indulgent to hire a life coach
Wrong! An indulgence is doing something that you enjoy even if it has negative consequences. Common negative consequences include regret or shame. Charging an expensive necklace on your VISA when you don’t have the money to pay it off would be an indulgence. You might be wracked with stress and regret once you realize you won’t be able to afford something that is a need and not a want. Taking care of yourself after a divorce is not an indulgence. By exploring how you can get to a better place mentally you are practicing self-care which will lead to growth, insight and taking steps to recover from the major life change of divorce.
Our December Power Partner, Lora Cheadle is a life choreographer who empowers high achieving women to reveal their smart, sexy, spiritual selves so they can fall in love with their bodies, themselves and their lives, and enjoy everything they’ve worked so hard to create.
Before you hire Lora or any other life coach, get to know them through their blogs, books and events to see if your personalities mesh well. The Divorce Resource Centre has come to know life coaches and other partners who help divorcing couples and will refer our clients to those that have our trust and respect.
A home full of clutter, keepsakes and accumulated possessions can be overwhelming to anyone but when you’re faced with divorce it can be paralyzing. You have essentially four options: toss, keep, sell or donate. This blog post helps you know what items you need to toss.
Only toss items that cannot be repaired by you or easily by someone else who knows what they are doing. If the current value is less than the cost of repairing it, then toss and replace.
UPOs (unidentified plastic objects) get 30 days. If they're still a mystery one month later, into the trash they go. Examples that come to mind can be found in the closet of almost any child’s room or in a kitchen junk drawer.
It’s Paper but you Can Digitize it. Throw away old receipts you don’t need for tax day or for items you’re not returning. Then scan the rest or take pictures with your smartphone of the receipts, bills, and other financial papers, and store them in cyberspace.
Expired Medicines
In Colorado, you can visit these medication take back locations. If there’s no drop off near you, do not flush medications down the toilet as it can affect the water supply. Instead, follow these steps before medicine hits the trashcan:
“No More Wire Hangers!” If you’ve seen Mommy Dearest, you know just how frightening these can be. Instead of tossing hangers, take them to your local dry cleaners. They will save money from not having to buy as many new ones and you keep them out of the landfill.
Magazines: If they are recent, within the last year, donate magazines to your local library or take them to a nursing home. Making vision boards has become very popular so post magazines on NextDoor, Craigslist or Facebook marketplace for free so these items can find new owners.
Craft Supplies: Rather than toss these, you can post for free on the aforementioned websites or contact a school’s art program, daycare or after school program to see if they can use them.
Stained or torn clothing: Use solo socks for dusting, especially between blinds and for ceiling fan blades. Items that are soft and absorbent also work well as cleaning rags.
Future blog posts from the Divorce Resource Center will cover with what items to keep, sell, and donate. Stay tuned for more helpful tips and suggestions for your post divorce life.
The idea of making new friends as an adult can be intimidating in general. The prospect of navigating your post divorce social life can be downright debilitating. In this post, we cover how to talk to your friends, make a clean break from others and gain new friendships.
We get it. You could bcc your mutual friends using email to tell them what's going on and cover a lot of ground. Resist the urge. Divorce is personal so when dealing with your close friends, have the decency to pick up the phone. After all, do you want it to become a reply all nightmare? Same advice for text, it may be simple but text, just like email, can be misinterpreted and unless you and your spouse craft a message together, it is likely to only be one party’s point of view.
Understand that if they are friends with both of you, they may be in unchartered waters and would appreciate some input. Let them know whether it’s ok to invite both of you to social events.
Accept that some of your friends that you met through your ex will pledge their loyalty to them no matter what you say or do. Even if there is dirty laundry and you weren’t the one in the wrong, their mindset is stuck in 1st grade and they won’t switch alliances.
What about friendships made when you were together? If you are able to continue adult discussions, factor friendships into the equation. If you are very close with other married couples, start here. Most often, the division will fall along gender lines. Be aware that even though divorce is not a communicable disease, your divorce may trigger something in still married couples and they may begin to phase you out of their lives. The inner workings of their mind will remain a mystery and you should not concern yourself.
Volunteerism:
Whether you are on the board of a nonprofit, or seeking a monthly hands on activity, sites like Eventbrite, Facebook events and Volunteer Match pair organizations with volunteers who work alongside like minded peers.
Health and Fitness:
You can even dip your toe into the world of workout buddies online. There are Facebook and Meetup groups for people doing Weight Watchers or 6 or 12 week fitness programs. If you join one of these groups, you can view their Facebook profile before you reach out to meet in person to workout.
Colorado has many recreational co-ed sports leagues like Sports Monster and WASA where you can play soccer, kickball, etc. If you live in a less active area, your local gym or recreation center will have group classes for a similar effect.
Networking Groups:
If you are a working professional, or better yet a business owner or entrepreneur, attending a networking events or joining an association is a surefire way to expand your professional and personal networks. Avoid networking groups that are completely leads based and select groups that have weekday coffee, evening cocktails and seminar or classroom events, conducive to learning a new program or skill.
In future blogs, we’ll address the post divorce pitfalls you may encounter online and at the holiday dinner table. A mediator ensures clients are equipped to handle their post divorce reality and that includes financial and emotional concerns.
Even before a marriage is irretrievably beyond repair, one or both spouses may have been hiding money without the other spouse’s knowledge. How common is hiding money from your spouse? If self-reported surveys are any indication, it occurs in roughly one third of marriages.
In 2011, The National Endowment for Financial Education (NEFE) released a study finding that 31% of people who combined finances with their significant other have been deceptive with their spouse/partner about money. Of that 31%, 58% say they hid cash from their partner/spouse.
1. Request a copy of your joint tax return from your local IRS tax office. The cleverest of divorcees may stretch the truth about their after-tax income by directing more money into a 401(k) plan, a deferred compensation plan or a health savings account. High deferrals into these and other savings accounts will lower their take-home pay. Soon-to-be exes will point to this amount to reduce alimony and child support obligations.
2. Regularly log-in to your joint accounts and look for suspicious withdrawals or transfers.
3. Look through credit card statements for overpayments. A spouse who makes an overpayment is essentially using the credit card account as a savings account.
Credit card companies that receive overpayments rarely send the difference back to the cardholder and simply credit the account. Good for them and your spouse, bad for you, because you're in the dark about the financial infidelity they’ve committed.
1) Paypal accounts and Venmo can be used to stash or park money. But just because your spouse has a Paypal or Venmo account that you didn’t know about doesn’t mean they are hiding money, they may have opened it up before you met.
2) Bank statements and credit card statements used to come in the mail but you haven’t seen any in months. Maybe you have found receipts listing the last four digits of an account you don’t recognize.
However, there may be perfectly legitimate reasons for not receiving snail mail or opening a new account. Maybe your spouse wants to go paperless and forgot to pass on the online account information. Or they opened up a new card to get airline miles for a surprise vacation or wanted to save money at the time of purchase and forgot to tell you. But if you are hesitant to ask, you may already have your answer to, “Do I have something to worry about?”
If you’re the “out-spouse,” the spouse who does not deal directly with the finances, simply ask for for copies of all financial records. If your spouse is able to produce all records, the information gathering process might not be too painful.
Sometimes, your spouse simply can’t find the records. If so, the two of you can work together to gather information. With online access to everything nowadays, it’s easy to get account records. You can also send joint requests for records to mortgage companies, banks, retirement plan administrators, etc.
As painful as it is to discover financial decisions were made without you, stashing away money means they aren’t planning on creating a better financial future for the both of you -- and that speaks volumes.
The Divorce Resource Centre of Colorado understands that if couples can’t solve their financial difficulties during the marriage, it is harder for them to agree on financial issues when the marriage has fallen apart. If both spouses understand their financial reality, any decisions made during mediation can be done with each spouses interests in mind.
As Certified Divorce Financial Analysts, we’re trained to understand complex tax issues, IRS rulings, capital gains, dividing pensions, etc. We assist divorcing spouses in every conceivable financial situation you could imagine with an innovative and creative approach that is enhanced by decades of experience.
For an overview about our divorce financial analysis process, click here.
The Divorce Resource Centre of Colorado assists with parenting plans, division of property, financial analysis AND a topic important to all Americans, especially those over 40 - Can you keep your health insurance after divorce?
The uncertainty of healthcare coverage post divorce is an especially worrisome topic for spouses who are stay at home parents or self-employed. Consider that as of 2015, according to the Kaiser Family Foundation, nearly a quarter of women in the United States under age 64 received health coverage through their spouse's employer-sponsored plan.
Thanks to COBRA, even after a divorce or separation, the uninsured party can keep their health insurance from their ex-spouse’s company if it has at least 20 employees, for up to three years after a divorce. Employees should verify this with their employer/plan administrator in writing or an email.
If your soon to be ex-spouse’s Colorado employer has less than 20 employees, you may still be able to enroll in mini COBRA. Like federal COBRA, it is also very expensive for most people because you must pay the entire premium on your own, but your health insurance plan remains exactly the same. Click here for more info on mini COBRA.
Beyond COBRA, we recommend that the uninsured party obtain their own health insurance as soon as possible.
Your options include: Signing up for coverage through your employer if it’s offered. You can sign up outside the regular open enrollment period if you’ve lost coverage from another source, or have experienced a ‘life event’ like divorce.
Your other option is to purchase a policy directly from a health insurance company or your state’s health insurance marketplace. In Colorado go here.
If you are worried that a soon-to-be-former spouse will cancel your health insurance during the divorce, Colorado law has you covered.
Colorado Revised Statutes 14-10-107 (4)(b)(I)(D) forbids the cancellation of health insurance that provides coverage for spouses and dependent children. Additionally, spouses cannot allow the insurance to lapse by not paying the premiums.
The only way a spouse can change or cancel health insurance coverage during a divorce is if both parties are given at least 14 days of advance notice and both agree to the change in writing.
To better understand your options for post divorce health coverage, schedule a time to speak with one of the experienced team members at the Divorce Resource Centre of Colorado. Your pathway to certainty becomes clearer with your first 20 minute complimentary phone call.
If you’re thinking about beginning divorce proceedings, chances are you’ve began thinking about what your financial situation will be after a divorce? Will you be able to afford to keep the home the kids were raised in? Can we afford to support two households? How will the changes in income affect our children?
When it comes to assets, often the family home is a big part of the financial picture and figuring out all of your options might feel overwhelming. So, let’s take a look at what you should be considering when it comes to your real estate investment as part of a divorce..
When we look at the real estate a couple jointly owns or acquired during the marriage, we’re including not only the residence, but also any rentals, timeshares, and land. Depending on the type of real estate, how it is titled, and whose name is on the mortgage, proper disposition of real estate is tricky due to tax traps and financing obstacles.
We also know it is important to do a complete forward-looking cash flow analysis; this helps the client see the future financial picture of home ownership and we help them determine how much they can afford, how much should be used as a down payment vs. be financed.
Sometimes, especially in the current Colorado real estate market, a marital residence must be sold in order to secure another residence, or a residence may need to be purchased as an investment property while still married just to make sure the family has a place to live.
Because this transaction and its timing is so complex, it is of utmost importance that all angles are analyzed, and the impact clearly known; this includes the moving and market readiness costs that are involved and how the marital residence is titled along with other potential issues with lenders. We work closely with Certified Divorce Lending Professionals (CDLP), to help navigate the complex maze of mortgage lending.
Bottom line, yes a home can be sold/bought in conjunction with a divorce, however it must be done with an abundance of caution!
In general, you cannot take distributions before age 59-½, as the are subject to a 10% penalty tax if you do. You can avoid the penalty if you become disabled, die, or receive a retirement distribution in divorce from an ex-spouse’s (i.e. 401(k), 403(b)).
Let’s take a look at what happens when the ex-spouse receives the 401(k) asset. There are some specific rules to be aware of.
Sarah was married to an airline pilot who was nearing retirement. They were both age 55. There was $640,000 in his 401(k) and the retirement plan was prepared to transfer $320,000 to her IRA. She could transfer the money to an IRA and pay no taxes on this amount until she withdraws funds from the IRA. But Sarah’s attorney’s fees were $60,000 and she needed to pay those to avoid a lien on her property.
If done correctly, Sarah could take the $60K cash she needed from her soon-to-be exes 401(k) and roll the other into an IRA in her name. She would owe the ordinary income tax but would save the 10% penalty or $6,000.
After the money from a pension plan goes into an IRA, which is not considered a qualified plan, Sarah is held to the early withdrawal rule. If she says, “Oh I forgot, I need another $5,000 to buy a car,” it is too late.
She will have to pay the 10% penalty and the taxes on that money.
It is important to understand the subtle differences when transferring money from qualified plans. One type is a direct rollover where the check is made payable to the company where the IRA is held; not payable to the client. The check may be sent directly to the IRA custodian or the client, however, the check is made payable to the custodian of the funds.
The other type is a 60-day rollover, where the distribution is made payable to the client with 20% withheld for Federal taxes. It is then up to the client to get the funds back into an IRA within 60 days. Additionally, the client must put in the additional 20% withheld for federal taxes for the entire transaction to be a non-taxable event.
The Unemployment Compensation Amendment Act (UCA), which took effect in January 1993, stated that any monies taken out of a qualified plan or tax-sheltered annuity would be subject to 20% withholding. This rule does not apply to IRAs or SEPs.
In other words, if money is transferred from a qualified plan to an IRA, the check is sent directly from the qualified plan to the IRA. In a rollover, the funds are paid to the person who then remits the money to an IRA. A payment to the person, whether or not there is a rollover, is subject to the 20% withholding. Only a direct transfer avoids the withholding tax.
This is a great planning tool when clients have a need for cash and there is no other way to get it.
It has been said that divorce lawyers have the highest number of malpractice claims. One reason may be that while advising their clients on settlement issues, the lawyer may be giving improper financial advice. This is commonly due to the constant changes in tax law and perhaps the fact that the divorce lawyer’s expertise is in the law, not in taxes.
