Social Security is one of the three major sources of retirement income alongside retirement and savings accounts. While retirement and savings accounts are subject to stops and starts and market volatility, social security benefits are steady and reliable. Thus, it’s no surprise many older Americans are especially dependent on their Social Security benefits.
According to a 2015 survey by the Social Security Administration, about half of the population aged 65 or older live in households that receive at least 50 percent of their income from Social Security and roughly 25 percent of those eligible for Social Security rely on it for at least 90 percent of their income.
Knowledge is power and understanding each scenario helps you plan your post-divorce future.
The following information is based on a presumption of one party in the marriage having earned less income throughout their working life than their spouse. If this is not the case and both spouses earned a roughly equal amount throughout their working lives, the following information is inapplicable. Remember, regardless of what you are entitled to based on the amount your ex-spouse earned, you still have your own social security benefit to draw from.
If a couple was married for 10 years or longer and they divorce, the spouse who earned less is entitled to the greater of half of the amount of the higher earning spouse's Social Security benefit or 100% of their own benefit provided certain provisions are met:
So, if the higher earning spouse is set to receive $2,500 a month in social security upon retirement, the lower earning spouse will receive a payment of half that amount and the higher earning spouse’s amount is not affected.
Higher earning spouse $2,500/month
Lower earning ex spouse $1,250/month
Q: What if the higher earning spouse remarries?
A: If they are married to their second spouse for 10 years and they end up getting divorced, their second ex also receives a monthly benefit equal to half.
The second marriage will have no effect on what the first ex spouse receives.The only time this will not be the case is if the higher earning spouse was to divorce a fifth spouse as the benefit stops with ex-spouse #4.
Considering the 10 year marriage requirement for each marriage, it would be very unusual to ever have this scenario take place.
Higher earning spouse $2,500
Lower earning ex spouse #1 $1,250
Lower earning ex spouse #2 $1,250
Q: What if the lower earning spouse remarries?
A: If the lower earning spouse is married and retires, they would look to their current spouse’s amount to calculate theirs. But if they have been married to spouse #2 for 10 years and they divorce,they are entitled an amount calculated as either: half of the first ex spouse’s benefit OR half of ex spouse #2’s benefits or their own, whichever is higher.
Assume the lower earning spouse, who has not yet retired, starts to earn more money. In doing so, at retirement, they will be entitled to receive $1,350 a month from their own Social Security account. When they retire, they choose between taking $1,350 from her own account, an amount based on half of spouse number #1’s account, or half of spouse #2’s account. They may only choose one and will of course choose the highest amount.
What happens after the higher earning ex-spouse dies?
The lower earning ex spouse is entitled to widow/widower benefits if:
If a higher earning spouse leaves behind a second spouse, this survivor also gets the same if they meet the above five requirements.
A widow/widower’s remarriage after age 60 will not prevent them from being entitled to payments based on the deceased’s higher earnings.
A widow/widower’s remarriage before age 60 will prevent entitlement unless the subsequent marriage ends, whether by death, divorce, or annulment. If the subsequent marriage ends, the widow/widower may become entitled or re-entitled to benefits on the prior deceased spouse’s earnings beginning with the month the subsequent marriage ends.
Example: Assume Kathy’s first husband died. At age 58, she met a wonderful widower, James, and wanted to get remarried but she realized that she would lose her entitlement to all of the deceased spouse’s Social Security benefits when she turned age 60. This may explain why Kathy and James may decide to not get married.
Now that we understand what happens to social security payments after divorce, remarriage and death, we’re better prepared for our post-divorce future. Having a full picture allows us to ease some of the anxiety brought on by divorce, especially in our more “experienced” years.
If you have questions about social security, retirement and understanding your financial future post-divorce, give us a call at 303 468-5626. Understanding your circumstances is the best way for a divorce mediator to show you your options and work with you and your soon to be ex on resolutions you both can agree to.
You and your spouse have made the decision to divorce. So what happens to your savings accounts, furnishings, and most importantly your home? In this blog post, we look at how property is divided in Colorado, what makes property subject to division and behaviors to avoid if your divorce mediation is underway.
Whether you are proceeding with an attorney assisted divorce or a divorce mediation, the ground rules for property division in Colorado are the same. Colorado follows the doctrine of equitable distribution when it comes to dividing marital property. Do not be fooled that because equitable and equal share the same first three letters, that the two words are interchangeable. It’s a bit more nuanced than that.
Equitable is not the same thing as equal but it doesn’t rule out that an equal division might sometimes be in order. An equitable solution is the solution based on what is just, fair, and right, in consideration of the facts and circumstances.
For example, if both parties to the marriage bought a sofa together and each person contributed $500 and both parties make roughly the same amount of money, what would be a way to make an equitable distribution? If they couldn’t come to an agreement about who gets to keep it, a judge or mediator may advise them to sell the couch and divide the proceeds equally.
In this instance, equitable worked out to be equal because each party was in relatively the same situation and contributed the same amount of money.
But, when you consider how rare it is that parties to a marriage will be on the same footing financially at that point, or into the future, it makes a lot more sense that Colorado uses a system of equitable distribution. Forty one states besides Colorado use equitable distribution while only Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin are community property states. In community property states, there is equal division among the spouses.
In Colorado, equitable distribution means property will be divided by the court or divorce mediator in a manner that is deemed fair to both parties. Note: spouses are free to come to a decision on their own. You do not have to make the determination for all items deemed marital property before they leave the house or are sold. Couples who can agree about what to do with any given item, marital or separate, can make those decisions and not wait for a mediator or judge to decide.
To make a determination about what to do with marital property, a court or mediator looks at all the factors.
Common factors include, but are not limited to:
The property of couples divorcing in Colorado is deemed to be either marital or separate property. Separate property is property brought into the marriage by that spouse, and or Property they received during the marriage by gift or inheritance. Compare this to marital property that covers anything acquired after the marriage.
The main determining factor for marital property is, was the item bought, or the account opened before the marriage began? If yes, it’s deemed separate property. If not, it’s marital property. The date of marriage is what controls.
Even if you opened up a savings account at the bank in your name only and only you made deposits into it, it is still marital property if you opened it after you were married.
Where it gets a little tricky is when one party co-mingles their separate property with the marital property, which changes the nature of the separate property.
Below are a few ways that co-mingling money changes separate property to marital property:
It boils down to keeping meticulous records. If you want to make a purchase and make sure it remains separate property, then use funds out of an account with only your name on it and keep records about the funds used to make the purchase. Also, it is never a good idea to sell or give away any of your property while your divorce proceedings, including mediation, are underway. The way around this is to come to a mutual agreement, especially if one party, or both, desperately needs the money. However, it is best practices and will keep things running more smoothly if you don’t move money around and don’t buy any big ticket items during this time. Yes, we’ve heard the news that interest rates will begin to rise by the end of 2022 but that doesn’t exempt you to ignore the “no big purchases” rule of thumb.
Our roadmap to resolution breaks down our 8-12 week mediation process. Property division is part of step 2 of our 6 step process and only comes after clarifying your future financial situation, your goals and guiding principles. We can guide you in making the kind of property decisions that best suit your unique circumstances without the tension usually experienced in an attorney led process.
To find out more about our process, please schedule a complimentary 20 minute consultation’ with one of our experienced divorce mediators.
If you’ve ever Googled “What will divorce mediation cost?” chances are you’re still confused. You may see a cost of $150 per session but they don’t tell you how long a session lasts. You may see results like, “The entire divorce cost is $750…. depending on how their mediation proceeds.” How it proceeds? Does this mean if it gets especially contentious, the divorce mediation cost will reflect this? Or does it mean, give or take a few hundred or thousands depending on how long it takes and how unique your situation is.
Another estimation found online provides a range of $3,000-$8,000 for the entire process. While a range is a better way to account for the uniqueness of each divorcing couple's situation, two questions remain, what are you getting for your divorce mediation dollars and shouldn’t divorce mediators be more transparent?
Let’s address both questions below.
It depends on the individual or firm you hire. When you look at a divorce mediation website, look at the biographies and background of their staff. Are they Certified Divorce Financial Analysts? Do they have CDFA after their name?
If not, you may need to hire one separately so you have peace of mind that a complete financial analysis was done prior to deciding how you’ll split assets. If you own a business for example, are you confident that your divorce mediator, without a financial background, can fairly evaluate its worth?
Do they have experience with high conflict personalities? A tip off is if they have a certification or they have completed coursework in this area. Divorce mediation works best when both parties agree to mediate and not litigate, but it doesn’t mean you and your soon to be ex-spouse will be amicable throughout the process. Conflict can come up during this process so it’s best to have a team with the experience to handle it and help you two proceed to a resolution.
Does your divorce mediator or divorce mediation team have someone who supports, motivates, and guides people going through divorce to help them make the best possible decisions? If you are relying on friends or your therapist to fill this role, is that fair to your friends? Does your therapist only have your point of view?
If your divorce mediator is also a certified divorce coach - they have the tools, experience and training to support and guide you through the challenging maze of divorce related emotions.
If your divorce mediator just does divorce mediation, keep in mind you may need to expand your team and hire experts in financial matters and a divorce coach to specifically address those areas.
So back to dollars and cents. Divorce mediation cost should be considered in light of what roles they can fill.
At the Divorce Resource Centre of Colorado our team is comprised of individuals with the following certifications: divorce coach, Certified Divorce Financial Analyst and divorce mediator.
In addition, we’re no strangers to working with attorneys too. Our team has participated in hundreds of collaborative divorces each spouse has chosen a divorce mediator and an attorney for each spouse.
Absolutely. Transparency instills trust and that’s why we explain our costs on our website.
For instance, if your combined household income is less than 125,000 and your total assets are less than $1,000,000, our retainer is $5,000.
*Pricing structures can vary based on levels of conflict, parenting and financial issues encountered throughout the process. The initial consultation provides an accurate estimate for the cost of your case.
There are two ways to see if DRCC is a good fit for your divorce mediation needs. The first is to book a complimentary 20 minute phone consultation. Select the date and time that works for you and be prepared to relay your particular situation to our team.
Or, if you’re ready to dive deeper into the process, we’re available for an initial consultation. This initial divorce mediation consultation lasts 90 minutes and costs $250. If you decide to hire us for mediation, the initial consultation cost is applied to the cost of your case.
Confusion during divorce is normal but being confused about price is entirely avoidable.
Ah debt. A four letter word indeed. When you and your spouse divorce, what happens to your joint debt? This blog explores your options for dealing with shared debt and includes a few suggestions for avoiding conflict about debt before divorce.
If you and your soon to be ex-spouse are communicating well AND the debt cannot be immediately paid off, AND you can trust them, create a written agreement about who will pay which debt. This includes mortgage debt, line(s) of credit, auto loans, student loans, and credit card debt.
Remember that the creditor doesn’t care that you’re getting divorced. They only care that both of your names are on the account. You may call and ask that one of you be taken off the loan but unless the remaining account holder is in a better situation financially than they were when you both took out the loan, it is likely the creditor will deny your request.
As long as your name is attached to the loan - you are ultimately responsible. The agreement you make in divorce does not supersede the loan agreement. Even if you make an agreement, circumstances can change. So, as long as your name is on the account, make sure you can monitor whether payments are being made. Furthermore, make sure that the creditor has your current phone number, email and address so important notices can reach you.
If one or both of you is financially able, you could offer to buy the other spouse out of the debt. This means one of you gets a new line of credit or loan on your own, paying off the existing joint account(s). This might occur if you have a mortgage together and one person wants to, or is able to do a buyout to keep the house. However, in any buyout, each party bears a risk. The selling spouse could lose out on future appreciation, and the buying spouse may end up feeling the price was too high if the property depreciates in the future.
There is more than one way to buy out your spouse’s interest. The buying spouse either refinances the house and takes out a new mortgage loan—or gives up other marital property worth about as much as the selling spouse’s share. For example, one spouse might keep the house in exchange for giving up his or her share of marital investments and retirement accounts.
If you are able to make money on the same of the marital home, you can agree to pay off your joint debts and you avoid having to keep track of whether your ex is making payments. It is prudent to walk away from divorce debt free, when possible. If it is not, make sure you have protections in place to guard your credit.
If the joint debt is the home and neither one of you can afford to make the payments alone, you may be faced with a choice to:
At the Divorce Resource Centre of Colorado, education is empowering. Here's a related blog post where you can download divorce related financial documents.
Please schedule an initial consultation to discuss your unique situation. We can also be reached at (303) 468-5626.
In part 2 of "Attaining Financial Independence," we cover "All Things Credit" including:
Let's discuss the scenario where one party wants to remain in the home, but they are the spouse who earns less.
According to Michelle Oddo of Oddo Group, a lending expert with 25 years experience, get advice from a lender as soon possible. The quicker you sort out housing, the easier it will be to address other divorce issues. It's hard to worry about anything else if you don't know where you, or your children, will sleep.
A lending professional determines if the spouse who wants to stay in the marital home has enough income or expected child and spousal support to sustain the mortgage. For conventional loans, a spouse would need to prove six months of income or support to be refinanced. If it is a FHA or VA mortgage loan, the spouse will only need to show three months of expected support payments to continue for three years.
If the spouse does not have the income or support payments, and it's a conventional loan, Oddo recommends refinancing since mortgage rates are still low and conventional loans are not assumable.
Michelle Oddo recommends a secured credit card. Even one with a low limit of $300, used to pay recurring charges can quickly help either build or repair credit.
Ms. Oddo warns spouses in this situation to be wary of paying off the balances and closing the cards. As soon as they are closed, you lose that credit history. If you end up wanting to secure another loan post divorce, it is better to have a credit history rather than none at all.
When a client's credit situation is overly complicated and beyond the advice of a lending professional, the Oddo group can refer you to a trusted credit repair company that has assisted their clients.
Ms. Oddo: It all depends on the kind of payment plan they have selected and whether Freddie Mac or Fannie Mae loans are involved. Typical payment plans are income based and conventional student loans. Those with an income based payment have a higher debt to income ratio since it takes them longer to pay down the principal on the loan. If a party is in deferment on their student loans, i.e. not making any payments at all, their debt to income ratio is likely too high to support a creditor letting them open up a line of credit in their name and they would need a co-signer.
Credit and debit cards are used in nearly identical ways. However, there are some significant differences you need to understand.
When you spend with a credit card, you are spending borrowed money! Sometimes people use credit cards for monthly purchases or to take advantage of points or rewards. Be sure to pay credit cards off in full each month so that fees aren’t incurred. Don't leave small balances on credit cards that build up over time and carry interest charges.
Debit cards are tied directly to your checking account. If you don’t have the funds to cover the deduction and don’t have overdraft protection, the charge is declined and you are charged a hefty fee. With overdraft protection, the bank honors the deduction and you pay interest to the bank.
One of the most significant differences between the two is the liability limit for fraudulent transactions. Under the Fair Credit Billing Act, with a credit card, you have no or minimal liability for unauthorized charges, and have recourse if what you purchased was damaged or not delivered.
With a debit card, however, your liability depends largely when you report the unauthorized charges to your bank. The worst case scenario is if you do not discover the fraudulent charges for more than 60 days after receiving the statement showing the activity, you could be held responsible for all charges after the 60 days. Even IF you do alert the bank within the 60 day period, you could still be responsible for up to $500. This is why it's important to periodically check your credit card charges online even before the statement is issued online or sent snail mail.
The Certified Divorce Financial Analysts at the Divorce Resource Centre of Colorado are trained to recognize and help divorcing spouses prepare for the financial realities of divorce and plan their futures. It only takes a 20 minute exploratory call to find out more.
Forms include: Asset Worksheet, Household Goods Inventory, Financial Checkup, Priorities Worksheet and Mandatory Financial Disclosures.
As Certified Divorce Financial Analysts who work with divorcing couples, we see many spouses who want to bury their heads in the sand even when their post divorce financial reality is staring them in the face. We believe that when you face your finances clear eyed and informed, with a forward facing plan, you can not only gain confidence but work towards financial independence post divorce.
Financial independence is when you have enough financial resources to pay your living expenses without being dependent on someone else or being employed. We recognize financial independence might seem like an audacious goal but it is possible with the right resources and commitment. You can gain the knowledge and lay the framework during and after your divorce.
Financial independence is NOT financial literacy. Financial literacy is the ability to understand and effectively apply various financial skills, including personal financial management, budgeting, and investing. Investopedia
In this blog we cover:
Before you head off on a road trip, you need to check the gas tank, right? One of the most important rules, and we can't stress this enough, is to PAY YOURSELF FIRST by contributing to your savings each month. If you don't look out for your future and instead pay all other expenses first, you might not have enough money to "make your trip."
Understand what your net take home pay is and how much your fixed, variable and discretionary expenses are. Fixed expenses are the same amount every time they're due and variable can change depending on usage, think utilities or water for instance.
As far as discretionary expenses go, if it's not groceries, rent or mortgage and utilities, it's essentially discretionary. A discretionary expense is something you can absolutely live without. For examples and a sample worksheet, see here.
Once you understand how much money you have coming in and going out, you are ready to implement a spending plan. A spending plan includes inputting your net income, your expenses and carves out what you can set aside to reach your goal. Your goal does not have to be financial independence, but without a goal, you are essentially monitoring inputs and outputs with the only "goal" of not being in debt. We want more for you and you should want that for yourself. Check out some other worthy financial goals.
Goodbye to adding machines, reams of receipt paper and spending late nights at your kitchen table and welcome to smart phone apps. It's important to find the one that works best for your lifestyle so be prepared to try more than one. The Divorce Resource Centre of Colorado recommends YNAB.com, Mint, Quicken and Pocketguard.com. YNAB stands for "You Need a Budget," Mint.com is a widely popular and intuitive app, Quicken has more bells and whistles and integrates with your business and Pocketguard.com is like a watchdog always looking to save you money.
Your online banking platform may divide your expenses up into categories but there is a usually a lot of manual work on the user's end to ensure that it's an accurate representation of where your money is going. The choice is yours to use an app, or your bank or both, but the important part is to keep track regardless.
Traditional big bank options in the Denver Metro Area include Wells Fargo, Chase, and 1st Bank. The benefits of a big bank are the number of locations and ATMs and that they are usually first adopters when it comes to online banking features like Zelle and online bill pay. Credit unions are nonprofit member-owned version of a banks that, rather than pay their Presidents and CEOs outrageous salaries, return the profits in the form of lower rates to their members. Online only banking options we recommend include ally.com and capitalone360.com. To help you evaluate online banks, click here.
We understand concerns about the online safety of financial information, but with precautions, banking online is not only safe and convenient but can also save you headaches during and after a divorce. As long as you set up strong passwords that do not include any personal identifying information, store this information in a place only you can access, you are banking smarter and safer. You will only have to log on and not wait on hold to talk to a human, or a robot screener, when you have a question or an issue. It also means that your hardcopy financial statements don't end up at your home when you've moved to a new residence during the divorce.
Watch out for overdraft protection no matter what financial institution you choose. While having it can help when you've overdrawn your account, there's no such thing as a free lunch and many banks' overdraft fees will make you feel like you paid for a steak dinner with a bottle of wine.
When it comes to savings accounts, there are many to choose from. However, for our purposes, we're focused on deposit savings accounts and money market savings accounts. The main difference is that money market accounts may earn a higher interest rate since they are funded differently than deposit savings accounts. But this is not always true so check the fine print and shop around.
The FDIC, aka Federal Deposit Insurance Corporation, insures all bank accounts up to $250,000. Note that this is per accountant not per customer so if you're a high roller, be sure to split your money into various accounts.
Our parting tips to face your financial fears head on include:
1) Just like in college or high school when you had an assignment or paper to complete, make sure your environment is set up in a way that invites calm. If you need to light a candle, play some light music or reward yourself with a glass of wine afterwards, cozy up with your statements and get clear on your priorities.
2) Break up tasks that seem overwhelming into three manageable parts. When you complete one part, you become more confident and able to handle the entire process.
The Divorce Resource Centre of Colorado will give you the tools to take control and gain confidence in your post divorce financial reality. We take a deep dive into your finances, the tax implications of divorce and provide a cash flow analysis to clients. Call us at 303 468-5626 or schedule a time to talk that works with your schedule.
Documents include: Asset Worksheet, Household Goods Inventory, Financial Checkup, Priorities Worksheet and Mandatory Financial Disclosures.
Logistical and financial reasons top the list for why a couple who is undergoing divorce or who has already completed the process, might agree to share a home. Especially when one or both of the parties employment situation has changed for the worse or neither party can afford to live on their own. Given the staggeringly high average home prices in the Denver Metro area that appear to be unfazed even by global events like COVID19, former couples face the very real prospect of sharing space for weeks or even months.
Here are seven tips for same space survival with your soon to be ex-spouse:
Draw boundaries within your home. Define your personal space and ask your spouse to honor it. Get to know your their personal space and extend them the same courtesy. This can head off potential arguments and just makes common sense. After all, you’re not sharing a bed anymore, so why would you continue to commingle your personal items?
Remember this is not Logic 101. There will be no- if then statements like, “Joe will move out if and when he secures employment that pays x amount per month.” If there is no goal line, one or both of you may be reluctant to move out anytime soon. It may seem counterintuitive, after all, why would they want to share space when the relationship has deteriorated? Think about a nightmare roommate you’ve had. The same question applied to them. They may have had their own motivations to stay put or worse, no motivation at all, so a projected move out date can only serve to motivate them to keep their word.
Even if you’ve always texted to ask what they want for dinner, refrain from hitting send. Start sweating the small stuff. For example, without noticing it, you are still ending sentences with “honey” after so many years together. Slow down and be deliberate with your actions and words.
Treat your new arrangement as you would a roommate and create an agreement for both parties to sign. Cover payment of the mortgage, maintenance tasks and if one person has done the bulk of the household duties, specify what each person will be doing going forward. Otherwise someone will continue to wash, dry and fold clothes for the other and there may be bleach and shrinkage of fabrics and resentment. If it is important, it goes in the agreement.
Say the above suggestions work beautifully and you and your soon to be ex are getting along swimmingly. You start to become muddled on why you wanted to divorce in the first place. Be clear about your reasons why you want a divorce and make sure to write them down. You can refer back in the moments where nostalgia clouds your judgment.
Set boundaries, set a time and if you have children in the home, a private place to talk. Take turns speaking and if emotions escalate, take a time out. We’re not that different from 3rd graders when it comes down to it. If the topic of discussion is of grave importance, write down what you agree on and what you have not come to an agreement about. Agree to end a conversation after a certain time limit and stay on one topic. Propose more than one solution and remain open to new ways to solve the disagreement.
We suggest that divorce discussions not take place at this stressful time and while confined to the house. There is a better time and place to get into divorce discussions. If there are children involved, consider implementing a child centered pledge.
During times of financial insecurity, more ex couples consider the prospect of co-habitating until they’re both able to transition. We hope you find these suggestions helpful if you or someone you know will be living with an ex.
The Divorce Resource Centre of Colorado team works with clients to prepare them financially and emotionally toward a peaceful solution for both parties. Give them a call at (303) 468-5626 or go online to schedule your 20 minute phone or Zoom call with one of our divorce professionals.
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 firstname.lastname@example.org and email@example.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.
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.