Strategic Divorce Solutions' Frequently Asked Questions
What to Bring to Your Meeting
Strategic Divorce Solutions® Document List
There are many designations for a financial professional, including
- Certified Divorce Financial Analyst® (CDFA®)
- Certified Financial Planner® (CFP®)
- Certified General Accountant (CGA)
- Certified Public Accountant (CPA)
- Chartered Accountant (CA)
- Chartered Financial Consultant (ChFC®)
- Financial Planner
The role of the financial planner (usually a CFP® or ChFC®) is to help people focus on their financial goals regardless of whether they are divorcing or happily married. After determining their client’s goals, their next step is to take inventory of assets and liabilities. Afterward, the planner looks at what needs to be done to pursue their client’s goals.
Conversely, an accountant (usually a CPA in the USA) typically looks at the details of the scenario as it is today and makes no future projections. In a divorce, they are hired to calculate the tax effect of dividing property and the effect of spousal and child support for one or two years. They typically do not project further into the future. Aside from this, they may also be retained to perform an audit of account activity or to perform forensic accounting functions to help find “hidden assets.”
The CDFA® designation was created to meet the needs of divorcing people, which calls for a blend of the two aforementioned ideologies. Their role is to assist the client and their lawyer to understand how the financial decisions they make today will impact their financial future based on certain assumptions. That way, the client can make informed decisions about his or her future.
Pensions and retirement plans are marital assets. Generally speaking, the portion you earned during your marriage will be subject to division. Depending on the state you live in, the portion that you’ve saved before your marriage could also be considered a marital asset. However, it may be possible to keep your pension intact and have it offset with other assets. Your marital assets can be determined through a pension valuation.
If your spouse has worked and if you have been married for 10 years or more, then you are entitled to one-half of your spouse’s Social Security or your own (whichever is higher). It is applicable even if you are divorced.
Your spouse still retains 100% of their Social Security benefit. This is an automatic guarantee and therefore not a negotiation point in a divorce.
For more information, check with your CDFA®, tax preparer, or Social Security.
This is a great question. The answer is sometimes yes, sometimes no. It’s important to pinpoint exactly what it will cost to maintain the house, factoring in taxes and insurance. The next step is to analyze if there is enough money coming in to stay comfortable in the home. You need to be able to pay the bills each month and keep the house in good condition.
Once that has been determined, the possibility of retaining the home must be compared to that of giving up other assets, such as liquid accounts, retirement plans, and more. Finally, all decisions need to be weighed against current economic and stock market conditions. Certified Divorce Financial Analysts® are trained to help people answer this question before they commit to a settlement that cannot be changed.
In this case, the whole house could be considered marital property. You might have made a “presumptive gift” to the marriage. Consult with a family law lawyer to discuss your options. In some areas, if your spouse moved into this house, and both of you lived there during your marriage, the house is marital property no matter whose name is on the title. Again, you need to discuss your unique situation with a family law lawyer.
Everything acquired during the marriage, no matter whose name it’s in, is typically considered marital property. In some states or provinces, the increase in value of separate property could also be considered marital property.
If you are going through a divorce, you should evaluate the financial drawbacks to having your IRA/401k included in the list of assets you will retain post-divorce. Remember, the funds in the IRA cannot be accessed before 59 1/2 without paying a 10% penalty for early withdrawal.
Regarding 401k, there is a little-known window of opportunity to access your spouse’s accounts before retirement without triggering the penalty. Talk to your CDFA® professional about your options.
In the USA, every state has child support guidelines that are mandated by the state. However, the guidelines get tricky when one (or both) spouse is an independent business owner who can control their wages. In this situation, it typically helps to bring in a financial or tax professional who can help determine the true potential income of the parties involved.
Child support is determined by guidelines that are mandated by the federal court. Generally speaking, it is based on these factors:
- Ages of Children Under 18
- Number of Minor Children
- Income of Parents
These factors are plugged into a formula, which then supplies a recommendation for the court. The guidelines may not cover the children’s actual costs. For instance, extraordinary medical expenses, private school tuition, or extracurricular activities are generally not covered. Speak to your lawyer about the possibility of increasing the guideline amounts to cover reasonable expenses for your co-parenting needs.
A Qualified Domestic Relations Order (QDRO) is the legal document that divides up a qualified pension or retirement account (including 401k’s) pursuant to a divorce. The Judgment of Divorce is not sufficient to divide up qualified plans, a QDRO is needed.
There are many nuances that go into QDROs and make it an advocating (versus neutral) document. In order to protect your assets, be sure to obtain qualified advice in this area from a professional.
A Certified Divorce Financial Analyst® is trained to help people through the maze of divorce finances. They sift through the various issues, including incomes, expenses, assets, tax issues, pensions, and division of property. In many instances they can help you reach an equitable divorce settlement that is fair to both parties.
They have professional practiced skills and experience that enable them to analyze financial issues in divorce in their long-term context. A CDFA® can take the offer and project how things will be 5, 10, or 20 years from now to show you what you’ll have to live on if you sign the agreement.
The tests for spousal support (also called “alimony” or “maintenance”) include some of the following:
- Length of marriage, since longer ones (ten years or more) are typically a stronger case for the lower-earning spouse
- Ability to support yourself with earned income plus investment income
- Health of both parties
- Sufficient funds to pay alimony
However, keep in mind that no two cases are the same. You need to seek individual advice in order to determine how the specifics of your case may impact your ability to receive or negotiate spousal support.
Strategic Divorce Solutions, Inc. and LPL Financial do not provide legal advice or tax services. Please consult your legal advisor or tax advisor regarding your specific situation. Some of the above discussed answers may differ state to state.