Divorce Analysis

Navigating Through the Financial Aspects of Divorce… During and After

Christy Adamcik Gammill

Divorce is emotionally and financially taxing for most, no question about it.  Having a team of professional advisors guide divorcing parties through this process provides a solid foundation for the client to understand their existing financial circumstances and paint a picture of what the post-divorce financial life will look like. Attorneys and clients have found that as the legal world evolves, financial professionals are becoming increasingly more crucial to the divorce process, whether you litigate or collaborate.

Our role, as the financial professional, in this process is often times a bit vague. To add some clarity to the overarching mystery, listed below are the 5 steps that we typically address with clients who are going through the divorce process.

I.The Introduction Meeting

  1. The purpose of this meeting is to gather information about you, your goals, and interests, as well as get a snapshot of the financial resources of your estate from 10,000 feet above. From here, we are able to gage where in the process you stand; emotionally, financially and legally.   All of these answers vary depending on what stage of the divorce process you are in, however it is often helpful for you to have a financial professional on board before the property settlement has been finalized.
  2. If a fit for one another is determined, we will be retained often at an agreed upon hourly rate. If it is pre-divorce, we will provide a checklist of homework to gather documents, and ask you to begin working through a detailed expense worksheet.

II.Identifying the Estate and/or Budgeting and Expenses Meeting

  1. Now that we have groundwork, what are you currently spending? Do you imagine maintaining a similar or different lifestyle moving forward?
  2. It is our job to get an accurate depiction of all expenses, not just for temporary orders during divorce proceedings but also to create a uniquely tailored financial plan for your future.
  3. As documents are transmitted by you or your attorney’s office to the us, we will then reviews the financial documents in detail. This includes anything from basic checking accounts to retirement plan assets (these can be 401(k)’s or more complicated defined benefit plans or annuity contracts) to executive compensation plans such as restricted stock, stock options and deferred compensation plans.  We may need more information from the financial institution or company depending on the complexity of the asset.  Once a suitable amount of information is gathered, we will prepare a Family Coded Asset & Liability Worksheet as a framework to work and build from.

III.Preparing the Settlement Strategies

  1. The process of understanding exactly what is in your estate may take awhile, sometimes months. In more complex cases a forensic CPA or an accredited business valuation “ABV” expert may be retained if tracing or understanding the value of a business is a part of the marital estate equation.
  2. Depending on whether the process is litigation or collaborative, parties will work with their professional team of advisors to articulate financial needs, interests and relevance of particular assets within the investment pie to be divided.
  3. After meeting with you and your attorney, forensic or ABV expert, we can fully analyze all external factors.
  4. Through the use of our extensive knowledge of the various asset types and our after-tax or liquidation values, we will take a look at all available resources of the parties. These may be derived from the estate in the form of asset liquidation, investment income, earned income, mineral interests, partnership interests, social security or a myriad of other income sources.  Backing into the overall financial resources and goals of the parties, we will assess your liquidity needs, now and later, and work you’re your tax, legal and other advisors to ultimately design a settlement package that benefits both the parties financially.
  5. A professional financial analysis or plan is done on behalf of the divorcing party to work through realistic assumptions of income and expense flows, assigning particular assets to you with investment rates of return and inflation adjustments.  These rates based on the backward and forward looking asset class rates of returns to match your time horizon and tolerance for risk.
  6. These reports may serve as a tool used to propose a settlement package to the opposing party based on the your needs, tying in the introduction meeting needs analysis as to whether you may need income now versus later, retirement planning, and tax concerns.

IV.  The Post-Divorce Settlement Meeting(s)

  1. Once you and your attorney come to an agreement, we will aid in moving the Qualified Domestic Relations Order (QDRO) and transferring of funds processes along.
  2. From there, the financial professional who represents the spouse with ‘money-in-motion’ typically switches hats. When you receive a certain investment, it is typical to take advantage of the many divorce tax/penalty exceptions. We can assist you with penalty free rollovers, transfers, and design a customized portfolio that keeps assets in tact while reallocating others to meet the new financial needs and risk tolerance of the party.

V.

VI.The Client Account Review Meetings

  1. If you have an account, you will receive yearly, semi-annual, or quarterly meetings to review how your new investment portfolio is coinciding with the financial plan previously agreed upon.
  2. We can make adjustments as necessary, and even revise the financial plan to account for life’s big surprises.

AXA Advisors and its affiliates and associates do not provide legal accounting or tax advice and this articles is not intended as legal or tax advice.  Accordingly, any tax information provided in this article is not intended or written to be used, and cannot be used, by any taxpayer for the purpose of avoiding penalties that may be imposed on the taxpayer.  The tax information was written to support the promotion or the marketing of the transaction(s) or matter(s) addressed and you should seek advice based on your particular circumstances from an independent tax advisor.

 

This article is provided by Christy Adamcik Gammill.  Christy Adamcik Gammill offers securities through AXA Advisors, LLC, member FINRA, SIPC. 12377 Merit Drive, Suite 1500, Dallas, TX 75251, offers investment advisory products and services through AXA Advisors, LLC, an investment advisor registered with the SEC and offers annuity and insurance products through an insurance brokerage affiliate, AXA Network, LLC. CBG Wealth Management is not a registered investment advisor and is not owned or operated by AXA Advisors or AXA Network. Contact information:  972-455-9021 or Christy@CBGWealth.com.