The Gray Divorce Podcast: Episode 7 11 Divorce Tips
In this episode I offer an abridged version of my presentation: The 11 Things To Do Now in Divorce. This presentation is periodically presented at the Wiser Divorce Workshop that I host in Las Vegas where divorce help is presented. The workshop usually features me talking about the financial aspects of divorce, which are covered in this presentation, and a family law attorney dealing with the legal aspects of divorce.
Tipping my hat to my attorney friends, it's important for people going through divorce to seek good counsel and to know the law. But divorce is about family, emotions, and money.
And it could be the biggest financial transaction of your life.
Unfortunately, such an important financial settlement is rarely made under the best conditions. Logic and common sense often go out the door and emotions can take over. Some of us who work in the divorce world call this “divorce brain.”
Here's a bullet point summary of the 11 divorce tips:
- Make sure you have money available to you
- Collect financial documents
- Don't overlook anything of value
- Consider the tax consequences
- Prepare
- Make a budget and monitor your spending
- Keep a level head - don't mix money and emotion
- But fight for what is yours
- Take control
- Concentrate on personal and professional development
- Get professional advice
The message I hope you take away from this episode and the divorce advice offered is that you can thrive after divorce. Many times you will have a better, more fulfilling life, as you come out of a situation that clearly wasn't right for you. Life after divorce is an opportunity. An opportunity to discover yourself and to look to connections in the outside world and start a journey to a more contented. purposeful life.
Transcript
Announcement: [00:00:00] Welcome to The Gray Divorce Podcast, hosted by divorce financial analyst and retirement planning counselor Andrew Hatherley. Join Andrew and guest experts as they help late-life divorcees build the financial and mental foundation for a meaningful future. There is life after divorce. Now on to the show.
Andrew Hatherley: Hello everybody. Welcome to the Gray Divorce Podcast. Today we're going to be talking about the 11 things you need to do now in divorce. Today's discussion is actually an abridged version of a presentation I've given periodically here in Las Vegas at a workshop I've founded called The Wiser Divorce.
As regular listeners of the podcast, we'll know I am a certified Divorce financial analyst and specialize with working with people before, during, and after [00:01:00] divorce. Particularly those people going through gray divorce. Divorce after 50. I am not an attorney. I work with attorneys to provide financial specialization and support in cases where we are advocating for our divorcing client.
I also work with couples who are trying to go through divorce amicably. In these cases, I work as a financial neutral, helping the splitting couple craft a settlement that works for. After we're done, they'll take the settlement to an attorney to get the agreement written in acceptable legal language.
Now, with all due respect to my attorney friends, while it's important to know about the law and seek good counsel, divorce is about family, emotion, and money, and it's probably the single biggest financial transaction of your life. [00:02:00] In a perfect world, divorce would be approached calmly with a level head.
Unfortunately, that's rarely the case, and emotions often take over. Logic and common sense often go out the door. Some of us who work in the divorce world refer to the phenomenon as divorce brain. I went through divorce brain in my own. I am sure my ex-wife would agree that we both did. We were the type of people who were very much do-it-yourselfers.
The type of people who didn't always put our faith in. Professionals, liked to do things ourselves. We were to use the polite term, very frugal, so it was very out of character that we would end up paying tens of thousands of dollars in legal fees to attorneys when we could have or should have [00:03:00] settled the divorce relatively quickly.
There's a saying in the legal world, Bad. The criminal justice system sees bad people on their best behavior while the divorce process sees good people on their worst behavior. That's divorce brain. So the title of this podcast episode is The 11 Things You Need To Do Now in Divorce. Written summary of this presentation is available on both of my websites, wiser divorce solutions.com and transcend retirement.net.
So the first thing you need to do is make sure that you have money available to you. Divorce is very cash hungry. There are filing fees, attorney's fees, retainers. Mediation fees, apartment rent. If you're [00:04:00] moving out. Counseling costs. If you're seeking the help of a therapist, which in many cases I strongly recommend and many other expenses, remember that money that previously supported one household will now need to stretch to support.
Two. I recommend that you have a bank account in your own name, just in case things get difficult. And it's important to have that account funded. The keyword here is control. This is an account that you control. You're not concealing it. Everything's above board and disclosed. It's just an account that only you can get at.
I also recommend getting a credit card in your own name and if possible, getting off your ex or soon-to-be ex-spouses credit card. It's wise also to pay off bills from joint funds before the separation so they aren't hanging over your head in divorce. And when possible, close those joint accounts. [00:05:00] Two.
Collect financial documents. Preparing for divorce means that you must take the time to collect all the relevant documents in your financial life. This means bank and brokerage statements. Credit cards, mortgages, retirement plans, tax returns, car loans, you name it. If you've recently refinanced your house.
Loan documents are a treasure trove of financial information. Speaking of the house, know how your house ownership is titled, and who's exactly on the. This may sound obvious, but I've had many cases where one of the parties wasn't sure if they were on the title or even whether they were on the mortgage.
If you're not sure of anything financially, do your best to find out. Otherwise, you're going to end up running up your divorce expenses. The easier you make it for your divorce attorney and [00:06:00] divorce financial advisor, the less time they need to. Valuable time chasing down the information and figuring it out.
It's also very helpful if you can assemble all the documents that you'll need to trace your separate property. Now, remember, separate property or assets you or your ex owned before the marriage. Separate property may be received during the marriage, also in the form of a gift inheritance or legal settle.
once you've made copies, don't store these documents at home. Store them with a trusted friend or family member or a safe deposit box that only you can access. I also recommend getting a fresh credit report. Not only will you be able to keep tabs on your credit, but you may be able to tell if your spouse is wasting funds.
It's a good idea to pay attention to any changes in the [00:07:00] delivery of financial documents. If statements aren't being delivered to your house anymore, your spouse may be trying to hide something. Third thing you need to do now in divorce, don't overlook any assets or anything of value. . Key assets in divorce are typically the family residents and retirement plans.
Retirement plans can be pension plans, profit sharing plans, 401k’s, 403b’s, IRAs, SCPs. Basically, any combination of letters and numbers. That's a stash of stash of cash that's put away for retirement is a retirement plan. Now, if it was put away during the marriage, then it's community, even though it may only be in the name of one spouse, it's subject to division.
So how do you get your share of the retirement plan? Well, maybe you don't want your share. Maybe you say, well, I want the house. He can have his stupid [00:08:00] retirement accounts he loves so much. Uh, I want the house. Um, let me tell you a little secret about men and their retirement plans. Have you ever seen the movie, Lord of the Ring?
Yes, you probably have, remember Gollum, I think that was his name. Gollum, the little guy always climbing over the rocks in the rain. Remember how he felt about the ring? My precious, well, that's how men feel about their 401ks in pensions. I know I'm a guy. I'm the same way. Women often tend to feel the same way about the.
Less so for gray divorcees because the children are likely to have left, but certainly more so in cases where the children, children are still in the home. If the retirement plan in the house are roughly equal in value. This seems like a pretty easy divorce. He gets the [00:09:00] retirement plans, she gets the house.
You each drive drive off in your own cars. There you go. But hold on a second. When you reach retirement age, what are you going to live on? Because you can't go to the grocery store and say, Hey, I've got that great house down the street, so give me two pounds of pastrami and Swiss cheese. If one party is paying spousal support, that's going to decrease and maybe even end when they retire.
So it's going to be a problem or it could be a problem for the person in the house. It's important to think straight at the beginning of the process about both the present and the future. That's why when I work with clients, either as a neutral or an advocate, I put together a 20 year plan to make sure that you've got sufficient income planned for the future.
Let's say for instance, that the husband's got most of the retirement plans on his. and you listen to the voice of [00:10:00] reason and decide that you need to get your share of those plans. How are you going to do that? Well, for most plans except IRAs, you need what's called a qualified domestic relations order.
The initials are QDRO, and it's pronounced quadro. The QDRO is an order signed by the judge that's given to the retirement plan administrator for the purpose of dividing the. Ideally, this is prepared and filed at the same time as a settlement agreement. Now, note that in military divorces there are variations to this Quadro document.
It's called something else, and we're not gonna get into that here. But I do work with specialists in military divorce if you need help there. Now, pensions, if one party has a pension, the other. Is entitled to a portion of that pension if employment with that company and pension credits [00:11:00] were earned during the marriage, and you may want to get the pension properly valued.
Many attorneys will look at a pension statement and look at a dollar value in that statement and mistakenly assume that to be the value of the pension. There are some fairly complex calculations that need to be done to value pensions, and there may be some creative ways to split the. Now, don't forget smaller assets and some may not be as small as you think.
These might include some assets in safe deposit, back safe deposit boxes, or for example, frequent flyer points. I know one colleague of mine had a client, her husband had 1.4 million frequent flyer miles. That's enough to lease an SUV for three years. Other overlooked assets may include vacation, sick pay.
A side business may have value. [00:12:00] There's also furnishings, vehicles, jewelry, hobby equipment. Fourth thing to consider now a divorce. Consider the tax consequences of any property settlement. Let's look at retirement plans again. Let's say you agreed to split your wife's $200,000 401k. If you need access to these funds, you're going to have to pay taxes and possibly penalties depending on how you took the distribution.
So instead of getting a hundred thousand, you may only get 60 or 70,000. Now if you transfer your portion of her 401k into your ira, you'll get the full hundred thousand, but you will still be subject to taxes and maybe penalties depending on your age. If and when you take funds out, consider also the tax consequences of keeping or selling the house in divorce.[00:13:00]
Now, I'm not going to get into the details. $250,000 capital gains exclusion for individuals and the $500,000 exclusion for married couples right here. But it's important to note that if you've got a ton of equity in your house, you want to plan the divorce in a way that you can take advantage of these potential tax breaks.
And I strongly recommend speaking to a Divorce financial analyst, and at least your tax advisor about this issue. Insofar as investment rental properties are concerned, they can be a a lot less value when you consider the tax that you'll pay when you'll sell it. There's no capital gains exclusion here.
The fifth thing you need to do in divorce. Prepare with preparation, and that means educating yourself about the divorce process. You'll be less confused or afraid and better able to [00:14:00] act rather than react. Learn as much as you can about the process. For one thing, I congratulate you for listening to this podcast today.
You know, check out other divorce podcasts, read books about divorce. Google is your friend, . Check out my two websites, transcend retirement.net and wiser divorce solutions.com. There's a lot of information out there and it pays to be educated. Another key preparation point is social security. Timing's a key issue here.
Um, you know as well, but this time it pays to wait. If you and your spouse have been married for 10 years or longer, When you reach Social Security Age, you can collect benefits based on your earnings record or your ex's earning record, whichever is higher. The benefits that you would get based on their earnings record are called Divorce Spouse [00:15:00] Benefits, and they're the equivalent of half of what they get.
So let's do a little math example. If the husband's entitled to get 2000 a month benefit, and that would be $1,000 a. But if your earnings history is $1,200 a month, then that's what you'll get. If your own earnings history would give you only $800 a month, then you can collect a thousand dollars based on his earnings history.
I recommend that you listen to a special co podcast I did exclusively on the subject of Social Security and divorce. It's episode number three. It's on all the major podcast players and you can also find it on my website, transcend Retirement dot. Six, prepare a budget and monitor your spending in a litigated divorce.
The court is going to require that you fill out a document called a financial affidavit, which includes your budget, [00:16:00] it's good to look at both your past budget and a future budget, recognizing of course that after divorce, maintaining two households is more expensive than maintaining one. So it's highly unlikely that either party is going to completely retain their marital, scattered of living, at least in the first few years after divorce in some high net worth divorce cases.
I work with my clients to create a lifestyle analysis. A lifestyle analysis is kind of like a budget on steroids and may not be necessary unless financially complex divorces. A lifestyle analysis establishes what your standard of living-wise during the marriage, it shows you what funds came into the marriage in terms of income and what funds left the marriage in terms of expenses.
And we use this information as a guide to help you develop an accurate picture of how much money you need to maintain your standard of living after [00:17:00] divorce. The lifestyle analysis is often used in divorce cases to justify a greater amount of spousal. A lifestyle analysis may also catch any red flags that may appear with respect to disguised, wasted, or diverted funds.
Seventh thing to do now in divorce. Keep a level head. Don't risk your financial future based on the emotions you're feeling today. Don't seek revenge. Don't rack up thousands of dollars in legal. Fighting over a watercolor you bought in a garage sale or the Elvis dinner plates, it's just not worth it.
Now, on the other hand, don't let guilt rule you. If you're feeling guilty about maybe initiating the divorce, or maybe [00:18:00] your mistakes have led to the divorce, you may be tempted to make concessions in the settlement agreement now that you may regret five, 10, or 20 years in the. And I don't wanna sound harsh here, but do your crying at home, not in an attorney's office.
It's very expensive to cry at $450 an hour. Lean on friends, family, or better yet, seek an experienced marital family therapist. Eight. You can keep a level head and also fight for what is yours. It's not always advisable to make nice and sacrifice your own needs. This is the rest of your life we're talking about, and you're going to want to make sure that you set the financial foundation for leading a good life going forward.
So that means including all your needs in your budget, health insurance, cost related to a new residence lifestyle. [00:19:00] Most importantly, for mid to late life divorcees, we need to have a plan for income later in life and have an idea of what we want our look life to look like in our sixties, seventies, eighties, and beyond.
Once again, the goal is to have the divorce settlement serve as a financial foundation for moving forward and thriving after divorce. Related to number eight is number. Take control. What this means is listen to your legal, financial, and emotional advisors, but be an active participant in the process. For instance, this may be illustrated by protecting your spousal support with life insurance, so you'll collect a death benefit if your ex-spouse dies an insurance payout that you can use for your support.
Now it's important to go through insurance underwriting before signing the settlement agreement to make sure [00:20:00] that coverage is available and that it's not prohibitively expensive. In that case, you might have to adjust the settlement. Many times, it's better to get a lump sum whenever possible, rather than being tied to a spouse for spousal support.
And don't forget to use those QDROs to get your share of re of a retirement account transferred to your I. I've seen cases where people are so exhausted by divorce, they forget to transfer their portion of their ex's retirement account to their own accounts. Needless to say, this can be very costly.
10th thing to do now in divorce, concentrate on personal and professional development. If you weren't working or have a job instead of a career, this is a good time to figure out your future, potentially go back to school. You might negotiate more spousal support up front to allow you the time to take classes.[00:21:00]
Have a healthy outlet for your emotions. Whether it's exercising, hiking, walking, maybe it's time to try yoga or boxing. Meditate, take a luxurious bath. Simply take a day to binge watch your favorite TV series, and I don't recommend too much tv, but sometimes it's okay to veg on the sofa. The more balanced you can remain through the divorce negotiations, the faster the process will go, the more confident you'll feel, and the quicker you can start to heal and begin your new life.
It's always a good idea to surround yourself with good friends and. And your friends and family may change during your divorce. Some people will drift away, and others will step up moving forward. You want to be surrounded with loving, supportive people, but I understand even people with the best intentions may not offer the [00:22:00] best advice, which leads us to the 11th thing you need to do now in divorce.
Get professional. Even if you do the divorce yourself, which I don't recommend, or if you go through mediation, you should speak to a good attorney at least somewhere along the way but do your research. Not all attorneys are the same. Some attorneys are sharks. Others are dolphins. Some are very litigious minded.
Others are much more settlement. Of course, depending on your circumstances, you may want a more litigious attorney. Just have a good idea what you're getting. Most people going through divorce will benefit from talking to a therapist and joining a support group as well and good financial advice is imperative.
I offer a three 30-minute consultation on divorce finances, whether you're [00:23:00] thinking about divorce in the middle of the process. Or whether you're recently divorced and not sure what to do now in terms of your investments or are planning for retirement income going forward. You just want to know that you're going to be okay financially.
I'm happy to talk to see if we're a good fit to work together. The message that I really hope you take from this. Is that there is life after divorce and it's usually a better, more fulfilling life because you're emerging from a situation that wasn't right for you. The good news is that this is an opportunity, an opportunity to both look inside yourself and look to the outside world and to embark upon a journey of meaning and purpose.
That's it for this episode of The Gray Divorce Podcast. Bye for now.
Announcement: Thanks so much for tuning into this episode of The [00:24:00] Gray Divorce Podcast. To learn more or get in contact with your host, you can visit Andrew's website at TranscendRetirement.net. Also, please feel free to rate, subscribe, and leave a review wherever you listen to your podcasts. That helps others find the show and we greatly appreciate it.
Thanks again for listening, and we'll catch you in the next episode.
Andrew Hatherley: Information provided is educational only and should not be construed as legal or tax advice. Each situation is unique and should be discussed with your tax or legal advisor prior to implementation. Andrew Hatherley is not an attorney and does not provide legal advice. Information provided is financial in nature.
Advisory services offered through Hatherley Capital Management, LLC. Divorce Financial Analysis Services offered through Wiser Divorce Solutions, an affiliated company.