By Annette Brown, CDFA
If you are considering divorce, you may have many financial considerations:
Will I have enough money to live?
What about the children’s expenses?
What is Separate Property?
How will we divide everything?
What about the house, business, and retirement?
Will I have enough money to live?”
The question, “Will I have enough money to live?” can be complicated. We will look at the sources of income (including current sources) commonly from Employment, Retirement, or Investment Income.
Spousal Support
Spousal support is determined by the need and ability to pay. Length of support is based upon the length of the marriage and both parties’ ability to work. A CDFA can help you paint the financial picture of your marriage to help set spousal support.
Child Support
Child support is one of the few non-negotiable items in California divorce. California has a statewide formula (called a “guideline”) for figuring out how much child support should be paid. This is based upon the income of each parent and time shared with the children. You can calculate it at this website:
https://childsupport.ca.gov/guideline-calculator/. Parents can negotiate extra expenses. These expenses include extra-curricular activities, private school, and college funding.
Separate Property
What is Separate Property? In California, what you owned prior to the marriage is considered separate property. Everything you earn after the date of separation is also separate property. Everything earned between the date of marriage and the date of separation is community property. California is a “community property” state. Everything earned during the marriage is BOTH parties’ property, regardless of who earned it. However, if you do have separate property, that property (plus the accumulation in some instances) remains separate property. Inheritances or gifts received during the marriage remain separate
property. A CDFA can help you trace and claim your separate property.
Division of Assets and Debts
Dividing everything starts with grouping “like” assets together: the same or similar cash liquidity, taxation, and time frames. Checking, savings, and investment accounts are often the most liquid. They are the easiest to transfer from one person to another. Retirement accounts have time restrictions. Most are taxed in the future (ROTH are exceptions). Real Estate may take time to sell. Assets, such as art or vehicles, take time to sell. RSUs and ISOs may have restrictions on who can hold them and when they can be exercised.
Special Calculations and Analysis
You need to make some calculations if you are dividing RSUs (Restricted Stock Options) or ISOs (Initial Stock Offerings). These have specific tax implications. You should make calculations if you owned property prior to the marriage. If one person moves out of the jointly held real estate, you need to make calculations.
Retirement Accounts
Retirement Accounts can be divided as part of the Marital Settlement Agreement. Some investment companies ask for a Qualified Domestic Relations Order (QDRO). A QDRO transfers assets from an ERISA-governed plan to an alternate payee that is accessible at retirement age.
Perspective
After the divorce, you will each have additional expenses. You will have two households. Every expense will be doubled. You will also have the temporary need for Professional Assistance, Mediators, Lawyers, Financial Analysts, Counselors, etc.
Going through a divorce can be a stressful time. It is important to maintain creative thinking and being open to ideas and different scenarios. Fighting about money may have been common in the marriage. It is common in divorces. A Certified Divorce Financial Analyst (CDFA) can help alleviate the financial stress of divorce. A great strategy before going into mediation is to talk with a CDFA to make sure you have clarity on all your assets and debts.
Can Do
- Provide financial scenarios
- Offer financial alternatives
- Provide financial forecasts
- Trace assets
- Assist filling forms
- Testify in court
Cannot Do
- Make your decisions
- Offer legal advice
- Offer psychological advice
- Represent you in court
Contemplating divorce?
I offer a one-hour complimentary consultation to discover how a CDFA can help you. Contact Annette Brown, CDFA