Some of these FAQs are reprinted here from www.institutedfa.com with the permission of the Institute for Divorce Financial Analysts™
Q: Will I be able to receive alimony? A: The tests for alimony (or maintenance or spousal support) include some of the following, 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 alimony: Need - Can you support yourself with earned income plus investment income? Ability to pay - Does the payer of alimony have sufficient funds to pay? Length of marriage - A long-term marriage (10 years or more) is typically a stronger case for the lower-earning spouse. Health of both parties.
Q: Will I lose my pension? A: Pensions and retirement plans are marital assets. Depending on the state you live in, the portion which was earned before your marriage could also be considered a marital asset. However, it is possible to keep your pension and have it offset with other assets.
Q: Should the custodial parent keep the house? A: This is a great question, because it's one of the most important overlooked questions. The answer is sometimes yes, sometimes no. It's important to pinpoint exactly what it will cost to maintain the home, factoring in taxes and inflation. The next step is to analyze if there is enough money coming in to stay comfortable in the home (in other words, pay the bills each month). Once that has been determined, the advisability of retaining the home must be compared to the advisability of giving up other assets (such as liquid accounts, retirement plans, etc.). 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.
Q: What if I bring a house into the marriage that is in my name only, and I add my spouse's name to the deed? A: In this case, the whole house could be considered marital property. You might have made a "presumptive gift" to the marriage and should consult with a family law attorney to discuss your options.
Q: Is my IRA considered marital property? It's in my name only A: Everything acquired during the marriage, no matter whose name it's in, is typically considered marital property. In some states, the increase in value of separate property could also be considered marital. If you are going through a divorce, it would important to evaluate the financial drawbacks to having your IRA included in the list of assets you retain, post divorce. Remember, the funds in the IRA cannot be accessed before 59 1/2 without paying a 10% penalty for early withdrawal.
Q: I have never worked. Can I get Social Security? A: If your spouse has worked and if you have been married for 10 years or more, than you are entitled to one-half of your spouse's Social Security or your own, whichever is higher-even if you are divorced. Your spouse still retains 100% of his/her Social Security benefit. This is an automatic guarantee and therefore it is not a negotiation point in a divorce.
Q: How do we figure how much child support should be paid? A: 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 expert who can help determine the true potential income of the partie(s).
Q: Do we have to go to court? A: Only if you can't reach an agreement. Then, a court date is set and a judge hears the case. Less than 2% of all divorce cases go to trial in the United States.
Q: What is a QDRO and why do I need one? A: A QDRO (or Qualified Domestic Relations Order) 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 QDRO's 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 specialist.
Q: Do I need to get an attorney? A: Yes definitely! In order to be properly represented and ensure that all legal procedures are followed an attorney is a requirement. A CDFA™ does not give legal advice and provides only financial expertise.
Q: Can my attorney handle the financial settlement? A: Maybe. Some attorneys are extremely knowledgeable about the financial aspects of divorce such as tax issues, IRS rulings, capital gains, and pension issues. However many are not and although they play a crucial and lead role in the divorce process, they may not have the knowledge of the intricate financial details that help you to avoid costly financial mistakes. CDFA™s work closely with attorneys to assist you in achieving the most equitable financial settlement possible.
Q: Why can't my CPA serve as financial expert? A: A CPA usually focuses on the short-term historical financial picture and as such they don't often make future projections. Also unless a CPA is also a divorce practitioner regularly working with the issues surrounding divorce they may not be familiar with the State Family Code or specific guidelines for child support, alimony and pension valuations. It's not to say your CPA cannot do the work, just that a specialist divorce financial practitioner certainly can. Also your CPA may have a conflict of interest if both you and your spouse are clients.
Q: How much do the services of a CDFA™ cost? A: Services are usually billed on an hourly basis under a retainer agreement. On average most cases take between 10 and 15 hours of work to complete. Hourly rates are comparable to those of other financial professionals but less than the average hourly cost of an attorney. We believe that the benefits of retaining a CDFA™ far outweigh the costs when considering the devastating impact of accepting a financial settlement that has not been reviewed for it's long-term implications.
Q: What other services do you offer? A: Divorce Financial Associates, LLC focuses exclusively on the financial aspects of divorce and does not offer traditional financial planning services nor do we sell any product or financial services of any kind. We feel that to do otherwise would be a conflict of interest.
Q: How is my financial information handled? A: Your financial information is STRICTLY CONFIDENTIAL and is subject to our strict PRIVACY POLICY. Only authorized individuals are permitted access to it and only on an "as-needed" basis. After an appropriate length of time all financial information is destroyed.
Q: How do I know if I need a CDFA™? A: In all but the simplest financial situations a CDFA™ can be useful in evaluating the situation and providing information to help with decision making. However a CDFA™ should certainly be consulted in the following situations:
Where net worth exceeds $250,000
When there will be alimony or child support
Where there are retirement assets to be divided (401K, pensions)
If your house is worth more than $250,000
When there is a business involved
Where one spouse has little or no knowledge of the finances or feels that the other may be hiding assets
Where one spouse earns much more than the other
Q: What is Collaborative Divorce? A: In the Collaborative Divorce approach, a professional team supports couples through the emotional aspects of divorce as they resolve the legal and financial issues. Both husband and wife retain an attorney who has had Collaborative Divorce training. The parties and lawyers all sign a commitment to reach a settlement without going to court.
Depending on the circumstances, other members of the Collaborative team may include divorce coaches, financial professionals, mediators, or a child specialist – all of whom are trained and committed.
Collaborative Divorce focuses on the future and puts children first.
