Just like each of the people in a relationship, every divorce has it's own, distinctive personality.
Most divorces are assets and income being separated simply in an effort to be fair and just. But sometimes, a divorce may be more complicated.
 
For example, in some divorces one party might be trying to hide assets or income from their spouse.
Uncovering them becomes the challenge. Other divorces may involve use and/or abuse of the soon-to-be ex-spouse’s separate property. Returning the property becomes an issue. Finally, some divorces see an actual dissipation of assets due to abuses like extramarital affairs, gambling, drug and alcohol abuse, or other bad behaviors. It becomes necessary to quantify the damages and attempt to restore them to the injured party.
 
To quote a colleague, lifestyle analysis is not limited to the rich and famous.
It has wide applications even to those of more moderate wealth. When a couple decides to file for divorce, lifestyle analysis is important. It represents the systematic reconstruction of income/expense inflows and outflow pre- and post-separation.
 
Lifestyle analysis establishes the parties’ marital standard of living, using is as a benchmark in reaching a divorce settlement.
Many recent court judgments underscore a number of universal needs concerning lifestyle analysis. Litigants, divorce attorneys and family court judges must understand and appropriately consider “lifestyle.” Then it’s critical to develop a uniform approach to analyzing marital lifestyle, conveying the data to one’s adversary and ultimately, to the court.
 
Lifestyle analysis has similarities to forensic accounting.
The assumption can be that this is a job for an accountant. However, one can argue that Certified Divorce Financial Analyst (CDFA) is better suited for this work. Most of us are also Financial Advisors. We have training and experience in looking to past earning and spending habits, and also looking ahead to determine if our client can afford to maintain the marital standard of living. If they’re not, we can help them re-imagine their future lifestyle and how to plan for living fully within their future finances.
 
Depending on the client and the objectives that the situation demands, lifestyle analysis can accomplish different things.
Commonly, we most often imagine the analysis being used for finding ways to maximize support, even if it requires using assets beyond earned income. But when earned income is expected rise substantially, lifestyle analysis can also be used to limit future support increases.
 
The objectives can change, but the process of analysis remains the same.
It generally involves the time period immediately before separation. The longer the time period, the more credible the report. The data gathering is consistent, and looks at various common components:

• All bank statements
• debit card statements
• cancelled checks
• credit card year end statements
• net worth statements
• business ledgers
• brokerage account
• contracts

 
Understandably, collecting and entering this data, categorizing it and analyzing it might seem cumbersome.
Fortunately, as CDFAs, we have tools to simplify it. For instance, optical character recognition software used in developing spreadsheets makes the process simpler. And once we’ve done the analysis, that’s when all parties meet (attorney or mediator, clients and advisors) to discuss any adjustments, outlying expenditures, incomes and conclusions the analysis suggests.
 
Lifestyle analysis is a useful tool in the divorce process.
It offers both parties an objective way to demonstrate need. In litigation, it allows a judge to determine the credibility of the reason for a support request. Lifestyle analysis might sound like a tool for the rich and famous. But at the end of the day, it’s just about the numbers. That makes it a useful tool in answering the important financial questions the come with divorce.
 
Want to know more about lifestyle analysis in financial planning for a smarter divorce? 
You can learn more about The Better Half, or schedule a free consultation, by clicking here. 

Spousal support or alimony can be both the most contentious and complicated discussion in a divorce negotiation.
​One spouse may need it, but the other spouse does not want to pay it. It's also a long-term commitment and connection--both being things that a divorce is trying to end. But in most long-term marriages, spousal support is a financial right. So, how can you develop a strategy in asking for your alimony?
 
Know the Rules of the Game
One thing that's not obvious to a layperson is that the rules around spousal support calculations are state-specific.

Some states have a set percentage. Some other states relate payments to the length of the marriage and duration of the payment. And there are states which do not allow spousal support at all. Instead, they designate funds to be paid for a limited time for specifically prescribed purposes. The starting point is understanding the framework of how spousal support is calculated in your area.

Next, factor in the 2017 tax reform that eliminated the tax deductibility of alimony, and made alimony tax-free to the recipient. The effect has been a reduction in the amount or the percentages paid in most jurisdictions.
 
Make Sure You Consider All Income Sources
It's critical to focus on all income sources. This is where a CDFA can be of help. We are used to asking and locating all income sources. Be aware of your date of separation, as this date is often the line of demarcation for dividing both marital assets and income.

Some of the most common income categories are:

• W2, bonuses and Commissions
• Deferred Compensation
• Business Income
• Equity compensation sources from options.
• Royalties, speaking fees, rental income, tip income, employee perks, expense reimbursement.
• Investment income. Oil and gas lease payments, side gigs, home based businesses.

​Review Expenses

• Review previous expenses form different time periods to determine if there are any unusual patterns.
• Note historical debt levels. Has there been a change in borrowing habits? Has there been an increase in home equity borrowing, margin funds or credit card spending? Review credit reports to determine indebtedness that might now be showing up on financial statements.
• Are there going to be additional expenses for minor children, educational medical or special needs support?

Begin the Calculation Process
Here, it's important to review both income and expenses, to identify and correct any unusual patterns, and begin to consider the possibilities.

• Payments--What will be a dedicated amount paid to the receiving spouse as indicated in the statutory rules of your jurisdiction?
• Time--What is the statutory framework of duration in your jurisdiction?
• Are there extenuation issues to consider? These can include but are not limited to: age of parties, health of parties, proximity to retirement, care of other dependents, and stability of employment.
• Over time, will there be a step down indicated for support as children emancipate, or as a spouse seeks more training and enhanced employment?
• Is a lump sum buyout a more amenable prospect?
• Are there other assets to trade or use in lieu of spousal support?

The important thing to recognize is that spousal support is unique to each divorce. And the financial realities are unraveled by each unique data set. No two divorces are the same. 

Want to know more about financial planning for a smarter divorce? 
You can learn more about The Better Half, or schedule a free consultation, by clicking here. 

A new client came to me at the recommendation of her Family Law attorney.
She wanted to consult with a financial advisor while preparing for her mediation. She wasn’t necessarily looking for a specialist, a Certified Financial Divorce Analyst. She just wanted someone who could help her envision her financial life post divorce.

I am a CDFA and understand divorce law in New Hampshire. 
But in this case, that really wasn’t my role. As her attorney defined it, my role was to help her understand what she and her husband owned and how some of that would support her for the rest of her life.

Therein defines the respective roles of an attorney and a financial advisor during a divorce process. 
The attorney will address the legal issues, and the CDFA® will assist the client and his/her lawyer in understanding how the financial decisions he/she makes today will impact the client’s financial future.

Today’s Family Court is a crowded and complex arena.
Family Law attorneys are handling increasingly complex issues such as commercial real estate, business interests, and complex family dynamics with child custodial issues. If attorneys can receive assistance in developing the financial settlement, it allows them to focus only on those legal issues.

Financial Planners have always assisted clients in understanding their financial resources.
Those resources, such as retirement plans, social security, and real estate holdings, all work together in retirement and other exit situations. Divorce is one of those exits with its own legal overlay.

During the divorce process, attorneys and their clients are often asked to present mediators with very clinical financial affidavits. 
These affidavits contain assets, budgets and family statistics, and outline only the very basic facts and financial information of a family’s circumstances. Proofs at trial can be equally empty and perfunctory.

What is lacking is a great deal of “non-legal” information from other disciplines. 
That information would take those same financial facts and incorporate them into a process that includes economic assumptions, tax consequences, and actuarial projections. These projections help all parties involved see the whole picture long term.

Divorce has the possibility of being devastating to the families involved.
But it doesn’t have to be. A mutually agreed upon settlement hammered out by informed parties can help. It has a greater possibility of successful acceptance and implementation than one handed down by a judge.

I've experienced the challenges firsthand.
I went through a lengthy divorce with painful consequences for myself and my children. Since then, it has been an ongoing mission for me to help others avoid the same challenges. And yes, it can be done!

Want to know more about financial planning for a smarter divorce? 
You can learn more about The Better Half, or schedule a free consultation, by clicking here. 

I have advised many clients on divorce and the related tax issues. The majority have been women and invariably, they tell me their husbands may be hiding assets.

These clients also fall into three categories: First, there are those who are looking to divorce in as efficient and friendly way as possible.

They ask for advice on things like property transfers, deductibility of legal fees and alimony payments. The seek guidance on the process and what to expect. They are looking for information that allows them to have better control of the process and hopefully the outcome. They also want to confirm that the assets their husbands are declaring are complete and accurate.

Then there are those who are already divorced.

They need guidance on how to best utilize their settlements. They may be the spouse who did not drive the finances during their marriage and they now need to learn the basics of budgeting, money management and investing. They may also be in the unfortunate circumstance of having to enforce their agreement and to compel their former husbands to pay up overdue payments of alimony or child support.

Not infrequently, however, there’s a third category: women going through down-and-dirty divorces that disrupt their lives in unpleasant and expensive ways.

They may be dealing with assets with which they are not familiar or that might include a private business where they are neither working or an active owner. They are afraid that the income from these investments or businesses may be underreported or even removed and hidden. Lots of them want to know whether it’s worth hiring private investigators to track down any hidden assets. I generally say NO.

I then alert them to an alternative: The information they need to start with is often tucked away in their filing cabinets.

It is their tax returns. They can begin to gather a good part of what they need from the separate schedules submitted with the returns they filed jointly with their husbands.

When they look into those 1040s, they may discover a list of the names, amounts and sources of income that would reveal asset locations and serve as clues as to where to look. Here’s what to look for:

Schedule B. This schedule requires listing the names of mutual funds, brokerage companies, banks and other sources of dividends and interest. At the bottom of Schedule B are questions about the existence of foreign financial accounts and trusts.

The IRS doesn’t ask for a Schedule B from individuals who receive less than $1,500 in income from interest and dividends.

Instead, the IRS tells them to list their totals for those kinds of income on the first page of Form 1040. Different rules, however, apply to taxpayers with foreign financial accounts and those involved in certain foreign trusts. They must submit Schedule B, regardless of the level of dividends or interest income.
​
All is not lost if there’s no listing of dividend and interest amounts on Schedule B.

True, it becomes harder for a wife to discover her husband’s investments or bank accounts. Still, just listing totals of interest and dividend income on Form 1040 reveals that an ex-husband owns assets that generate interest and dividends, at least during the year covered by the return. This, in turn, gives women a starting point for where to look for assets held in their husband’s name.

​Want to know more about financial planning for a smarter divorce? 
You can learn more about The Better Half, or schedule a free consultation, by clicking here. 

I remember quite clearly when I sold the home where I raised my kids. 

It was the only home my youngest son knew with me. It was the home I had moved into just six months before separation from my then husband.

My sons and I spent all of the holidays reminiscing about the times we had there.

There was the trampoline pit that morphed into a fire pit. A back porch that transformed from hosting birthday parties for youngsters into a place of gatherings for teenagers just chillin'. I remember all the conversations that were the victims of my eavesdropping. I remember all the good times and good friends. On our final night, we all sat on the steps and just had a good cry.

The decision to sell the house was purely economic which made it kind of tough!

I loved that house! It had grown into a warm, inviting space. During the holidays all my children’s friends passed through, fondly enjoying being there for the last time. One even told me my back porch had been one of the spaces he had felt most safe.

I remember the Christmas parties with Santa, the celebratory parties for birthdays, graduations, family celebrations and just all the good times.

It's easy to recall all the renovations over the years. From spaces where every wall needed to be mudded, to a space where elegant stone work by local artisans hugged its borders, caressed by Christmas snow.

Selling something that you love this much, that holds your history and memories is never easy!

But every day, I help folks make reasonable financial decisions that make good sense for their futures--but also aren’t easy.

When I work with divorcing couples, the home is one of those difficult decisions.

Do we keep it or sell it? If we keep it, who is the "fortunate" one? Can they afford to keep it?

Even if they can is it the best decision for their financial future?

How do we equalize things for the spouse leaving the home, and how do we help them with the transition?

And how does this affect our kids?

What do we do to help them with the transition of maybe staying in the home that one of their parents is now leaving, or else moving themselves to two new and different homes?

Each of these questions deserve attention, we'll discuss them in detail here in this blog.

​Do I miss my home? You betcha! I’ll probably share more about that, too...

​Want to know more about financial planning for a smarter divorce? 
You can learn more about The Better Half, or schedule a free consultation, by clicking here.