The Not So Golden Years – Together or Solo

lili heartLate in life challenges often produce anxiety about the not so golden years. With the first wave of baby boomers officially reaching retirement age, financial planning issues underscore basic life decisions about staying married and continuing to work. Divorce statistics for the older baby boomers have increased for a variety of reasons, leaving divorced older individuals with unique worries specifically concerning income planning.

Dividing marital property (including retirement accounts) on the cusp of retirement age after a long term marriage equates typically to halving all assets. A long term marriage also indicates a potential entitlement for long term or lifetime spousal support. However, the reality is that lifetime spousal support is viable for only as long as your ex-spouse works. Most courts are reluctant to order your ex-spouse to work past retirement years, simply to pay you spousal support. Clearly, the window between the time of divorce and date of retirement can increase stress to produce replacement income from your half of the marital assets or force you back into the workforce past retirement age.

Greater financial pressures bear down on Boomers

More often than not, divorced baby boomers also face substantial credit card debt, low returns on investments, disappearing pensions, and sinking home equity. In some case, the financial situation may be dire and further include prior actions taken to increase their cash flow to simply sustain daily living needs, such as reverse mortgages or early withdrawals or loans from retirement assets. This is the perfect storm for many financial advisors because there is no easy way to remedy these predicaments based on your limited earning capacity, reduced resources, and longer life expectancy.

It is prudent to start early and examine what you and your spouse expect from retirement and how much you are willing to set aside savings for the future. The factors that may impede baby boomers’ ability to plan and save for retirement are gaps in communication and financial decision-making. The opportunity to improve communication about your retirement and quality of life priorities is not only critical for you to engage in, but significantly important to share with your children. Without such efforts, your competing needs and mismatched expectations are in full display in divorce.

Retirement assets should be the last assets invaded to support your living needs. Most often, your retirement assets are defined contribution plans. In divorce, and only in divorce, you have an opportunity to take out cash from these plans with no 10% penalty before the age of 59 ½ years. If cash is king, this could be a necessity and resource for you to survive financially from your divorce. Furthermore, only in divorce, you may be entitled to collect social security benefits on your ex-spouse’s social security record as early as 60 years old. This strategy allows you to plan and maximize your social security benefits over your lifetime.

Here are some tips for baby boomers approaching retirement to avoid financial disasters, and maybe even divorce:

  • Accelerate retirement savings
  • Re-run your retirement numbers to target working years needed to sustain living needs
  • Re-examine your investment portfolio
  • Make sure you have adequate liability insurance
  • Get your estate planning in order
  • Know your Social Security benefits and learn about how to maximize benefits if either married or divorced.
  • Pay off your debts
  • Evaluate regularly your health care choices and needs (disability and long term care insurances)

It is probably true that two halves may never equal a whole. However, you can stay flexible as to when you take your benefits and how to take your benefits (lump sum or annuity). You should take your time to prepare for the worst by protecting your assets and updating estate plans. And, and lastly, you always can wait a few years before you divorce, or, stay married and wait for your partner to die.

- See more at: http://www.lifehealth.com/planning-divorce/#sthash.RZmcX2jl.aEtZxj5l.dpuf

 

Financial Planning Empowers Divorcees: Interview

Lili Vasileff, president of the Association of Divorce Financial Planners shares financial planning dos and don’ts

pink smileyWed, 07/18/2012 | BY Donald Liebenson

Financial planning in preparation for divorce can be an overwhelming and intimidating process. Lili Vasileff, CFP, president of the Connecticut-based Divorce & Money Matters and president of the Association of Divorce Financial Planners, is a pioneer in an industry that she believed was not addressing perhaps the most intimidating question facing women going through a divorce: “What do I do now?”

She founded her company in 1993 to empower women with the knowledge and tools they would need to successfully navigate their divorce. “What existed then, and what continues to exist,” she told Millionaire Corner, “is a lack of focused resources for individuals going through this transition. (When I started my company) it was clear that women, typically, were  inexperienced, and less knowledgeable about finances, and had very few resources to tap into to gain that knowledge and a better understanding of the decisions she was being called upon to make.”

Working with women who had little experience about their finances, formulating goals or creating a budget (and in some extreme cases not even knowing how to open a bank account), Vasileff was motivated to fill a void left by divorce attorneys. “They were, appropriately, focused on the legal side (of the divorce),” she observed, “dotting the i’s and crossing the t’s. But no one was giving these women a financial planning roadmap. Many were in a state of paralysis, fear, or trauma, and didn’t know how to proceed. I thought that was a huge injustice.”

Here, according to Vasileff, are some of the most common financial planning mistakes women should avoid:

·         “Don’t let the attorney make decisions for you. They are experts in the legal process, but not the experts on your life. They don’t know your goals, fears, or preferences. They navigate a legal process to make sure (the divorce) is fair and ethical. They don’t tailor it to the individual. Women need to participate in those discussions and decisions.”

·         Not understanding tax implications of decisions women are called upon to make.

·         Not projecting forward how your expenses will change and incorporating those changes into your settlement. “If, for example, you lose health insurance,” she noted, “you’ll have to purchase it through COBRA. That expense is vastly different from what you currently pay. “

·         Hang tough. In an adversarial divorce involving children, Vasillef said, she has seen women beaten down over issues of visitation and custody. “It’s a scare tactic,” she said. “By the time talks get around to finances, women are drained of energy and forfeit their financial wellbeing for the sake of their children.”

What can women do prior to the divorce to put themselves on more solid footing? Vasileff recommended:

·         Make copies of all financial records and statements. “This is good practice for everyone,” Vasileff noted. “If something happened to your spouse, would you know where your life insurance policy is? You should have this information on handy anyway, like a first-aid kit.”

·         Make a list of assets.

·          Obtain credit reports on yourself and your spouse. “Sometimes, when people go through a divorce, (the credit rating) holds the biggest surprises.”

·         Pay down as much debt as possible.

·         Set aside a rainy day fund with enough money to cover at least two or three months of expenses.

Money, Vasileff said, is the primary issue in divorce. “Couples need to communicate about money; not just about how much there is, but what their goals and values are.”

The prolonged economic downturn has only complicated the process, with some couples postponing their divorce because their assets are underwater, or there are the needs of aging parents and so-called “boomerang children” returning to the fold to consider.

Now, more than ever, Vasileff observed, “financial literacy is not just for divorce. “For men and women, whether they divorce or not, she emphasized, “information is power.”

Obamacare Could Ease Divorce’s Sting

Ex-spouses stuck without health insurance could find cheaper coverage

By: Elizabeth O’Brien

It’s been well noted that divorce among the over 50 crowd is on the rise, spreading like crow’s feet even as the overall divorce rate has dipped. Financial headaches related to health care can loom large in later-life divorces, experts say. Yet if the Affordable Care Act works as intended, the law could prove to be a game-changer, by easing the financial burden of health insurance for divorced people who get dropped from their spouses’ plans.

About 115,000 women lose their private health insurance every year in the wake of divorce, according to a study last year out of the University of Michigan, and many don’t regain coverage quickly. Many of these women either don’t have jobs outside the home or work at jobs that don’t provide insurance, and some women with employer-sponsored coverage can no longer afford the premiums. Many former spouses qualify for post-divorce COBRA health benefits under their ex-spouse’s plan, but this coverage is both prohibitively expensive and limited in duration, typically to 36 months, advisers say.

The cost of health insurance is one of the many factors that makes “gray divorce” particularly hurtful to the retirement readiness of women. A study released earlier this year by the National Bureau of Economic Research noted that people who are single (for any reason, including divorce) typically lag far behind married people in the amount they’ve saved. Older women who are too young to qualify for Medicare have been particularly financially vulnerable if they lose insurance, since pre-existing conditions often make it hard to find affordable coverage—or any coverage at all—on the individual market.

But post-divorce health-care costs will decline for some Jan. 1, and coverage will become more accessible, starting with the full implementation of the Affordable Care Act. Under President Obama’s signature health-care law, insurance companies will no longer be able to deny people coverage or charge them more due to pre-existing conditions. “It gives the non-working spouse the freedom to move on and not worry about their health,” said Judy Resnick, a private wealth adviser with the Johnston, Resnick, Mittman Group, in Century City, Calif., part of Bank of America Merrill Lynch’s private banking and investment group. “It will take one of the fears out of divorcing—I think it’s huge.”

(Despite the efforts of some Republicans in Congress to defund Obamacare, a report by the bipartisan Congressional Research Service has noted that “substantial ACA implementation” might continue even during a temporary government shutdown. Link courtesy of The Washington Post’s Wonkblog.)

Health-care concerns can be so pressing that some older would-be divorcers wait to finalize their divorce until they turn 65 and are eligible for Medicare, attorneys said. The fear of going without coverage due to a pre-existing condition “sends fear up and down the spines of women,” said Janice L. Green, a family law attorney in Austin, Texas. In the past, some couples would get a legal separation but remain married for the health benefits, but fewer employers these days offer the option of covering the separated spouse, said Lili Vasileff, a certified divorce financial planner and founder of Divorce and Money Matters in Greenwich, Ct. (She added that failure to disclose a change in marital status, including legal separation, to an employer could get the employee in serious hot water, held liable for fraud and required to pay back all insurance charges paid on the separated or ex-spouse’s behalf.)

A factor in alimony talks

Lower prices aren’t the only potential benefit the law offers to older divorcers. Health-care costs are often a factor in divorce negotiations, and the Affordable Care Act might make it easier to calculate costs for ex-spouses who buy individual coverage through the marketplaces, said Erika Salerno, a family law attorney with Kreis Enderle in Kalamazoo, Mich. That’s because these exchanges are designed to make comparison-shopping for policies easier, with more transparent price information—experts have said the experience will be like booking a vacation through a travel site like Travelocity. The coverage offered within each of the metal-tiered policy levels—platinum, gold, silver and bronze—is standardized so that each requires policyholders to assume the same percentage of out-of-pocket costs.

Under Obamacare, many people will be eligible for a government tax credit toward their insurance coverage, and the availability of this subsidy will likely factor into spousal support calculations, said David Tracy, manager of the Tulsa Family Law Center and a member of the American Academy of Matrimonial Lawyers. Indeed, health insurance costs often enter the equation when one spouse owes another spousal support (some states call this alimony, others maintenance). Those with pre-existing conditions often argue for larger support payments, since their costs will be greater.

Starting next year, if a spouse who doesn’t have workplace-based insurance is eligible for subsidies, the opposing side may try to use that fact to argue for lower support payments, Salerno said. For policies bought on the state marketplaces, households qualify for sliding-scale subsidies if members make up to 400% of the federal poverty level, or $94,200 for a family of four, $62,040 for a family of two, and $45,960 for a single person. What’s more, the ex-spouse who’s paying support might become eligible for a subsidy as a result, Tracy said, since alimony is counted as taxable income by the recipient but is tax deductible for the payer.

Many states will also expand their Medicaid program under the Affordable Care Act, raising the eligibility threshold to allow coverage for people making up to 138% of the federal poverty level, or about $15,800 for a single person and $32,500 for a family of four, to use the government insurance program for the poor. It’s possible that this new level will open up the program to more divorced people who don’t get employer-sponsored coverage, and that attorneys for the opposing side might argue for lower support payments on that basis. “I can’t imagine there won’t be a crafty lawyer arguing that,” Salerno said.

More on insurance and divorce

Regardless of how the Affordable Care Act may change the landscape, there are some other health-related considerations for those contemplating or in the midst of divorce after age 50. Here are a few key factors to consider:

Insurance premiums . At the start of divorce proceedings, Green advocates obtaining a temporary court order to ensure that all insurance premiums get paid as usual. This goes for health insurance, where one spouse could drop the other; life insurance, whose value can be used to secure alimony payments; and long-term-care insurance premiums.

Lost future caregiving . In some instances when a longtime couple is divorcing, Green has worked into the divorce agreement the value of future caregiving that would have been provided by the departing spouse. “How do you measure the sense of security, knowing someone is there?” she said. While it may be harder to quantify the emotional peace of mind, there are ways to quantify the financial benefit of future caregiving that becomes lost to an ex-spouse, she said. (She’s included this in a divorce agreement even when the couple has adult children and when neither spouse is sick.) If they don’t already have it, Resnick advises her divorcing clients to buy long-term care insurance if they can pass medical underwriting.

Long-term-care coverage . If a couple already owns long-term-care insurance together, they need to research what happens to their coverage in a divorce. While couples in the past were sometimes issued a single policy for both lives, most of today’s policies are issued separately, one for each member, said Jesse Slome, executive director of the American Association for Long-Term Care Insurance. With separate policies, the parties must notify the insurer so they can get billed separately, and they’d likely retain any spousal discount, Slome said. It gets more complicated if the couple has a so-called “shared care” rider on their policy, which allows one spouse to tap the other’s benefit pool, he said, noting divorcing parties should consider dropping that rider.

Power of attorney . If you’ve named your soon-to-be ex as your health-care power of attorney, you’ll need to change that to another person who you’d like to make medical decisions for you if you’re no longer able to do so yourself.

Original Article: http://www.marketwatch.com/story/obamacare-winners-the-recently-divorced-2013-09-25

Women In Transition

Meeting the challenge to develop adequate retirement income streams

by Lili A. Vasileff, CFP, CDFA

Ms. Vasileff is founder & president of Divorce and Money Matters, LLC. She is a nationally recognized fee only financial planner and independent investment advisor. Connect with her by e-mail at lili@divorcematters.com 

Women have unique challenges facing retirement and handle retirement preparation differently in general than men. Women on average live longer than men, experience a longer period of time as single adults, have lower annual retirement incomes, face greater health care costs, and carry greater care giving responsibilities.

Despite many gains in the workforce and greater consumer purchasing power, women generally have less confidence than men when preparing for retirement. Lack of confidence is coupled with lack of adequate planning, which leads to a significant gap between retirement income security needs and their response to them. Marketing to women in transition has become popular as a targeted demographic who are vulnerable to financial risk. This is in large part due to the traditional employment histories of female Baby Boomers as well as the difference between genders concerning money management. Time and time again, surveys reveal that women and men use very different strategies to find a balance between work and their personal lives.

Women continue to be the primary users of formal reduced work arrangements, which often carry high career penalties. According to the Bureau of Labor Statistics, Current Population Survey, Annual Averages, 2003:

  1.  “Women outnumber men by 2 to 1 in part time jobs; many lack employer-sponsored benefits and retirement plans.
  2.  Women are out of the work force more than men due to pregnancy, childcare and care giving for elderly parents. On average, women spend ten years away from the workforce versus one year for men.
  3.  For every year a woman stays out of the workforce, it will take her five years to recover lost income, pension coverage and career advancement. Many women are homemakers who have no entitlements whatsoever.”

Trying to Catch Up

Adding to lower overall earnings is a diminished capacity to catch up in pay. Pay parity has not budged much from early 1970s to now. “Women are almost half of the workforce. They are the equal, if not main, breadwinner in four out of ten families. They receive more college and graduate degrees than men. Yet, on average, women continue to earn considerably less than men. In 2010, female full-time workers made only 77 cents for every dollar earned by men, a gender wage gap of 23 percent. Women, on average, earn less than men in virtually every single occupation for which there is sufficient earnings data for both men and women to calculate an earnings ratio”, the study Workforce Investment System Reinforces Occupational Gender Segregation and the Gender Wage Gap by Institute for Women’s Policy Research (June 2013).

Shorter work tenure means lower overall earnings, smaller pensions, and reduced Social Security benefits. Because the pension benefit picture is bleak for many women, the majority of older widows living alone end up relying on Social Security benefits as their primary source of income. Divorce and single parenthood also add to significant declines in the standard of living for custodial mothers versus men immediately in the year following divorce. Dividing one household into two households is a challenge that demands compromise and contingency planning for unanticipated financial needs. Yet it is often impossible to establish any safety net for custodial mothers who are unemployed and incur the most minor of financial emergencies due to lack of savings, zero income, and no access to credit. Defaults in payment of expenses, child support and alimony, as well as, declines in asset values are rampant in a poor economy.

Women can be caught on the other side of the fence in a divorce. Women paying alimony to their spouses increasingly are becoming a real factor in divorce. When a spouse becomes unemployed, disabled, laid off, or forced into early retirement, women who held supplemental jobs (even part time) now find themselves as the only wage earner in the family. Often divorce results from unintended consequences of a wife becoming the breadwinner while still maintaining the primary homemaker role. Nearly one in three married women makes more money than their spouses do, which rarely is greater than $75,000, according the Bureau of Labor Statistics.

Finally, women today tend to be more involved with care giving, the so called sandwich generation, caring for both young adult children and elderly parents. In addition to a strain on one’s capacity to work full time, care giving is expensive, time consuming and labor intensive. It is not unusual for couples to have to choose between saving for college for their children, saving for their own retirement, or paying for nursing care / home care for an elderly parent. In tough economic times, these choices are severely limited and imperil one’s future financial security.

Proactive Planning

Women can be caught on the other side of the fence in a divorce.  Women paying alimony to their spouses increasingly are becoming a real factor in divorce.  When a spouse becomes unemployed, disabled, laid off, or forced into early retirement, women who held supplemental jobs (even part time) now find themselves as the only wage earner in the family

Approaching retirement years calls for proactive planning by women in order to survive financially. Women quite simply cannot afford to plan for “if and when”; they must assume responsibility for their own well being now. A call to action is needed.

If you are still working, women should take these steps to maximize any financial benefits that benefit them in future years:

  1. Coordinate retirement contributions with your spouse and ensure beneficiary designations provide for survivor benefits
  2. Evaluate and plan strategically how and when to maximize Social Security benefits between you and your spouse
  3. Be sure to stay in a job long enough to qualify for retirement benefits and social security benefits based on your total quarters of earnings
  4. Be careful to track down all prior employers’ retirement benefits and rollover over any accounts. Find out if you might be due any pensions and be sure to inform them of your whereabouts when you are reach retirement age
  5. Determine if any employer benefits are portable if you leave your company
  6. Negotiate for any severance benefits that cover health care costs And, even if you are not working, women should:
  7. Prioritize your future financial well being above your young adult children’s (they are younger and have more opportunity to establish themselves)
  8. Understand the rules for eligibility for Social Security benefits if filed on your ex-spouse’s record (stay married for at least 10 years)
  9. If divorced:
  • Track all tasks required in a divorce agreement to be sure they are executed and completed within a reasonable time frame. Enforcing compliance is costly in legal fees and puts assets at risk if not under your control
  • Create a timeline for any post divorce tasks that are part of the agreement, such as to pay off debts; divide qualified pension accounts via a qualified Domestic relations Order; transfer titles to assets; enroll in COBRA; etc. Ensure the intent of the agreement is executed and that your share of total wealth is now yours to manage
  • Be sure to ask for and exchange financial information if ordered in your divorce agreement – especially, if your support is based on a percentage of income, your ex-spouse’s income is variable, or infrequent. You may be able to modify support received if your ex-spouse’s income has risen
  • Keep a schedule for the vesting of your (ex-) spouse’s deferred compensation benefits you are entitled to receive when they become exercisable. Do not forfeit these assets simply because they are difficult to value, intangible, or sustain a forced connection into the future with your ex-spouse
  • Set aside savings as best as possible from support paid to you or through your budgeting to provide for your own future savings. Additionally:
  1. Squeeze every dollar from major financial purchases – negotiate best terms and discounts
  2. Evaluate how to make your assets throw off greater cash flow:
    • evaluate reverse mortgages that yield you cash flow
    • borrow against cash value in whole life insurance policies which is nontaxable
    • deploy your assets such as renting out properties
  3. Understand how to invest and not to be risk averse to investing for growth and appreciation; understand the impact of inflation and taxes on investments
  4. Consider that you will have to work longer in later years

“From 2008 to 2018, the women’s civilian labor force is projected to increase by 9.0 percent, or 6,462,000. The number of women aged 65 to 74 in the civilian labor force is projected to increase more than the number of women in any other age group—increasing by 89.8 percent, or 2,030,000. Although projected to be the smallest in number among all age groups, the number of women in the civilian labor force aged 75 years and older is projected to have the second highest increase—61.4 percent, or 336,000.”

In order to develop and grow adequate streams of income during retirement years, women need to plan for living longer than their mothers, being single, and stretching every dollar. There are many diverse opportunities all throughout one’s life to maximize cash flow, minimize taxes, enhance savings, and manage spending. Strategies for cautious fiscal management evolve based on need, preference, and risk tolerance. Women should be prepared to learn as much as possible to assume responsibility for their financial future to stay prepared for both financial opportunities as well as financial disruptions.

Endnote 1. Bureau of Labor Statistics, March 2011 Spotlight on Statistics, “Women at Work” .

Original Article: http://www.lifehealth.com/women-transition/

Published by: Life and Health

Divorce Your House When You Divorce Your Spouse

Divorce Your House When You Divorce Your Spouse

Feb 10, 2012

Marcie Geffner

HSH.com

Divorce is never a happy circumstance, and the financial necessity of selling your home as a result can compound the emotional stress.

Still, even if you’re inclined to keep your house post-divorce, selling is oftentimes the best solution, even if it means taking a loss, according to Carl Palatnik, principal of the Center for Divorce and Finance, a financial planning firm in Melville, N.Y. Indeed, Palatnik says, the choice to sell is much more common today than it was in the past.

Unfortunately, once you’ve made the decision to sell, all your questions haven’t been answered. Here’s a list of factors to consider once you’ve decided to sell your home, post divorce.

Proceeds. One of your first questions should be how much money will the sale net, who will get what share of the total and what will the tax implications be? That’s according to Jerry Cohen, principal of California Divorce Financial Planning in Woodland Hills, Calif. He says he advises spouses to run the numbers before they put their home on the market.

If your mortgage debt is more than value of your house, you’ll also need to think about how you’ll afford another place to live and whether your lender might try to collect the deficiency on y our loan, a prospect that’s allowed in some, though, not all, states.

 

 

Timing. Another high-priority question is whether to sell your house immediately or sometime further off in the future, according to Lili Vasileff, president of Divorce and Money Matters, a financial planning firm in Greenwich, Conn. Factors to consider include your children’s ages and local housing market conditions. If you have school-aged children or home prices in your area still haven’t begun to recover, it might pay off to delay the sale.

Occupancy and decision making. The next issue is whether you or your spouse will continue to live in the house until the sale closes, and how much decision-making authority each of you will have during the sale, Vasileff explains.

“If the Realtor says you need to paint the front door, put in flowers and do it by tomorrow morning and the other spouse is traveling in Asia, it becomes very difficult to track them down and make sure they have a response time that’s reasonable,” she says.

Maintenance and repairs. One way to approach interim property upkeep as well as any costs associated with prepping or staging your house for sale, is for you and your spouse to establish a landlord-tenant relationship, Cohen suggests. While no landlord-tenant relationship exists in a legal sense, those roles can help to “frame who should do what,” he says.

Trouble selling. You’ll also need to plan for what will happen if your house doesn’t attract a buyer, Vasileff says.

“There has to be language that if the house doesn’t sell within — pick a time — six, eight, 12 months, the parties will decrease the price by XYZ or meet with a Realtor and re-evaluate why the house isn’t selling,” she says.

This might seem like grounds for a major disagreement, but Vasileff says most divorcing couples want to move on with their lives, not squabble about the sale of their home.

“The house has been, historically, their largest asset,” she says. “They want the decision made. Whether they divide it, sell it or offset it (with other assets), it’s a big piece of the puzzle.”

Cooperation. Finally, you and your divorcing spouse naturally have different priorities. Still, cooperation is the most crucial aspect whether you’re trying to decide on a sales price or who will live in the home until it sells.

“You want a clause that says both parties will be reasonable and not withhold permission in order to negate the sale or defeat the intent of the agreement, so they won’t purposely be obnoxious or cruel,” Vasileff says.

About the author:

Marcie Geffner is a freelance real estate reporter and writer whose news stories, features and columns have been published by dozens of newspapers, magazines and Web sites. She is a former managing editor of Inman News, senior editor of California Real Estate magazine and board member of the National Association of Real Estate Editors (NAREE).

 

Advisers Brace for Correction

By: Liz Skinner

Published By: Investment News

May 12, 2013

The extended rally in stocks has led financial advisers to take steps to prepare portfolios for a pullback.

Advisers are also actively helping clients curb their enthusiasm – and fears – about the new peaks in the Dow Jones Industrial Average.

The Dow industrials closed above 15,000 for the first time last Tuesday and closed last Friday at 15,118.49, up 1% for the week.

Some advisers are building up client cash stockpiles and moving larger portions of client portfolios out of equities.

In fact, $4.3 billion flowed out of stock mutual funds over the seven-day period ended May 1, according to the Investment Company Institute.

That is the first time that the sector has seen outflows all year.

“People are kind of spooked from what happened in 2008 and saying, ‘I’m not getting fooled again,’” said financial adviser Paul LaViola of RTD Financial Advisers Inc.

He is recommending that clients take profits and sock away the cash they will want access to over the next two years in highly liquid accounts.

Mr. LaViola is also doing some re-balancing into short-term bonds.

Jeffry R. Miller, chief investment officer of Armor Investment Advisers LLC, said that he isn’t selling equities now, but he isn’t reinvesting interest and dividends into them, either.

Those payoffs are going into short-term fixed income and short-term corporate investments.

The firm had already trimmed its long-term bonds over the past year, Mr. Miller said.

He is still investing new money into equities, but very carefully.

For instance, emerging markets have trailed the U.S. equity markets substantially over the past four months, suggesting that there is more value to be had there in the long term, Mr. Miller said.

“We’re still making some equity investments, but being slow and deliberate about going into anything in the equity space,” he said.

In reaction to phone calls from investors and as part of regularly planned portfolio reviews over the past month, advisers have been warning investors to expect a pullback. Part of the message is positive – reminding clients that they have already benefited from the run-up.

“I try to take the emotion out of investing by focusing on valuations,” said Jeremy Kisner, an adviser and president of SureVest Capital Management. “I tell them to tune out all the stories in the news.”

Over the past month or two, clients have worried that the U.S. equity market is rising so fast that it is destined to crash.

The market will go down, Mr. Kisner tells them, but not in the way it did in 2008.

“We definitely could and probably will have a 5% to 10% correction, he said he tells clients. “But I think you are worried about having another 2008, and I don’t think it will happen.”

Mr. Kisner backs up his declaration with the following logic: Equity valuations are responsible; company balance sheets are stronger than they have been in decades; the U.S. economy is growing, if slowly; and U.S. companies are growing even more because they are exporting goods to China, India and other countries.

He also reminds clients that their portfolios are hedged so that there is built-in protection for any downturn greater than a typical 5% to 10% correction.

The Dow industrials are up about 15% for the year (25% over the past 52 weeks), and up 6% over the past two months.

“We tell clients, ‘Yes, the markets are reaching all-time highs, but we anticipate a pullback that would be healthy for any markets,’” said John West, an advisor with Spraker Wealth Management, Inc. “Markets can’t continue to go up every day.”

A 40% rise on any investment touches off a conversion among Sraker’s financial professionals about whether it is time to take the gain and reinvest the funds elsewhere.

Over the past three months, the firm that has shold shares in Altria Group Inc. (MO), Ford Motors Co. (F) and The Proctor & Gamble CO (PG), according to Mr. West.

Clients who have been with the firm for a decade or longer are easiest to keep on an even keel, he said.

New clients in the past year typically are almost all in cash because they have been out of the market for four or five years.

“With those clients, we are tempering expectations and explaining that when we get a pullback, we will start putting a percentage of their cash back to work,” Mr. West said.

Lili Vasileff, a financial adviser and founder of Divorce and Money Matters LLC, said that a large client recently e-mailed her asking what she thought about “the bubble,” and included a link to a video that was “full of gloom and doom.”

She reminded the woman that her diverse portfolio is designed based on historical performance in both bull and bear markets.

Ms. Vasileff also told her that any holdings that declines 2.5% is re-evaluated to see if any changes are needed.

Ms. Vasileff doesn’t contact clients with market news because she has found that the action itself causes them to ask if they should be afraid. Instead, she sends out a monthly newsletter with information about other issues.

Scott, Brewster, President of Brewster Financial Planning LLC, said that he hasn’t heard much from clients.

“I think clients are holding their breath and afraid to mess up the recent good fortune.”

 

The New Realities of Retirement and Divorce

Single boomers now represent close to one-third of all retirees

By Lili A. Vasileff, CFP, CDFA

Ms. Vasileff is a fee-only Certified Financial Planner™ professional, a Certified Divorce Financial Analyst, and President of Divorce and Money Matters, LLC with offices in CT and NY. Lili is a nationally recognized expert in financial planning for divorce as a practitioner, writer and speaker. She is the co-author of “The Ultimate Divorce Organizer: The Complete, Interactive Guide to Achieving the Best Legal, Financial, and Personal Divorce, and co-authored a chapter “Complex Compensation Issues In Divorce” in the book “Forensic Accounting in Matrimonial Divorce”, published by Wiley & Sons in 2006. Lili has many years of experience and an interdisciplinary knowledge of legal and financial issues. She brings expert analysis as well as clarity to complicated marital property and complex compensation issues for high net worth divorces. She is a qualified financial expert in CT, testifying to issues on lifestyle analysis, longevity of assets, and safe withdrawal rates. Her website is www.divorcematters.com.
 
Divorcing after age 50 is different and creates a sense of urgency for planning to survive financially. Most divorcing Boomers nearing retirement age will likely not have enough money to live as well as they had during their marriage years. Most advisors already face the disturbing prospect of telling their clients they may outlive retirement income. Dividing a marital estate just on the cusp of these years makes the primacy of the retirement income issue even greater. The shorter time for post divorce financial recovery requires a heightened need to generate income, or, a better understanding of the complexities of assets received in the property division.Wealth clearly makes a difference to retirement preparedness and to planning opportunities. Also, Boomers’ expectations about latter years play a role. Men are more likely than women to say they are very confident about several of the various financial aspects of retirement. More so than women, men feel that they are doing a very good job of preparing financially for retirement. Women typically say they do not know how much they need during retirement years and are more inclined to underestimate spending during the first five years prior to retirement. This underscores unique planning opportunities for divorce financial planners to address during the divorce process.

Financial Planning Opportunities

About one third of Baby Boomers are moving into old age as singles, due to divorce, being widowed, or never having married. Health care and outliving one’s assets in retirement are the two primary anxieties expressed by Baby Boomers. Divorce financial planners can help alleviate divorcing Boomers’ fears in certain key areas during the divorce process. Baby Boomers, especially those who are single, need expertise in financial planning to address:
  • Longer life expectancies
  • Intention/Requirement to work past normal retirement age (NRA)
  • Health insurance and gaps in coverage
  • Investment decisions for longer life expectancies
  • Declining Social Security and Pension benefits (strains on social system)
  • Estate planning for nontraditional (cohabiting) and blended families
 

Health Care

Baby boomers are encouraged to plan for future health care issues. The health conditions of those divorcing later in life are major influences on all stages of the divorce process. They should discuss cost, accessibility, quality of service, reputable service providers, as well as, perform a cost-benefit analysis of going without health, disability, or long term care insurances. The rationale for examining health care costs comes down to practicality, risk, and certainty.Men and women equally expect to receive retiree health insurance through an employer. In fact, workers report they have postponed retirement by a few years to retain or be eligible for an employer’s health insurance plan. The likelihood of an employee being uninsured is tied to the strength of the economy and the unemployment rate, but uninsured workers reported multiple reasons for not having coverage. Each year, many divorcing adults under the age of 65 lose their health insurance coverage for any number of reasons, with the most important being that they may not qualify for COBRA, (their employer is ineligible or as an individual), cannot afford COBRA, or they run eventually out of benefits. Demographically, women in particular face a higher risk of being uninsured.
In divorce, the risks of not being insured is one challenge; the risk of a divorced nonemployee spouse running out benefits under COBRA shy of qualifying for Medicare is a separate risk. This latter risk calls for considering seriously the timing of divorce
In divorce, the risks of not being insured is one challenge; the risk of a divorced nonemployee spouse running out benefits under COBRA shy of qualifying for Medicare is a separate risk. This latter risk calls for considering seriously the timing of divorce or for seeking a legal separation. In many cases, spouses’ with medical histories may feel either held hostage in the existing relationship or thwarted from entering a new one.The cost for health insurance may be exacerbated further if pursuant to divorce, an individual’s credit rating has suffered or an individual is dangerously dependent on support payments that are frequently paid late or go unpaid. The recipient spouse may be seriously challenged to secure health insurance for self and / or family when support is received infrequently or late, coupled with increasingly poor credit rating, limited access to credit, and a finite pool of assets (the settlement).Ex-spouses who fall mercy to these dire consequences have little success in applying for financial aid, state assistance or Medicaid if they have a legal order that states they are to receive “X” dollars of income (aka support) which exceeds eligibility income limits. Financial planning for contingency such as fault, unemployment, and disability, suggests allocating assets for liquidity, safety, and accessibility. Escrowing assets with an impartial third party may be another strategy to protect for health care costs. If health care is a priority for Boomers, it should not be dismissed easily as a major point of negotiation during divorce. Assets subject to division may address who retains and pays for health insurance, life insurance, disability insurance, long term care insurance, and unused sick pay.

Social Security

Baby Boomers will retire with fundamentally different work and earnings histories than prior generations. Retirees also need to plan for longer life expectancies. A married woman contemplating divorce today needs to think about extending the length of her marriage to 10 years. For marriages that last over 10 years, chances are that her husband’s lifetime earnings are greater than hers, and her benefits on his Social Security record as an ex-spouse (or divorced survivor) may be more valuable to her than those based on her own earnings record. His benefits are not reduced. One should examine all factors concerning the timing of when benefits are first taken, the amount of spousal benefits, and the individual’s projected mortality to create a strategy that effectively maximizes the lifetime value of Social Security benefits.

Pensions

As Boomers divorce closer to their retirement years, many pensions are no longer defined benefit plans with annuity payouts over life. Individuals are responsible for investing and managing their profit sharing accounts.The responsibility for investment risk has been shifted from the employer to the employee and ex-spouse – leaving room for important planning advice on allocation, diversification, risk management and analysis of cash flow. The planning challenge is to project cash flows: (1) based on investment scenarios to replace earned income, as well as, (2) based on developing solutions for creating cash flow, which may include reverse mortgages, annuitizing assets, decreasing expenses, etc.A divorce financial planner may help manage the ex-spouse’s expectations surrounding receiving support, sustainable living expenses, and longevity of assets during retirement years. Emotions surrounding money management and fear of the future are obvious and frequent impediments to a smooth divorce process.

Summary

Many dimensions of financial challenges face Boomers who divorce. With an interdisciplinary knowledge of the legal context of divorce, a divorce financial planner provides Boomers going through divorce with forward looking analysis for not only transition to single life, but transition into older stage of life with different (more finite) opportunities for financial remuneration, savings, and lifestyle. While many Boomers never anticipated becoming divorced in later years, specialized divorce financial planning can ease their anxieties and fears by evaluating options during the divorce process to foster confidence about the future.

Lili Participates in Panel about Financial Neutral Professional in Collaborative Cases

The Financial Neutral Professional in Collaborative cases

 

CLEBC: Getting Started in Interdisciplinary Collaborative Practice training

November 26, 2012

 To see the raw footage of this Panel Discussion, please Click Here:

Moderator:  Doreen Gardner Brown, BHEc CFP® AFC

 

Panelists:

Lili Vasileff, CFP®, CDFA™, MIA – Greenwich, Connecticut

Amy Whitlatch, CFP®, CDFA™, MBA – Cincinnati, Ohio

Donna Smalldon, CFP®, CDFA™, MBA - Portland, Oregon

Judith Sterling, CDFA™, CPA – Santa Rosa, California

Eva Sachs, B Comm., CFP®, CDFA™ – Toronto, Ontario

 

All panelists are members of IACP, many with leadership and training roles in the collaborative community.  Each professional has been a Financial Neutral on many collaborative cases and it is this expertise that was featured in the panel. The volunteer contribution to this CLEBC training by this exceptional group of collaborative colleagues is acknowledged and appreciated.  The excellent technical and professional support of CLEBC staff for this project contributed to its success – thank you Mary Kingston, Meredith Woods, Meisze Man and Brian Quan. The panelists and facilitator listened to the recording to create this reference document for participants.

 

During the presentation, panelists shared ideas about their work in the Financial Neutral role. While the consulting financial professional plays an equally valuable role and one that is likely more familiar, for example pension actuaries, it is the work of the Financial Neutral that was addressed.  The Financial Neutral, a financial professional that can be a Certified Public Accountant/Chartered Accountant, Certified General Accountant, Certified Management Accountant or a Certified Financial Planner, can be involved in the collaborative process from the start and continuing throughout until the process is concluded or for a specific purpose during the process.  On some occasions the Financial Neutral will continue to work with one of the clients, with the agreement of all concerned, for a specific task to be completed in a specified period of time after the process.

 

DGB: What is it that Financial Neutrals do that makes the professional lives easier for lawyers and mental health professionals?

Amy:  One of the main things we can do and probably historically what has been an entrée for many neutral divorce financial planners onto cases is that we can efficiently and effectively do a lot of the detailed financial tasks that an attorney may not like to do or may not be well equipped to do and detracts their focus from the most important things that attorneys do.  Things like client budget creation and organizing financial information take time away from the important legal work. The Financial Neutral can make a lawyer’s professional life easier by taking off the layers of financial work that are subsidiary to the important legal work that attorneys are doing.

 

Donna:  As a neutral, the attorneys can lean on us to help facilitate the conversation and strip away or unpeel where the emotionality exists.  We can help assess, if coaches have not yet been involved, and recommend to the attorneys that the clients would be well served by bringing on mental health professionals. Some attorneys are concerned about liability and bringing Financial Neutrals onto cases can lessen that responsibility.

 

DGB:  Just how exactly is the work of the financial done?  Who does it?  How is it done?  What does it look like?  How long does it take?

Amy:  Amy’s Collaborative Practice Continuum is at 11.1.59 in the training materials.  In Cincinnati, this chart is often used to ground clients in the process because we have noticed that clients often want to jump to the “resolution stage” directly after the “goals and interests determination” stage.  Financial Neutrals may be brought in at any stage.  The various services that the Financial Neutrals can provide at the different stages are noted in the continuum. Often we are invited in at the “option evaluation” stage.

 

The Financial Neutral’s work can begin with helping clients clarify their financial goals and then moves into the information gathering and information evaluation stage.  Financial Neutrals can gather and organize all the financial information that will be used in the collaborative process. Once confirmed by clients it is distributed to the attorneys.

 

Clients may have both joint and individual meetings with the financial neutral.  At the next stage, the financial will be involved in option generation and option evaluation.  Short and long term implications will be discussed.  Once resolution is achieved, the financial may be involved in assisting clients with transition items.

 

Amy noted that the continuum helps client to see where they are in the process and where the process is going.

 

Jude: Jude’s Collaborative Divorce Financial Professional Timeline is at 11.1.47 in the training materials.  She is experiencing that clients are often coming to her first.  She does a complete work up of all the financial pieces to come up with a complete report on the financial situation, with supporting documentation.  She meets with clients one time alone, each of them separately, to go over what their financial concerns and their goals and interests are and this is included in her report.  It isn’t just collecting information it is educating clients and attorneys about the clients’ financial situation.  She assembles all the documents and supporting statements and information into a report that is then used in the process.

 

Bringing financial reality to the sessions with clients is an important part of her work.  Financial Neutrals facilitate the conversation about finances and the attention is on the neutral rather than either of the attorneys.  When she is in the room with the clients, the focus can be on her rather than either of the attorneys about sensitive issues related to the financial situation.  Jude noted that the financial reality role is vital and often times it is easier for clients to hear about financial reality from the Financial Neutral.

 

Eva:  Eva finds that education is an important function of the Financial Neutral. Sometimes one client is less sophisticated and the Financial Neutral can be effective in providing a refresher course to get this client up to speed. She finds that when clients have the same understanding of all the aspects of the financial situation everyone is very clear going into the options generation stage.

 

The kind of discussion we can have about immediate financial needs is very important.  When one person has moved out and there is still no agreement, it is very helpful for the Financial Neutral to be involved in helping clients create short term budgets so that each client can live on the funds that are available. The longer this period is, the more critical and useful the involvement of the Financial Neutral.  There is good value of having the Financial Neutral be involved in the “in between” or transition budgets that clients will need to have.

 

DGB:  Family Law software is often used by Financial Neutrals.  This was developed in the US and is used extensively.  How do you use this software?

Jude:  She uses the Family Law software to prepare the personal financial statements and to do projections.

 

Donna:    She sends invitations to clients to populate the worksheets in Family Law software so that clients begin to own the numbers in their budgets. She uses a projector with a screen during brainstorming to illustrate both short and long term projections so that attorneys and clients can easily see the impact of the various options under consideration.  Impasse is often alleviated by showing both short and long term projections.

 

Donna thinks the collaborative process is all about self-determining clients. The Financial Neutral needs to remember this and give clients the opportunity to come up with the solutions.

 

Amy: Long term projections are not always done. This tool is very powerful but there may be times when the long term projections do not add useful information. Short term analyses are frequently provided.

 

DGB:  Who can do this work?

Lili: Lili refers to the Financial Neutral as a place mark in the collaborative process. We are a safe harbor for all the “what ifs” that will be played out during the process.  Respect for the legal process is a given and in addition, the Financial Neutral has to be expert in comprehensive personal financial information.  We are supplementary to the legal process and we must be sure that we hold true to the neutrality.  Neutrality is essential.  Fee only, placing clients’ interests first, and no selling of products or giving investment advice, are the prerequisites for how Financial Neutrals maintain this neutrality.  The Financial Neutral might be described as a quarterback in the process in that we hold all the information but will act in consensus with the entire team member as consensual decisions about property and support issues are made.

Financial Neutrals must be trained in Collaborative Practice, must hold true to our financial licensing bodies and abide by the protocol and standards of practice of their respective financial professional organizations and the IACP standards of practice.

 

 

DGB:  For some time, IACP has had standards of practice that Financial Neutrals are asked to embrace and all the panelists adhere to these standards in their collaborative engagements.

Donna:  IACP requires a professional designation – CFP, CPA or CA, CGA, CMA for the Financial Neutral.  Getting these designations is a rigorous process and to keep the designations requires annual continuous professional development/education.  All five have disciplinary processes in place.

 

Many Financial Neutrals will have a CDFA or FDS designation, which can be regarded as an add-on that allows the CFP, CPA or CA, CGA, CMA to learn more about specific content that applies to the divorcing client.

 

Jude:  Jude’s collaborative practice group requires that members be a CPA, Chartered Financial Consultant or a CFP.  There are differences between the CPA and the CFP.  CPAs can come from a tax or audit background, and she finds her audit and tax background important in her work whereas the CFP may have more expertise in financial planning.

 

 

DGB:  Many Financial Neutrals belong to the ADFP.  How do you get to be a member?

Lili:  The Association of Divorce Financial Planners (ADFP) organization’s mission is to heighten awareness of benefits that Divorce Financial Planners bring to the divorce process.  The ADFP is providing a leadership role in this niche profession for divorce financial professionals.  The goal is to have trustworthy professionals for divorcing clients that will hold themselves to a high standard of practice, protocols, and ethics.    http://www.divorceandfinance.org

 

Amy:  There are lots of applicants who do not meet the Membership Level criteria.  A depth of tax understanding and a deep understanding of financial planning are essential.

 

Membership in the ADFP is not for those who are looking to gather assets or sell product.  It is a gathering of financial professionals who are competent and serious about the divorce financial planning profession and are willing and able to provide services for an hourly fee.

 

DGB:  The Vancouver based study group, founded in 2010, while not formally linked to the ADFP uses its membership criteria.  www.divorcefinancialplanners.ca  It is this group that produced the two checklists in the materials at 11.1.61 and 11.1.65.

 

DGB:  What is the value proposition of the divorce financial planner?

Lili:  The value added piece could be discreet to a specific task or entail a comprehensive engagement throughout the whole process.  There are a myriad of tasks that will be defined by an engagement up front.

 

The Financial Neutral’s role is multi-dimensional.   There are three steps:

1. Collecting the financial information, including clients’ emotions about this financial information and making sure that the information it is as accurate and comprehensive as it can be.

2. Finessing how the financial information is analyzed and applied to different options or scenarios.

3.  Making sure that all the clients’ priorities and preferences are addressed.  Priorities can vary depending on the outcome of different scenarios and will include tax analysis and planning, cash flow and budgeting, debt repayment, funding college education, etc.

 

The Financial Neutral brings all the “what ifs” into the discussion.  What if you tapped into a different asset, what would be the result?  What if you increased income, decreased expenses?  We just don’t input numbers blindly into a software program; because of our experience and knowledge, we can capture critical information and nuances as well as pull apart all the threads holding together any situation.  Our job is to answer every what if that clients or other team members have.

 

We wrestle with the questions raised to find out what is really being asked.  We can be the neutral and field all the financial questions in one place.  Our job is to help clients discover what the opportunities are.  We can ask, are you sure you want to do this?  Or, might this be something that could work better to achieve the desired outcome?

 

DGB: How does the work of the financial neutral complement the work of the lawyers?

Amy:  By describing a current case, the interaction of the Financial Neutral and the attorneys were illustrated.  For Amy, the Financial Neutral and the attorneys’ pieces are woven together in collaborative process.  In the case she described, she had been involved from the beginning, so she was able to do a cash flow tracing to determine the money that had been used both inside and outside the family.  This was helpful because the money that was spent on an affair was documented for use in the process.

 

The coach set the table for how the clients and the professionals would look at the financial situation and have the legal framework applied so that the clients could come up with options for resolution.  The coach described the long term projection as the trail head and not the exact trail.  The coach provided an important resource as this case was highly charged from an emotional standpoint.

 

All the professionals danced together very well to bring a resolution for these clients.  The neutral voice of the financial was used to bring out crucial information while the coach was key in creating a safe container for the difficult conversations.

 

DGB:  Clients often question the need for attorneys. 

Amy:  All of us on the panel have experienced clients who are hoping to work just with Financial Neutrals to resolve the issues of their divorce.  We must clearly describe the need for the legal advocate each and every time.  We gather the info, organize it, analyze it and get clients and their lawyers to the point where the discussions about options can take place.

 

Lili:  Financial Neutrals have to be trained in the collaborative process and have enough experience with divorce cases so that we are able to stay within the bounds of the law.  Financial Neutrals work under the umbrella of the legal framework and it is very important that we all respect professional boundaries.

 

Jude:  The Financial Neutral is not the decision maker.  We provide info about the options and can provide ideas if clients are short of these. It is the clients who make the decisions.

 

Donna:  When she began doing collaborative cases she learned very quickly that she had to be clearly listening with both ears when doing financial neutral work.  Collaborative means that clients decide what the solutions are going to be.  Donna’s role is to empower and educate clients to be self-determining.   She is helping to choreograph the process of resolution.

 

Doreen:  Spousal Support is an area that requires both legal and financial guidance.

 

 

DGB:  In Toronto, Eva is part of a special initiative with one of her lawyer colleagues. How did this happen?  What is it?

Eva:  During many conversations with Marion Korn, family law lawyer and collaborative professional, we created a process where each collaborative professional team member   describes their professional contributions in a collaborative process. The goal was to get couples to meet and hear from the different professional directly who are best able to describe who does what when.  www.mutualsolutions.ca

 

Each collaborative professional separates out the different tasks that need to be accomplished.

 

 

DGB:  How much does all of this cost?  We know something from the IACP research study on Canadian cases (2009).  The amount was $3,116.  However, the stats reflect both the Financial Neutral work and the fees that were incurred to do business and pension valuations.  The total costs reported were for work done by both consulting financials and Financial Neutrals.  In almost all conversations with divorcing clients, the topic of lawyer fees comes up.  As we learn to work together better and form effective teams, we can minimize the professional fees that are payable by clients.

 

DGB:  Please comment on the costs to clients of your work as a Financial Neutral.

Jude:  Most of Jude’s cases are with high net worth clients with complex situations.  Her range of time spent is 10 – 30 hours on a case, at the higher end when the situation is more complex.  Her time line was developed to help clients understand how many times they would be meeting with Jude.  Typically the attorneys who include Financial Neutrals in their cases are getting more referrals. Clients like that there are a family professional to do the parenting plan and a Financial Neutral to do the numbers.  Clients like the idea of segregated services.

 

Donna: Clients want segregation of services.  We continue to have clients say that they don’t want to pay for attorneys and they are already engaged in personal counseling.  Financial Neutrals end up selling the benefits of the attorneys and divorce coaches specific to the uncoupling. Her average assignment is 6 to 10 hours, unless there is lots of emotionality or conflict.

 

Amy: Sometimes financial tasks get done twice because some of the attorneys also own the Family Law software.  This adds to the cost.  Conversation can address this.  Working on the relationships between attorneys and Financial Neutrals is required.  Sometimes control of the process is the issue.  Collaborative practice group meetings provide opportunities for conversation.  Good solutions bring more referrals.

 

Eva:  Working as teams is essential so that we can begin to understand what each professional likes to do.  What is the divorce budget?  One to one relationships with collaborative colleagues, including the debriefs with others on the team may appear expensive for clients, in the long run, contributes to the overall efficiency of the team.

 

 

DGB: Projections are often used in collaborative cases. How does this happen? How long does it take to prepare such work product?

Donna:  Modeling software has been used in retirement planning.  Assumptions need to be set first.  For divorcing clients, for longer term marriages and when clients are worried about their long term situation, projections become very important.  Clients are very involved in the assumptions that are used in the preparation of the projections.  For the brainstorming sessions in collaborative cases, she uses a projector so that as different scenarios are contemplated, the results can immediately be seen.  This has helped avoid impasse. Final versions are emailed to clients after the session so that Donna can have some quiet time in her office to review the inputs and make sure that everything has been entered accurately.

 

Donna on average spends about 6 to 10 hours.  If more, there would be more emotionality or multiple documents to review.

 

Doreen: There is an example of a projection in your materials.  Doreen’s experience is that a projection takes from 2 to 3 hours per client to prepare the report.  Modifications take less time.  This is after the financial data has been verified and assumptions clarified.

The projections example in the training materials was first created for a CLE TV course in October 2011, done with Diane Bell and Carla Lewis.  In this course, a fact pattern that is becoming more common – the divorce of couples about to retire was used.  In these situations projections can help clients visualize how their retirement plans will change.

 

Doreen:  This tool was borrowed from financial planners. Here are three programs that are being used in Canada for divorce financial planning assignments, in addition to the proprietary software that CDFAs and FDSs have available to use:

RRIFmetic from Fimetrics

Canadian Retirement Planner from Gobeil and Associates

Naviplan Extended

 

DGB: Family Law software.  While this can be used in Canada, it isn’t being used at this point.  Eva and DGB participated in a training session about this software in January 2011 and determined that it would take considerable time to get the changes made so that the reports would reflect Canadian content as well as the financial planning software currently in use.

 

There are existing software programs available to use in Canada that are designed for financial planning and reference our particular government programs.  Eva will be reviewing the Canadian version that was just released in November 2012 to assess how it can be used in Canada.  It was noted by others on the panel that one of the co-founders of Family Law software, Dan Caine is very responsive to the needs of the divorce financial planner.

 

Donna:  One of the features of Family Law software is clients’ ability of constructing their budgets and submitting that information to the Financial Neutral. This minimizes the time the Financial Neutral spends in this area and helps get clients attached to their numbers and budgets.

 

DGB:  Pitfalls with projections?

Jude:  The whole team talks about each assumption.  The team also talks about what kinds of projections might be most helpful.  Her early experience was that when we do too many projections, we can cause unnecessary angst.

 

Amy:  Has learned that it is important for attorneys to see and understand the results of any projections before the meeting.  Understanding the different ways people learn needs to be taken into consideration in deciding how information is presented so it is best understood.

DGB:  What can go wrong when we engage a Financial Neutral or more generally, with the process?  We all have examples of this and have learned from them.  Amy in particular will be able to share very current examples of this from her Grand Rounds sessions at the Chicago IACP Forum.

 

Amy:  Honest communication among the team members is critical.

 

Donna:  Donna has found that team-sabotage arises when we have omitted the pre-meeting stage.  Too often we minimize the incredible importance of understanding our colleagues and their working preferences.  We short change our clients when we are not optimally working in sync with one another.  The same importance applies for debriefing where deep learning takes place and our level of competence improves.

 

Doreen:  Having principles clearly described at the beginning is essential.

 DGB:  As a summary Jude will reference the responses she received from two of her collaborative attorneys.  The following responses are from Attorney, first President of the Collaborative Council of the Redwood Empire, and current IACP President Catherine Conner and from Attorney and past President of the Collaborative Council of the Redwood Empire Amy Rodney.

 

1. What can the financial neutral do that the lawyers cannot?

-Work together with both parties to gather financial information in an efficient manner – it takes longer and is less efficient with 2 aligned lawyers.

-Raise financial issues or questions that lawyers might not think of when focused on legal issues.

-Provide financial expertise.

-Discuss with the parties their financial attitudes, history, knowledge in a way that can work better facilitated by a neutral than one of the lawyers.

-Be the voice of economic reality and bring a reality check when needed.

-Prepare financial projections.

 

2. What can the financial neutral add to the collaborative process that can make the lawyer’s life easier?

-A lot of the above, but particularly organizing the financial information in a way that is digestible for clients and is accessible to everyone in the same format.

-Educate less knowledgeable clients about financial issues.

-Be the economic voice of reason.

-Increase the number of options during brainstorming.


3. What can the financial neutral add that will make the clients happier?

-Make financial information understandable.

-Help clients organize financial information, particularly if they are not financially minded or are disorganized or lost.

-Help clients to understand the economic consequences of possible options.

-Help clients with financial resources (e.g. insurance broker, bookkeeper)

-Flag financial follow up items.

 

4. How can you invite your clients to want to incur the expense of working with a financial?

-Talk to clients about the value they can bring as described above.  One in particular is the cost benefit of having one professional prepare all the financial information.

 

5. What can go wrong if a financial neutral is not part of the Team?

-Disagreement or distrust by clients when financial information is gathered/organized in different ways by the two attorneys.

-The attorneys may miss some financial issue or consequence.

-The attorneys may miss an option that a financial professional would have thought of.

 

Q and A: 

One participant wondered about when projections might create a crushing result.  When projections would not work?  Why would clients with little money not benefit.

Jude:  When both cash flows are negative, it may not be helpful. Analysis and guidance is still done and this is valued and valuable.

 

Amy:  Is the situation redeemable?  If both are going to be in trouble, to emphasize this sometimes raises roadblocks and impedes progress toward resolution of the divorce.

 

Donna:  In really tough situations, the Financial Neutral can help brainstorm the ideas that would minimize the damage.  Are you really asking if there is education that might be helpful?  Participant clarified that he thought it would be helpful to educate and Donna concurred.  She would have clients brainstorm some ideas and other options that could minimize the damage going forward.

 

Amy:  There is a delicate balance between divorce financial planning and financial planning.  The goal is to end the marriage.  It is not the point of the collaborative process to do long term financial planning.

Jude:  The Financial Neutrals do address the hard issues, but not necessarily with projections.

 

Second question:  How does neutrality play out in a situation where one of the clients manages a highly volatile portfolio?  What do you do?  Just the numbers?

Lili:  A huge part of our role is to educate both clients.  We can educate about what is held in the portfolio.  Our job is to explore and explain what their portfolio of investments consists of so that both clients will understand the current portfolio.  Understanding concepts of investment are important to help move clients forward.

 

Doreen: Going forward, each client needs their own team of advisors.

 

A third question:  Suspicion often present around finances.  Is it the role for the Financial Neutral to explain the situation?

Donna:  Yes, and education is key.

 

Doreen:  Sometimes both clients do not understand the way their affairs have been set up.  The Financial Neutral can do education about this.

Final questions:  Are financial neutral involved in doing risk evaluation of portfolios?  How do neutral financials raise difficult issues? 

Amy:  Cautioned using differing rates of return for each party.  This just introduces another variable in why the projected outcomes of the parties are different. Using the same rate for both parties in the projection allows us to better understand the impact of different levels of support payments or a different asset division.

Donna:  Reframes the question to – How do we bring up sensitive issues?  How do we bring this to the table?

Jude:  Her reports include as much information as possible and then the team decides how this will be addressed, including how to investigate further if required.

Lili:  It is the team’s responsibility to put sensitive information on the table.  Sometimes collaborative cases do fail.

Donna:  Just be curious!  When she is working with highly compensated employees, she asks a question like “when do those bonuses get paid?” “I read in the paper that ….

Lili:  A degree of timing and / or subtlety may be necessary – such as:  “By the way, (on your way out) what is…” as per Colombo style!

Lili: All of us are believers in the Collaborative Process because it offers an opportunity to be more holistic than any other legal process and an opportunity to contribute positively to our clients’ lives for the very long term.  We bring our expertise and passion to the process, to our team and most importantly, to our clients to enable us all to focus on attaining a positive and optimistic outcome. This is just a beginning of how clients will view divorce.

 

What is that we want to create for our clients?  A better experience.

Contact info for Panelists:

Lili A. Vasileff, CFP®, CDFA™, MIA
Company Name: Divorce and Money Matters, LLC
Address: 2 Greenwich Office Park, Suite 300, Greenwich, CT 06831
Phone: 203-393-7200
Email: Lili@DivorceMatters.com
Website: www.divorcematters.com

 

Amy L. Whitlatch, CFP®, CDFA™, MBA

Company Name: Amy L. Whitlatch, CFP®, CDFA™
Address: 1050 Delta Avenue, Suite 2000, Cincinnati, OH 45208
Fax: 513-562-8822
Phone: 513-984-0200
Email: alw@amywhitlatch.com
Website: www.amywhitlatch.com

 

 

Donna Smalldon, CFP®, CDFA™, MBA
Company Name: Applied Divorce Solutions
Address: PO Box 91567 Portland, OR 97291
Fax: 503-531-2586
Phone: 503-350-2314
Email: donna@applieddivorcesolutions.com

Website: www.applieddivorcesolutions.com

 

 

Jude Sterling, CDFA™, CPA
Company Name: Judith F. Sterling, CDFA, CPA
Address: 5418 Diane Way, Santa Rosa, CA 95409
Phone: 707-538-2665
Email: jude@sterlingcdfa.com
Website: www.sterlingcdfa.com

Eva Sachs, B Comm., CFP® CDFA™
Company Name: Women in Divorce Financial
Address: 79 Shuter Street, Suite 200, Toronto, ON  M5B 1B3
Phone: 647-349-5353

Fax:  416-915-7055

Email: esachs@womenindivorce.ca

Websites: www.womenindivorce.ca  www.mutualsolutions.ca  www.evasachs.com

 

 

 

 

 

 

Lili’s Appearance on CNN Money – Money Saving Tax Tips

Lili’s Money Saving Year End Tax Tips

By: Lili Vasileff, CFP(r), CDFA(tm)
QUICK TIPS:
1. You CANNOT file married for the year if you are officially divorced as of 12/31/2012.
2. You and your ex-spouse MUST agree on who claims which deductions and which children as dependency exemptions.
3. If you receive alimony you MUST start paying quarterly taxes as estimated by your CPA. 
Watch Lili’s appearance on CNN Money!
THREE STRATEGIES:
1. Defer Income
   a. Ask employer to pay bonus next year
   b. Sell any Investments with gains next year
   c. Hold off taking any distributions from retirement plans or IRAs until January
   d. Max out savings to retirement plans
CONVERSELY ACCELERATE INCOME IF NEXT YEAR TAXES WILL BE HIGHER
   e. Including converting any traditional IRAs to ROTH IRAs
   f. Sell any exercised incentive stock options to add to AMT income
   g. Sell all investments gains at lower capital gains rate than next year
   h. Reallocate to tax efficient investments and minimize taxable income subject to new 3.8 % tax
2. Accelerate Deductions
   a. Prepay mortgage property taxes and mortgage insurance premiums.
   b. Prepay state income taxes
   c. Prepay tuition, student loan interest payments.
   d. Pay alimony in advance for next year
   e. Pay all medical bills (7.5 % AGI hurdle to 10 %) in 2013
   f. Make gifts or charitable donations this year, especially with fiscal cliff looming that sharply cuts allowable amounts to $ 1 MM from $ 5 MM exemption
   g. Bundle tax prep professional fees, and investment advisory fees to accumulate costs
3. Take Advantage of Expiring Tax Credits & Breaks
   a. The American Opportunity Credit  provides a refundable tax credit of up to $ 2,500 for undergraduate education that expires at the end of 2012
   b. School Teacher Education Credit of $ 250 Child Tax Credit halved from $ 1,000 to $ 500
   c. End of Payroll Tax Cuts
   d. AMT Tax Fix will be erased
   e. Tax breaks expire for those who refinanced mortgages to restructure and avoid short sales
MINIMIZING TAX LIABILITY SHOULD BE A YEAR ROUND PURSUIT AND NOT A YEAR END EFFORT

Lili Rings the Bell at the New York Stock Exchange

Lili Ringing the Bell at the New York Stock Exchange attending the FT Investment Management Summit

Divorce and the Special Needs Child

Published in: Domestic Law Journal

Family Law Section

Western County Bar Association

 

There are few challenges more difficult than going through a divorce while having a special needs child.  When a special needs child is involved, issues of child custody, visitation, support and property division can be significantly more complex.

Divorcing parents with a special needs child confront singular issues.  For example, that child often has more expenses than a child without special needs.  The uncertainty about the nature, cost and predictibility of future care expenses makes enumerating child related add-on expenses relating to a disability challenging in a divorce agreement.  Particularly important, the child’s eligibility for governmental agency benefits may be threatened or reduced by providing a cusodial spouse child support or maintenance.  Parents also need to be aware of how to navigate the educational system and take advantage of estate planning strategies to maximize necessary support for their child.

Family law legislation does not yet sufficiently recognize the unique considerations of these families in the areas of custody and support.  Child support guidelines may be inadequate for resolving lifelong issues for families with a special needs child.  “The U.S. court system is overwhelmed when it comes to dealing with all divorces, child custody, and child visitation and support issues.  As a result, it cannot adequately address the unique needs inherent in family law cases involving children with special needs – an especially critical situation as the number of special-needs children is skyrocketing.” Until the law of divorce provides properly for special needs children, family law attorneys have an unparalleled opportunity and responsibility to educate their clients and provide viable resolutions by agreement.

TO READ ENTIRE ARTICLE, PLEASE DOWNLOAD PDF BELOW:

Divorce and the Special Needs Child

 

Editorial Staff

Tamara A. Mitchel

Editor in Chief

 

Lisa Zeiderman

Recent Decisions Editor

 

Lynn Maier

Articles Editor

The New Age of Divorce Financial Planning

Divorce is a time of great emotion, transition, and planning.  Your client may be the initiator of the divorce or the party who is on the receiving end of notice – but either way, the financial union is soon to be over, and your client will need expert financial guidance.  Most likely, you will need to provide advice, either by outsourcing to an experienced divorce financial planner or by acquiring new skills yourself.

Divorce financial planning is an evolving niche practice in which financial advisors work with clients and allied divorce professionals before, during and after divorce.  A divorce financial planner is a fee-only practitioner who charges an hourly fee for unbiased and objective financial expertise.  Like a NAPFA-Registered Financial Advisor(TM), a divorce financial planner places the clients’ interests first and provides comprehensive financial planning that guides individuals to a reasonable, practical and workable outcome.  Combining a CFP(r) with additional certification, a Certified Divorce Financial Advisor ™ is trained specifically in the financial issues of divorce and has an interdisciplinary knowledge of practical standards and state divorce laws.

Divorce financial planning is similar to financial planning, but with the added challenges of highly charged emotional and unique divorce laws of the jurisdiction in which parties live.  A divorce financial planner works within a legal setting, as we supplement the efforts of the legal professional in litigation, mediation, or collaborative divorce.

Our skills might be called upon from the outset of the divorce process (or even in the preparation for a divorce), at any point during the process, or post-divorce to assist with implementing the terms of the agreement.  Therefore, it is important for the planner to define the scope of the engagement and the tasks to be performed, and to have all parties acknowledge and confirm that agreement.  (The tasks may change over time, as new needs arise.)

A divorce financial planner can help a client with these tasks as well as others:

  • Gathering, organizing, and preparing documentation of income, expenses, assets, and liabilities:
  • Preparing financial reports within the context of divorce laws specific to a state;
  • Providing ongoing financial education, guidance, and analysis throughout the divorce process;
  • Making and explaining projections for the long-term impact of financial decisions and related tax implications; and
  • Assisting the client with post-divorce asset transfers, estate planning, and development of the long-term financial planning goals.

In a divorce, each party experiences a significant shift in their financial situation.

Without assistance, the changes that occur can greatly affect a client’s financial well-being. That’s why a divorce financial planner will help a client answer questions such as:

  • How much house can I afford?
  • How much life insurance do I need?
  • How do I prioritize which debts to pay first?
  • How do I protect my credit rating from my spouse’s negative actions?
  • Is the spouse’s share of a pension limited to the amount of earnings during the marriage only, or will it be increased by work after the divorce?
  • What are the guidelines for dividing assets during a divorce?
  • What does it mean to hide assets, and how do we find the assets?
  • How much may “fault” for the divorce influence a financial settlement?
  • What are the tax implications of child support, alimony, or unallocated support?
  • How do I plan for the unexpected? How do I plan for my future?
  • What are the financial priorities post-divorce? Is there a checklist of common tasks?

A divorce financial planner is the point person for pulling all of the historic information together, as well as for making specific financial recommendations that enable an individual to move forward post-divorce with a sense of confidence and security.  Ultimately, a divorce financial planner can educate clients, manage their financial expectations, ensure they make well-informed decisions, give peace of mind that the settlement is practical, and increase the clients’ satisfaction with legal process.

ASSN. of Divorce Financial Professionals Host Conference in September: Discount for NAPFA Members:

Obtaining the skills to be an effective divorce financial planner can require specialized training, continuing education, knowledge on how to use specialized software, and pertinent credentials and designations. These have been defined by the Association of Divorce Financial Planners (ADFP) for those aspiring to do this work in any legal setting.  The mission of the ADFP (www.divorceandfinance.org) is to heighten awareness of the benefits of divorce financial planning so that it becomes an integral part of the divorce process and to establish protocols and standards for divorce financial planners.

To learn more about divorce financial planning, attend the 10th Annual Conference of the ADFP on September 21-22 at the Doral Arrowwood resort in Ryebrook, NY. NAPFA members will be offered the ADFP membership rate for conference registration.

Financial Planning Empowers Divorcees: Interview

Financial planning in preparation for divorce can be an overwhelming and intimidating process. Lili Vasileff, CFP, president of the Connecticut-based Divorce & Money Matters and president of the Association of Divorce Financial Planners, is a pioneer in an industry that she believed was not addressing perhaps the most intimidating question facing women going through a divorce: “What do I do now?”

She founded her company in 1993 to empower women with the knowledge and tools they would need to successfully navigate their divorce. “What existed then, and what continues to exist,” she told Millionaire Corner, “is a lack of focused resources for individuals going through this transition. (When I started my company) it was clear that women, typically, were  inexperienced, and less knowledgeable about finances, and had very few resources to tap into to gain that knowledge and a better understanding of the decisions she was being called upon to make.”

Working with women who had little experience about their finances, formulating goals or creating a budget (and in some extreme cases not even knowing how to open a bank account), Vasileff was motivated to fill a void left by divorce attorneys. “They were, appropriately, focused on the legal side (of the divorce),” she observed, “dotting the i’s and crossing the t’s. But no one was giving these women a financial planning roadmap. Many were in a state of paralysis, fear, or trauma, and didn’t know how to proceed. I thought that was a huge injustice.”

Here, according to Vasileff, are some of the most common financial planning mistakes women should avoid:

·         “Don’t let the attorney make decisions for you. They are experts in the legal process, but not the experts on your life. They don’t know your goals, fears, or preferences. They navigate a legal process to make sure (the divorce) is fair and ethical. They don’t tailor it to the individual. Women need to participate in those discussions and decisions.”

·         Not understanding tax implications of decisions women are called upon to make.

·         Not projecting forward how your expenses will change and incorporating those changes into your settlement. “If, for example, you lose health insurance,” she noted, “you’ll have to purchase it through COBRA. That expense is vastly different from what you currently pay. “

·         Hang tough. In an adversarial divorce involving children, Vasillef said, she has seen women beaten down over issues of visitation and custody. “It’s a scare tactic,” she said. “By the time talks get around to finances, women are drained of energy and forfeit their financial wellbeing for the sake of their children.”

What can women do prior to the divorce to put themselves on more solid footing? Vasileff recommended:

·         Make copies of all financial records and statements. “This is good practice for everyone,” Vasileff noted. “If something happened to your spouse, would you know where your life insurance policy is? You should have this information on handy anyway, like a first-aid kit.”

·         Make a list of assets.

·          Obtain credit reports on yourself and your spouse. “Sometimes, when people go through a divorce, (the credit rating) holds the biggest surprises.”

·         Pay down as much debt as possible.

·         Set aside a rainy day fund with enough money to cover at least two or three months of expenses.

Money, Vasileff said, is the primary issue in divorce. “Couples need to communicate about money; not just about how much there is, but what their goals and values are.”

The prolonged economic downturn has only complicated the process, with some couples postponing their divorce because their assets are underwater, or there are the needs of aging parents and so-called “boomerang children” returning to the fold to consider.

Now, more than ever, Vasileff observed, “financial literacy is not just for divorce. “For men and women, whether they divorce or not, she emphasized, “information is power.”

 

 

Lili Vasileff, president of the Association of Divorce Financial Planners shares financial planning dos and don’ts
Article |            | By Donald Liebenson

How to Provide for the Kids Post-Divorce

By: Elizabeth Alterman

Published on CNBC.com http://www.cnbc.com/id/46797194/page/2/ on May 7, 2012

If you think providing for your children after divorce is basically about diapers, dentistry, and diplomas, you’re in for a life of surprises.

 

Whether you’re supporting preschoolers or those who have returned home after college, experts say preparing for any scenario and putting everything in writing is the best way to defuse potentially explosive situations in the future.

Helene Bernstein, a Brooklyn-based divorce attorney with more than 20 years of experience in family law, says even small items can cause big problems.

“Little things that couples argue about and they don’t think of is who pays for the children’s clothing? Does the clothing travel with the child? Who pays for the birthday gifts? They get expensive. When they’re little, they go to a lot of parties,” Bernstein says.

Other considerations such as orthodontia or therapy, should the child need them, are important to take into account. If a child is diagnosed with a medical condition, parents should think about how they would handle treatment and the possibility of unreimbursed medical expenses.

“When a child has attention deficit disorder a lot of people disagree on whether medication should be administered, and that’s a really big thing,” Bernstein adds.

The lawyer and mediator recommends that parents renegotiate their agreements every few years because children’s needs change as they get older. One thing she advises clients do immediately is change their beneficiary information.

Growing Pains

Lili Vasileff, certified financial planner and president of the National Association of Divorce Financial Planners, in Greenwich, Conn., says that while basic child-related expenses are included in a budget intake form that is part of divorce negotiation, many people don’t think to plan beyond their child’s current age.

“If you’ve got a 3-year old, when they’re 16 they’ve got driver’s ed, auto insurance, or the prom,” Vasileff says. “Bar mitzvahs, or let’s go a bit farther, college applications are like $250 a pop, and who’s going to pay for the child traveling to go see those colleges? All the things that are prospective, that occur on an if-and-when basis, are generally left unaddressed. It’s up to the parents to discuss how to address those costs. Leaving it open results in a lot of misunderstanding, miscommunication and acrimony.”

Jeff Landers, founder of Bedrock Divorce Advisors, LLC, agrees. He says if a child has been taking violin lessons or gymnastics and the money is there, most courts will try to maintain the status quo for kids. However, there are plenty of gray areas within those extra-curriculars that can cause trouble.

“You can choose an $8,000 summer camp or go to the Y. If you talk just about the nature of the expense but not the character of it, then you’re setting yourself up for all future arguments which the child realizes that they’re the cause of, and that is very, very difficult,” adds Vasileff. “Unless you’re working with an expert during this process who can really pull the threads on each one of these areas to help you think in the future or at least has enough experience to say, ‘these are the things that can come up,’ how are you going to address these things head-on when they happen?”

Jodi Paige, a divorced mother of two, says she and her ex-husband agreed on the number of enrichment activities that will be covered and have a contingency plan in place for dividing expenses beyond that number.

“I pay for the first two classes and then anything else that they want to do, my ex pays 50 percent of the cost of that,” says Paige. “The state guidelines are pretty low, so if you live in an area where classes are more expensive, make sure your agreement reflects that.”

The College Years

While big-ticket items such as college tuition may seem fairly straight forward, the devil is in the details, say financial planners who specialize in divorce.

Landers says it’s essential to ask what’s included because if you don’t negotiate it up front, then “good luck trying to get it after the fact.”

“Is room and board included? Is a computer for the child’s use included in that? Does it include traveling back and forth?” Landers says. “You really need to get into the nitty-gritty details, and I’ve seen some agreements that will state, ‘I will pay for a state school but if the kid wants to go to a private school or an Ivy League, not my problem.’ A parent may say I’m not going pay unless the child maintains a 3.0 GPA, since it’s not a legal requirement, it’s very much up to the negotiations between the parties.”

He adds that some agreements may include a “cap,” whereby a parent will be on the hook for no more than the state university charges.

Paige also recommends including a stipulation that if one parent’s finances significantly improve, the amount contributed toward college be raised accordingly.

“Situations change, and everything needs to be very much spelled out,” she says.

The Boomerang Generation

Vasileff points out that even after paying for college, many parents are still supporting their adult children.

The good news, she says, is under Obama healthcare, coverage continues until age 26. But parents usually don’t think about is who is going to pay for an adult child’s healthcare should he or she be unemployed.

Vasileff says the boomerang generation, the group of adults who return home to live, poses a whole new set of issues for divorced parents.

“When you have adult boomerang children who come back to live with you, how do you set the rules? Are they supposed to pay rent; are you supposed to pay for their groceries?” she asks.

According to a U.S. Census Bureau report, the number of men ages 25-34 living with their parents grew from 14 to 19 percent between 2005 and 2011; the number of women rose from 8 to 10 percent.

While most people to some extent address the cost of college, Vasileff says few plan for those kids who take a year off or return home without any plans to leave.

Second-Family Complications

Experts agree that counseling for all parties also bears consideration. Providing the least disruptive environment possible is also important.

“We got an apartment and for the first nine months, my ex-husband and I went back and forth and the kids stayed in the house,” explains Paige, who’s been divorced since 2006. “It was important for them not to leave their safety zone and we got a feeling for how tiring and crappy that was. It’s a good perspective thing for parents.”

Vasileff also recommends parties discuss what would happen in the event that one or both parents have new families, which she says is something very few people think about unless one party already has a serious new partner.

Paige suggests discussing what will be left to the children after the parents are deceased, especially if children from new marriages enter the picture.

“Don’t leave things vague. Things change, especially when a person gets a new significant other,” Paige says.

While no one can see into the future, anticipating expenses and deciding how to divide them can make things a lot less contentious down the line.

Advisors Name Favorite Actively Managed Mutual Funds

April 24, 2012

 

By Karen DeMasters

 

Each financial advisor who manages mutual funds for his clients has a  favorite or two that fulfills a specific goal in their clients’  portfolios. Financial Advisormagazine recently asked several advisors to reveal their favorites. The advisors, who report they are satisfied with the expenses compared to the returns, have been using some of the funds for many years.

Bob Mecca, CFP, of Robert A. Mecca & Associates LLC in Hoffman Estates, Ill., wants funds that have a relatively low risk as measured by beta and other factors, do not mirror indexes, have historically outpaced the competition and have been in the top quartile of mutual funds for a period of time.  Mecca publishes a weekly e-mail commentary called Mecca on Money. 

Mecca says he likes low-risk funds, especially in the current market environment, and he wants ones where the fund and the manager have been around for a long period of time.

One of his favorites is the Vanguard Wellesley Balanced Fund, which is comprised of about 60% bonds and 40% stocks. Since its inception, the fund has done relatively well with low risk. It invests mostly in large-cap value companies.

At the same time, Mecca notes that he has all types of clients and not all funds are appropriate for everyone.  He has his special ‘Mecca 40′ funds, which have historically outpaced index funds with relatively low risk.

David Loesser, CFP and president of The Estate Planning Group in Washington’s Crossing, Pa., has three favorite funds he feels make a good mix in his clients’ portfolios.

Doubleline Total Return Bond Fund is a relatively new fund but the manager, Jeffrey Gundach, has been around for a long time and Loesser likes his track record.

“We like it because it has low standard deviation and little volatility. It is conservative, so it’s excellent for a core holding in a retirement portfolio,” he says. Templeton Global Bond Fund, managed by Michael Hasenstab, is another that Loesser likes for its diversifying value. It holds debt in foreign countries and has a low correlation to the stock market, he says.

Finally, MFS Emerging Market Debt Fund is good because it uses bonds from emerging markets and is still moderately correlated to the S&P 500, Loesser says.

Different mutual funds have different purposes, and Lili Vasileff, CFP, registered investment advisor and founder of Divorce and Money Matters in Greenwich, Conn., says she judges funds by their performance relative to their peers and relative to the stock market.

She has three she feels are a nice mix for her target audience, divorced women. The Yachtman Fund has a conservative allocation and modest appreciation. It is a large value fund that does not have a lot of turnover.

She also likes the Janus Triton Fund, a small growth fund with higher turnover. “It tends to favor up-and-coming growth companies and faster-growing companies and can counter the large-cap fund,” Vasileff says.

Vanguard Prime Cap Fund is another she likes because it is one of the highest-rated Vanguard funds. It is a large growth fund with a long history and low turnover. “It is fairly middle-of-the-road conservative,” she adds.

Leuthold Core Fund moves in and out of sectors when necessary, which makes it one of the favorites for James Holtzman, CFP, an advisor and shareholder with Legend Financial Advisors in Pittsburgh.

“I have been using this fund for 15 years. It is not overly expensive, has a good standard deviation and a good return,” he says. “Leuthold is good at giving advisors information on what they are doing and they will close [a fund] if it becomes too big and unwieldy.” It is an aggressive fund with a diverse mix of large-, small- and medium-cap investments.

Another fund Holtzman likes is Ivy Asset Strategy, which is mostly large cap and is fairly aggressive.  The fund changes holdings frequently but is good at informing advisors on its activities, he says. It has the ability to hedge its bets and sell when it needs to.

Sam McFall, investment analyst and investment officer with Bryn Mawr Trust in Bryn Mawr, Pa., says his firm recently added BBH Core Select Fund to some of its clients’ portfolios because it invests in mega-cap companies that will not be impacted as much by the cyclical nature of the market.

It has a strong track record for good returns and can be the anchor for U.S. large-cap exposure, he says.

The firm also recently added Legg Mason Brandywine Global Opportunities Bond Fund to its mix because it is a high-quality fund that is truly global, iand includes U.S. debt, McFall says.

“By bringing in a high-quality fund of this type, you may lose a little on the return but you reduce risk. We are looking for small boutique managers who add value to our portfolios,” he notes.

The third fund in the mix is Wasatch Emerging Markets Small Cap, which he says is an unusual fund because not many are dedicated to small caps in emerging markets.

“Emerging markets are going to be the global growth area to come and this fund targets consumer sectors rather than technology,” McCall says.

Original Article: http://www.fa-mag.com/fa-news/10722-advisors-favorite-actively-managed-mutual-funds.html

Finances and the newly single

Original Article on https://retirementplans.vanguard.com/VGApp/pe/pubnews/DivorcedWomen.jsf

The divorce proceedings may be over and the papers signed.

But for many, divorce brings a new challenge: Figuring out how to handle the financial decisions—on everything from budgeting to investing—that may have been handled before by their spouse.

What steps should the newly divorced take to get a grip on their new financial situation? To find out we interviewed Lili A.Vasileff, a Certified Financial Planner™ professional based  in Greenwich, Connecticut, and president of the Association of Divorce Financial Planners.*

Ms. Vasileff writes about financial issues in divorce on many professional blogs, and on her website, DivorceMatters.com.*

Question: What are some important first financial steps to take after divorce?

Ms.Vasileff: First, try to get a handle on your cash flow. That can start by re-examining your budget because the post-divorce world will be new for you, one in which you will have different assets, debts, expenses, and income streams.

Consider tracking your spending for three months, whether you used checks, credit cards, savings, or cash. From that spending information, you can extrapolate to estimate your total annual spending.

Segregate your expenses into three pots: Those that are fixed, those that are variable, and those that are discretionary. Consider covering your fixed expenses first, your variable ones next, and your discretionary expenses next.

The next step is to identify all possible sources of money coming in, which may include alimony and child support.

Deduct your expenses from your income and calculate whether you have excess or a shortfall. If you have a shortfall, consider reducing expenses. If you have a surplus, think about adding to your savings.

Also consider growing an emergency fund, in cash, to cover three months’ worth of expenses, if necessary, or for a short-term goal, like taking a vacation to decompress after your divorce.

If you are thinking about investing extra money rather than just putting it into a savings account, keep in mind that investing is for larger, long-term goals—at least five years away—such as retirement, college, new home.

Keep in mind that investing comes with risks.You can lose money as well as earn it. Investing, however, also provides a greater opportunity for earning a higher rate of return over the long term than you can earn through savings.

If you have any debts, pay off the most expensive first, including credit cards and other debts that have a high interest rate.

It is also important to consider updating your estate documents as soon as possible after divorce. Make sure you have a new will, power of attorney, and updated designations of beneficiaries on your financial accounts and insurance policies.

Question: If you haven’t had responsibility for your family’s finances, how can you learn how to handle finances on your own?

Ms.Vasileff: Talk to your banker about savings and checking accounts. Even ask the banker to teach you how to balance a checkbook, if you haven’t done that before.

Consider consulting a financial planner to help you set goals, pay off debts, plan for retirement, and do so in a comprehensive fashion.

The websites of leading investment companies, such as Vanguard, have a lot of sound information written in plain everyday English for beginners.

How do you go about handling credit issues?

Ms.Vasileff: Begin by establishing your own financial identity: If you have not established credit for yourself, consider doing so now.

If you are unsure about your credit worthiness, you can run a free credit report from all three principal credit rating agencies—TransUnion, Equifax, and Experian*—by applying online.

If you have no credit in your own name, you can start by applying for one major credit card or a credit card from a major department store.

If you haven’t had a checking account, consider opening one.

Applying to refinance your mortgage or get a new one will also add data for your credit rating.

If you are going to be renting, the landlord may do a credit check and that may help establish your credit worthiness.

Question: Where do goals such as paying for a college education and retirement fit into the budget?

Ms.Vasileff: One of the things you may have to consider doing is finding a balance between saving for different goals, such as a child’s education, and saving for your own retirement.

The harsh fact is that you probably will not be able to do both completely. But keep in mind that your child will have more opportunities for financing college through subsidized government loans, private loans, scholarships, work study, and grants than you will for financing your bills when you retire.

In this economy, it is prudent to save for yourself. You must plan for your own nest egg and add to it to grow it.

Take advantage of your employer’s retirement savings plans and contribute as much as possible. Your employer may match your savings, so the total contributions are greater over time and grow on a tax-deferred basis.

Best yet, the contributions are usually on a pre-tax basis, thereby reducing income taxes on your earned income.

If you are already contributing the maximum to your retirement plan, or your employer’s profit sharing plan, you may want to consider investing in any supplemental savings plans your employer may offer. Depending on your income, you may be eligible to contribute also to your own individual IRA.

After all that, if you find you can save for college, consider options such as custodial accounts for minors, college savings plans, education IRAs, and standard savings accounts, etc.

Question: If you are near retirement what strategies should you think about?

Ms.Vasileff: If you are covered by an employer retirement plan, read the description of the plan and its terms to understand your options for electing benefits at retirement. Find out about the plan’s trigger dates for making investment decisions as well as payout decisions, including when you can make changes each year.

Be aware similarly of key trigger dates for initiating Social Security benefits, or for drawing on IRAs or annuities, if you have them.

You may be entitled to collect spousal benefits based on your ex-spouse’s Social Security record, and those should be analyzed along with your own Social Security and pension benefits to maximize total income for yourself.

If you have been awarded part of your ex-spouse’s pension, you need to keep informed about the trigger events for initiating the distributions. It could be your own age or when your ex starts to get them.

When you are retired cash flow becomes an important factor. You need a certain amount of cash flow for expenses, and at the same time, ensure you don’t outlive your assets.

At this stage, too, you may want to consult with a consultant to help you with investment and withdrawal decisions.

Question: Anything else you should pay attention to?

Ms.Vasileff: Revisit your beneficiary designations on all financial accounts and real property to make sure they are up to date and that you have named your new spouse and/or your children as beneficiaries, if that is what you now wish.

Editor’s note: To update your beneficiaries, log on to your Vanguard account, click My Profile, then Beneficiaries.

Notes

Ms. Vasileff’s opinions are not necessarily those of Vanguard.

Photo by William W. Good

Vanguard recommends you consult a tax professional.

All investing is subject to risk.

*When you access any of the sites mentioned in this article, you will be leaving our site. Vanguard / Divorce and Money Matters, LLC is not responsible for the accuracy of information on third-party sites. Vanguard / Divorce and Money Matters, LLC receives no remuneration for website links in this article. This article is for educational purposes only.

 

New York City’s First Divorce Expo: 3 Ways to “Start Over Smart”

Thursday, March 29, 2012 at 12:40 PM

posted by April Daniels Hussar on http://www.self.com/health/blogs/healthyself/2012/03/new-york-citys-first-divorce-e.html

First comes love, then comes marriage, then comes … well, sometimes the happy ending you had in mind doesn’t quite work out.  But that doesn’t mean there isn’t life after divorce, or that it can’t be a step to another, truly happy ending.

This weekend in New York, several thousand people are expected to attend the city’s first Divorce Expo.  Taking place at the Metropolitan Pavilion on March 31 and April 1, “Start Over Smart” aims to help those contemplating or going through divorce by giving them the information and answers they need.  The Expo also intends to provide inspirational ideas about how life can begin anew after a split.

Presenting experts include everyone from lawyers and therapists to style advisers, plus some big names like New York Times best-selling author and life coach Cheryl Richardson and TODAY show Financial Editor and Adviser Jean Chatzky.  And yes, on Saturday night, there will be a mixer for attendees.

The Expo is the brainchild of the mother-daughter team of Francine Baras (a clinical social worker with an advanced degree in child psychiatry and parent guidance) and Nicole Baras (a divorce and family mediator). “As trained divorce mediators, we saw a need to help epopel gather correct information when going through a divorce,” Baras told HealthySELF.  “There is so much overwhelming information and a lot of it is not accurate.”

Baras and her daughter were writing a simple how-to-get-divorced guide when they heard about a divoce expo in France. “We flew to Paris, spent two days iwth the expo organizers and we were sold,” she says.

Who should attend? “Men and women who are thinking about a divorce, going through a divorce or who have just completed the process,” says Baras Feuer. “There is something for anyone, in all stages of the divorce process.”

What can you expect at Start Over Smart? According to Baras Feuer, each of the approximately 100 speakers and exhibitors has been curated by the founders and an advisory board. “The Expo will represent four pillars,” she explains, “building a community, keeping the cost of a divorce down, minimizing the impact of a divorce on your children and reinventin oneself.”

There will be several featured workshops and panel discussions throughout the weekend targeted to crucial divorce-related topics, including the Top 10 Parenting Mistakes, Same Sex Divorce, Reinventing Your Style, Be Your Own Handyman, Blending Familieis & Co-Parenting with Your Ex, plus book signings, makeovers, dating advice and career counseling.

Above all, Expo founder Baras says she hopes people come away from the event armed with information and a brighter outloook.  “Less anxiety, a clearer understanding of thier options, help with theri finances, help with their children and a connection with others who are experiencing the same things,” she says.

Speaking of finances, on the of the Expo’s presenters Lili A. Vasileff, CFP, CDFA, president of the national Association of Divorce Financial Planners and co-author of Ultimate Divorce Organizer: The Complete Interactive Guide to Acheiving the Best Legal, Financial and Personal Divorce, says money is one of the things people worry about the most when it comes to divorce.  According to Vasileff, the biggest mistake you can make in a divorce is letting your emotions drive your financail decisions.

Here are 3 of her top financial tips for being smart about your start-over:

1. You are your best advocate. No one, not even your attorney, understands your needs or goals better than you. Do not let someone else make your decisions without you understanding them.

2. Remember, your attorney is a legal expert, not a financial expert.

3. Three things that people often fail to do, but must: Examine your long-term financial projections, develop a post-divorce financial plan and insure your divorce settlement.

And remember … you will have another shot at your happy ending!

For more about the expo, visit http://startoversmartny.com

Breaking Up Is Hard to Do – Especially with Annuities

Attorneys often split contracts  in divorce settlements, unaware  of the potentially costly impact

March 18, 2012

When a client came to his office bearing her new divorce decree, adviser Dale Russell became the bearer of bad news.

During the divorce proceedings, the couple’s lawyers decided that their chief financial asset, a $500,000 variable annuity inside one of their individual retirement accounts, was to be split among the two. But that Solomon-like decision was made without the attorneys’ awareness of its dire financial consequences.

Splitting the variable annuity meant that Mr. Russell’s client had to pay an 8% surrender charge and a 10% penalty for an early withdrawal from the IRA.

For Mr. Russell, vice president of Gallo & Russell Inc., the experience is hardly uncommon.

With nearly one in two marriages ending in divorce, financial advisers who deal with divorcing couples often face complex problems connected with untangling annuities that are in the pool of shared assets.

With divorce attorneys typically unaware of the nuances of annuity contracts and the various ways insurers treat contracts in the context of divorce, and with advisers typically out of the loop when settlements are hammered out, the problem lands in the lap of advisers.

“In the case of my client, there wasn’t much I could do in the way of alternatives,” said Mr. Russell, who hadn’t been consulted before the couple began preparing for the split.

“This was essentially the only asset they had, and instead of my client’s getting the $250,000 she expected, she’s getting almost $50,000 less,” he said,

“It’s a big problem, said adviser Lili A. Vasileff, president of Divorce and Money Matters LLC and president of the Association of Divorce Financial Planners Inc. “Most attorneys think these annuities can be divided, and don’t wait for the consequences.”

Couples who work out divorce agreements on their own are even less likely to consider the financial consequences of splitting an annuity, and typically face surrender charges and loss of accrued living or death benefits due to excess withdrawals.

What makes annuities peculiar is the fact that they usually are not liquid in the immediate term, and each contract has its own rules on how it can be divided.

CONTRACT TERMS

Contract terms vary wildly among insurers, with some prohibiting partial tax-free exchanges into other annuities, which potentially could be a way to apportion an annuity in a divorce. Exchanges into a new annuity, however, generally involve the beginning of a new surrender period.

Ideally, an adviser would intercede early in the split, analyze the shared pool of assets and communicate with life insurers about the annuities. This would also entail ensuring that if an annuity split involved a partial Section 1035 exchange, the division would be performed without the risk of taxes.

“I had an incident with an accountant who thought the client would pay thousands more in taxes because the contract was split,” said Barbara Shapiro, president of HMS Financial Group. “We called the annuity company and they assured us that the division was nontaxable because it was incident to divorce.”

Ms. Shapiro added that when dividing annuities in this manner, she takes the extra step of noting in bold print that the transfer is nontaxable because it is in the context of a divorce — just to be safe.

It pays to be attentive to these details, advisers said, as insurers adhere strictly to the terms of the divorce decree.

“If the court says the contract needs to be split a certain way, we have our hands tied,” said Brian L. Kunkel, national director of advanced planning and solutions at Prudential Financial Inc.

“If the client calls us, we can outline the options available to comply with the court agreement and still be as contract-friendly as possible,” he said. “If people just process the agreement, then we merely follow the instructions.”

In most cases, a divorce decree absolves the attorneys involved from responsibility for any financial consequences.

If a court order of divorce specifies how an annuity is treated, then the liability on the attorney is mostly eliminated, even if there is economic harm to the client, said Steven B. Caruso, partner at Maddox Hargett & Caruso PC.

Determining the best way to treat an annuity with living benefits presents another series of problems.

Riders contain separate contractual provisions governing how they are treated in a divorce, and as insurers are always adding and removing riders, advisers need to be in the know. This is crucial because living benefits in an existing annuity may no longer be available on a new annuity, should the owner decide to share the asset through a partial exchange.

VALUATION EXPERT

“There could very well be an actuarial value in a living benefit that’s beyond the value of the contract,” Mr. Kunkel said. “You may want to hire a valuation expert on the annuity, especially if there’s a large discrepancy.”

It might make sense to leave the annuity intact and allow one party to keep it while the other gets something of equivalent value.

Such was the conclusion reached by Scott Stolz, president of Raymond James Insurance Group, after he was called in by attorneys to testify as an expert witness in a divorce that involved four insurers and the division of 20 annuities.

Each insurer had its own terms for dealing with divorces, and the ordeal encouraged him to begin working on a resource manual on this topic for advisers.

“There were so many policies, it was easier to come up with a combination that made sense,” Mr. Stolz said of the divorce case.

“If you have one or two policies, you have to say, “You take the annuity and I’ll take the house.’ It never makes sense to divide the annuities up,” Mr. Stolz said.

The Perfect Storm: Divorcing Baby Boomers

By FPA Member Lili A. Vasileff, CFP®, CDFA™

Last Updated: June 6, 2011 

As Baby Boomers approach the last hurdle before the magic retirement age of 65, it is becoming increasingly newsworthy that growing legions of older Americans are untying the marital knot. With this trend for “gray” divorces, there are several challenges: dividing one household into two; re-evaluating near term retirement and estate planning goals; addressing gaps in health insurance coverages; re-examining investment decisions for longer life expectancies. It is truly a “perfect storm” where not only are your financial goals turned upside down, but planning is further complicated by emotional and psychological turmoil affecting your rational decision-making.

Every 10 seconds a Boomer turns 60 years old.1 Boomers are unlike predecessor generations in a myriad of ways. One of the most pronounced differences is that there was a shift in attitudes to more of a “me” generation focused on personal rewards and self fulfillment.

So has this attitude resulted in an increasing rate of gray divorces? Surprisingly, the answer is no. The divorce rates for seniors have remained nearly steady since the 1970s.2 The surge in divorcing Boomers actually reflects that more divorced adults are becoming divorced seniors. More Boomer women initiate divorce (66 percent) and claim satisfaction (70 percent) than men.3 The biggest fear expressed about divorce is the prospect of living alone. Interestingly, the traditional moral taboo against divorce has little effect on holding together troubled marriages.

Yet most divorced Boomers are not living alone. The number of Boomers cohabiting has nearly doubled in the last decade. What stops many Boomers from remarrying is the prospect of financial loss. Remarriage may mean giving up alimony, a former spouse’s medical insurance, a former spouse’s pension and/or their Social Security benefits. Other factors that weigh heavily against remarriage include the influences of adult children and the likelihood that one or both Boomers may be care givers and/or may provide primary financial support for ailing elderly parents.

The reality for most Boomers is that expectations will be different during retirement years and planning needs cannot be ignored or postponed during a major life transition such as divorce. A divorce financial planner can address your fears, anxieties and actual financial challenges as you approach retirement, simultaneously with specific divorce financial issues. The perfect storm is an opportunity to address comprehensive personal financial goals and allows for contingency planning by forward thinking.

Key points for you to address during the divorce process must include these subject areas:

  1. Your credit rating: Have you or your ex-spouse impaired your creditworthiness and affected the cost of your health, auto, life, or homeowners insurances? Are there any individual debts in your name such as your mortgage, car loan, or security/down payment on housing?
  2. Your individual financial identity: Are you able to qualify individually for loans, credit cards and insurances? At your age, what are the added costs to begin a fresh new financial identify?
  3. Your health insurance: Will your health insurance coverage under COBRA fall short of you qualifying for Medicare? What can you do to fill the gaps in coverage and at what cost? Can you delay the divorce to sustain COBRA until Medicare eligibility if you have health issues? In many cases, spouses with medical histories may feel either held hostage in the existing relationship or thwarted from entering a new one. Demographically, women face a higher risk of being uninsured.
  4. Social Security eligibility: Will you qualify for Social Security on your own or on your ex-spouse’s record? Be aware of the criteria for qualifying under your ex-spouse’s — stay married for at least 10 years, and remain unmarried at age 60 at time of application for benefits.
  5. Social Security strategy: Should you take your own Social Security benefits at an early retirement age and defer electing your ex-spouse’s until later age (or vice versa)? Be sure you know the criteria for disclaiming benefits, deferring until later dates, etc.
  6. Pensions: Nearly 41 percent of Boomers receive pensions.4 You need to stay informed of your ex-spouse’s employer and pension terms; notify them when you elect to receive benefits; be aware of any time or event triggers when your ex-spouse can elect that may impact your benefits.
  7. Estate plans: You need to revamp your estate plan (redo wills, POAs, health care proxy, living will, etc.) and beneficiary designations post divorce. Be sure to maximize your estate and gifting strategies. A divorce financial planner recognizes unique opportunities that may allow for greater estate tax savings otherwise unobtainable in the non-divorce setting.
  8. Future families: Protecting heirs may be an implicit or explicit goal during divorce, especially in light of remarriages, second families and adult children. The ex-spouse, one’s own children, the new spouse or partner, and estate taxes all are interrelated and require careful attention to be sure your intent and wishes are carried forward accurately.
  9. Protect and preserve wealth: Lastly, if you wish to protect assets from dissipation (either to creditors, an ex-spouse or children), a divorce financial planner can advise you of the factors by which the court weighs the consequences of actions taken by you and your ex-spouse. To avoid traps that the Internal Revenue Service (IRS) closes in on, special rules apply to alimony, child support and property settlements per a written agreement certified by the court.

In summary, a divorce financial planner brings comprehensive expertise about personal finance to the divorce process and will help analyze the many dimensions of financial challenges facing Boomers who divorce. While many of never expect divorce in your later years, a divorce financial planner can help ease your anxieties and fears by carefully evaluating your goals, strategies, and options during divorce to secure the financial future you desire.

Selected characteristics of Baby Boomers 42 to 60 years old in 2006; Age and Special Population Branch Population Division, U.S. Census Bureau Washington D.C., 11/04/2009.
U.S. Census Bureau Study, 11/4/2009
U.S. Census Bureau Study, 11/4/2009
Jack VanDerhei and Craig Copeland, “The EBRI Retirement Readiness Rating”™: Retirement Income Preparation and Future Prospects”, July, 2010 Issue Brief, No. 344.

FPA Member Lili A. Vasileff, CFP®, CDFA™, is President of the Association of Divorce Financial Planners.


Divorce Retirement: Financial Advisers Face Challenges When Couples Split Later

Divorce Retirement: Financial Advisers Face Challenges When Couples Split Later

 

Divorce Retirement

Posted: 03/12/2012  1:11 pm

By Jessica Toonkel

NEW YORK, March 12 (Reuters) – As part of the  retirement planning process, financial advisers often help  married couples prepare for the eventuality of one dying before  the other.

What few people talk about is what happens if the couple  divorces as they are approaching retirement.
Unfortunately, this is becoming more and more common. Over  the past 20 years, the divorce rate among people between the  ages of 48 and 66 has increased by more than 50 percent,  according to U.S. Census Bureau data.

“We always talk about the risks people face in retirement,  like inflation risk and health care costs risks, but very rarely  does anyone mention the risks of being single in retirement,”  said Tina Di Vito, head of Bank of Montreal’s BMO  Retirement Institute.
For financial advisers, a divorce by clients can be a  minefield of strong emotions and conflicting interests, not to  mention their shock at seeing their assets get cut in half.

But advisers say they can get their clients through this  trying time with a significant amount of hand-holding and  expectation-setting. In some cases, they may even refer them to  other financial advisers who do not have a previous relationship  with either of the clients.

PLANNING FOR THE UNPLANNABLE
While advisers agree that there is no way to plan long-term  for divorce, they can take steps to be more prepared for it.
A growing number of advisers are becoming “certified divorce  financial analysts” by taking a four-part, self-paced course  covering such issues as tax ramifications, property division and  budgeting matters.

The number of advisers who get certified annually has  doubled since 2002, according to the Institute of Certified  Divorce Financial Analysts. There are now 1,500 CDFAs in the  United States and Canada.

Having this designation can help advisers get to clients  before they have been hit by the emotional toll and financial  distress that a divorce causes because clients are likely to  come to them early in the process after seeing they are  certified divorce financial analysts.

“I was meeting so many people post-divorce who came to me  with their settlement checks asking, ‘What should I do now?’”  said Lauren Klein, a Newport Beach, California-based adviser who  got the certification. “I thought if I could get to them sooner,  I could help them avoid the litigation process.”

Often, once a couple starts thinking about divorce, the  husband, wife or both will ask the adviser what to do. This  presents a tricky situation.

If only one spouse is coming for help, advisers have to be  sure to include the other in the conversations, or else they are  opening themselves up to lawsuits down the road.

“I might help them understand what their assets are and what  the tax consequences would be if they sell certain assets, but  then I refer them on to someone else during the actual divorce  process,” said Wendy Spencer, a certified divorce financial  analyst and family law mediator.

Some advisers feel that there is too much potential for a  conflict of interest if they continue to work with a couple  during a divorce. In these cases, they often refer their clients  to another adviser just to help them through that process.
The danger with referring clients, however, is that the  adviser risks losing them.
“I would rather risk losing a (client) than the possibility  of a lawsuit from a client claiming I sided with the other  party,” Spencer said.

And lawsuits are something to be concerned about. “Most  clients coming through a divorce want to blame someone,” said  Lili Vasileff, an adviser with Divorce and Money Matters LLC and  president of the International Association of Divorce Financial  Planners. “Advisers need to make sure they have liability  insurance.”

DECISION TIME
Once clients have decided to divorce, advisers can do  several things to help them — as a couple or as individuals.
But when emotions run high, the challenge for advisers is  helping clients understand when to let go. In particular, many  clients insist on keeping the house no matter what it means for  them.

“There is this idea that winning the house means you have  won, and that is just not the case,” said Columbus,  Indiana-based adviser Warren Ward.

Judith McGee, a Raymond James Financial Services adviser in  Portland, Oregon, had clients who were divorcing; the wife was  leaving the husband for another man.

The husband “did not want to finance his house to pay her  off because he was angry,” she said. “But all he had was an IRA  and his house and some income because he was semi-retired.”

McGee convinced the client to take a loan out on the house,  rather than dip into his IRA, to pay his wife.
Advisers are instrumental in helping clients divide their  assets.

Splitting up a pension plan when the employee is still  working, for example, is not so simple, said Diane Pearson, an  adviser with Pittsburgh-based Legend Financial Advisors Inc,  which has $350 million in assets under management.

The adviser needs to determine the present value of the  pension. Then the adviser must confer with the nonworking spouse  to see if it makes better sense to receive the pension amount  now or upon the working spouse’s retirement.

Similarly, splitting up stocks requires figuring out what  the couple paid for the shares.

“Even in a collaborative divorce that is amicable, splitting  everything 50/50 can be tricky,” Pearson said.

POST-DIVORCE
An important, yet challenging priority is helping to set the  client’s expectations about his or her post-divorce lifestyle.
This can be particularly challenging if the client did not  manage the finances in the family. For these clients, who tend  to be the wives, advisers may need to do extra hand-holding,  they said.

A lot of this work has to do with knowing when a client just  needs empathy rather than advice.

“Advisers need to understand the stages of grief and that  this is a slow process,” McGee said. “Don’t give a lot of advice  too soon.”