Personal Financial Planning for
Divorce
FPA MA-November 19, 2010
Jeffrey H. Rattiner, CPA, CFP®, MBA, RFC
Rattiner’s Financial Planning Fast Track® – CFP® education
JR Financial Group, Inc. – Financial and Tax Planning
6410 South Quebec Street, Centennial, CO 80111-4628
14850 N. Scottsdale Rd.; Ste 355; Scottsdale, AZ 85254
Tel: (720)529-1888; Fax: (720)529-9888
jeff@jrfinancialgroup.com
www.jrfinancialgroup.com
1
Jeffrey H. Rattiner, CPA, CFP®, MBA,
RFC
Mr. Rattiner is president and chief
executive office (CEO) of Rattiner’s
Financial Planning Fast Track®, Inc. and
The JR Financial Group, Inc. which is a
multi-purpose holding company with
offices in the Denver and Phoenix metro
areas serving consumers and the
financial services industry.
2
Training
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Rattiner runs the nationally acclaimed “Financial Planning Fast Track®
which is a boot camp for financial advisors to take them through the
education requirements mandated by the CFP Board of Standards within 7
months. His 22+ years of preparation experience demonstrates his longtime commitment to help advisors successfully complete the CFP ®
Certification Examination. Rattiner teaches the following classes:
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“Personal Financial Planning”
“Insurance Planning”
“Investment Planning”
“Income Tax Planning”
“Retirement Planning”
“Estate Planning”
“CFP Examination Review Course”
Rattiner was also rewarded the “1997 Distinguished Faculty MemberTeacher of the Year” by Community College of Denver.
3
Writing
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Personal Financial Planning for Divorce: Real World Solutions –
John Wiley & Sons
“Rattiner’s Review for the CFP Certification Examination - Fast
Track” – (3nd ed.) John Wiley & Sons
“Rattiner’s Financial Planner’s Bible: The Advisor’s Advisor” – John
Wiley & Sons
“Financial Planning Answer Book” – CCH/Aspen
“Getting Started as a Financial Planner” (2nd ed.) – Bloomberg
Press
“Adding Personal Financial Planning to Your Practice”-American
Management Association
“Personal Financial Planning Library” for Harcourt Professional
Publishing.
Co-authored “Practicing Financial Planning” textbook
He has been a columnist for Financial Planning Magazine and
Financial Advisor Magazine.
4
Background
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Bachelor of Business Administration (BBA) with an
emphasis in Marketing Management from Bernard M.
Baruch College of the City University of New York
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Master of Business Administration (MBA) in Certified Public
Accounting from Hofstra University
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Certified Financial Planner education from New York
University
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Certified Financial Planner (CFP) Certificant with the CFP
Board of Standards in Denver, Colorado
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Certified Public Accountant in New York, Colorado, and
Arizona
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Insurance Broker
5
TABLE OF CONTENTS
Chapter 1:
Chapter 2:
Chapter 3:
Chapter 4:
Chapter 5:
Chapter 6:
Chapter 7:
Chapter 8:
Chapter 9:
WHAT IS MARRIAGE?
MINIMIZING THE DAMAGE
PAYING FOR DIVORCE
PLAN OF ATTACK
ALIMONY AND CHILD SUPPORT ISSUES
INCOME TAXES
RETIREMENT PLANS
VALUATION ISSUES
REDESIGNING YOUR PERSONAL FINANCIAL
PLAN AFTER THE DIVORCE
Chapter 10: AFTERWARDS: THE 25 STEPS TO FUTURE
SUCCESS
Chapter 11: PLANNING FOR SAME SEX COUPLE DIVORCE
slide # 7
slide # 17
slide # 20
slide # 31
slide # 40
slide # 52
slide # 75
slide # 90
slide # 100
slide # 154
slide # 162
6
Chapter 1: The Unthinkable
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My wife and I were happy for twenty years.
Then we met.
-- Rodney Dangerfield
7
Chapter 1: What is Marriage?
Financial Contract
 Business Deal
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8
What is Divorce?
Emotional Nightmare
 Irrational Process
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9
Objectives of Divorce
Minimize Damage
 50/50 Split of Assets to start with
 Stay Focused on the End Result
 Be Prepared
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10
“Top 10” master financial checklist you need to ponder during the divorce
process:
1. What do we own (assets)?
2. What do we owe (debt)?
3. What have our budgeted revenue and expense numbers looked like
based on previous experience? (planning)
4. What sources of income do we expect to have going forward? (support)
5. What is the total marital estate worth now (assets – liabilities)?
6. Has everything been factored into account (future contingencies,
compensation, unforeseen issues, etc.)?
7. Do I have all the paperwork necessary to begin (all the legal documents
necessary for transferring title, verifying information, etc.)?
8. Can we negotiate a split ourselves or do we each need representation?
(to help keep the cost down)
9. Which type of divorce makes the most sense? (with the goal of
minimizing the damage)
10. How do we negotiate to encourage a “win-win” scenario for each
spouse? (fair division of assets, debt and income) knowing that the
ultimate conclusion is a lose-lose proposition
11
Kinds of Divorce at a Glance
Kind of
Divorce
Summary
How It Works
Hassle and Expense
Spouses, who haven't been married long and don't have
children or many assets or debts, file together
Relatively simple paperwork; lawyer usually not
necessary; often only one filing fee
One spouse files for divorce, the other doesn't respond
Relatively simple paperwork; lawyer may or may not be
necessary
Trained, neutral mediator helps spouses work out settlement
agreement without court fight
Not cheap - except compared to a contested divorce; can
help spouses communicate
Each spouse hires lawyer, but everyone agrees to settle out of
court using negotiation and four-way meetings
Can take longer than mediation, but cheaper, nicer, and
quicker than contested case
Arbitrated
Spouses hire private judge to hear evidence and decide
contested issues outside of court
faster and slightly less expensive than trial; can be more
civil than court trial and provides greater privacy
Contested
Souses hire lawyers and fight out issues at trial
Expensive, stressful for everyone (especially children),
guaranteed to ruin chances of civil relationship in
future
Default
Mediated
Collaborative
12
Representation
Educating Yourself
 Should You Go It Alone
 Attorneys
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13
Blocking Out the Competition
Playing Offense
14
Becoming Too Passive
What happens when you don’t take the
initiative?
15
RATTINER’S PLANNING TIPS
1.
BE COMFORTABLE WITH YOUR DECISION TOPURSUE THE DIVORCE
(REGRDLESS OF WHO INITIATED IT.)
2.
The divorce process is a business decision. Keep emotions in check and pursue it as you would
any other business deal.
Get a handle on your finances. Start with a budget so you can determine the assets, debt and
income issues that need to be addressed.
Trial, permanent and legal separation are geared towards the same thing, but demonstrate different
ways of getting there. This goes back to answering the question, is divorce right for you?
There are many different types of ways to approach divorce. Select the method that gives you the
least amount of discomfort. A method that helps maintain your health is primary. If it is also easier
and cheaper for both spouses to run, that is a major plus. In addition, it offers you the best chance
of a complete and overall recovery in the shortest amount of time.
The person you divorce is not the same person you married.
Don’t sweat the small stuff. Pick and choose your battles carefully. Look at the big picture. Not
everything is a major battle or a huge catastrophe.
Don’t be a part of the blame game. Take it from a CPA, two wrongs don’t make a right.
Work with and attorney always. Don’t go through the motions without any counsel walking you
through the process. Even if your ex asks you not to work with one, you owe it to yourself and your
ex to become as educated as possible.
Rely on a close family member or friend to bounce ideas off.
Don’t be too hasty. Step back from the situation, try to look in from the outside and act rationally.
Remember, it’s ultimately all about the children! Don’t make waves with your children by trying to
get revenge on your ex.
Look at various scenarios including a best case and worst case picture. This will provide you with
some boundaries as to what to expect.
No matter how bad it seems now, just remember my mother’s saying, “this too shall pass.”
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
16
Chapter 2: Minimizing the Damage
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The secret of a happy marriage remains a
secret. --Henny Youngman
17
Chapter 2: MINIMIZING THE
DAMAGE
In a lose-lose situation, the objective is to
try and get out of the marriage with as little
damage as possible.
 Damage includes financial and emotional
issues – Pick your battles – Stay focused
 Staying out of court
 Negotiating the deal
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18
Rattiner Damage Control Tips
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Taking Care of yourself – It’s all about me!
Protecting Your Mail
Protecting Your Computer
Open Your Own Credit card and Bank Account
Close Joint Credit Accounts
Protect Your Separate Property
Filing a Tax Return
Temporary Support Agreements
Innocent Spouse Rule
Re-enter the Workforce
19
Chapter 3: Paying for Divorce
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Marriage is grand…divorce is about 100
grand.
20
Chapter 3: PAYING FOR
DIVORCE
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Costs Involved
What Should You Pay for in the Divorce?
How Long Will these Expenses Go On?
Creating a Budget
Litigation Budget
Analyzing Your Income
Keep Your Income Separate
Going Solo
Solo Assets
Separate Property
Joint Assets
Before Divorce Papers Have Been Filed
After Divorce Papers Have Been Filed
What is Truly Important
How to Pay for It: Prevent Paying for Your Ex’s Legal Fees
Your Monthly Budget
Income Allocation for You and Your Ex
Your Balance Sheet
21
Costs Involved: What Should You
Pay For & For How Long?
Everyday life
 New Temporary Costs – legal fees,
valuation experts, mediators, therapists,
arbitrators
 Pay as you incur
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22
Creating a Budget
Monthly Budget – the 3 C’s
 Litigation Budget
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23
Analyzing Your Income
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Include income from all sources
24
Keep Your Income Separate
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Don’t Commingle!
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Separate Property
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Keep separate!
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Solo Assets – Those assets in Your Name
Only, such as retirement plans
26
Joint Assets
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Before You File – use anyway you want
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After you File – you are legally prohibited
from doing anything that would harm your
jointly owned interests or spouse’s
separately owned property
27
What is Truly Important
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Have sufficient assets to feed and shelter
each spouse until the divorce is final
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Divorced spouses find out too late that
there are cheaper ways to go about this
process
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How to Pay for It: Prevent Paying
for Your Ex’s Legal Fees
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The bigger wage earned generally loses here
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Begin liquidating jointly owned assets
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Put your attorney fees on a credit card
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Take out a joint loan to pay bills
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Use retirement assets
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Sell assets, such as rental real estate
THE BOTTOM LINE: IT ALL ENDS UP IN THE ATTORNEY’S POCKETS!
29
Rattiner’s Planning Tips
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Many costs show up for the first time during the divorce process. Take an accounting
of what each one represents before you act on it.
Try to shorten the divorce process, where possible. The longer it goes, the more
expensive it becomes
When figuring out how much each spouse needs during the divorce process, the first
thing you should do is to create a budget.
Lawyers will provide you with a litigation budget if you request one.
Once the divorce process is underway, keep your income separate from that of your
ex.
As long as separate property is not commingled, it should remain separate property
after the divorce.
Joint assets should be taken care of in a fiduciary capacity by each spouse during the
divorce process.
Your responsibility for using and caring for joint assets differ before and after divorce
papers have been filed.
Taking out a mortgage, home equity line of credit, liquidating assets in a joint account,
credit cards, and retirement accounts are all sources for paying legal fees during the
divorce
Don’t forget the tax angles of your expenses, since this will truly determine what you
have to spend during the divorce.
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Chapter 4: Plan of Attack: Let the
Games Begin
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Love is the quest, marriage the conquest
and divorce... the inquest.
31
Chapter 4: PLAN OF ATTACK
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Taking Your Ex Out
1-800-MOBSTER
Litigation
Anything Other Than Litigation
Mediation
The Mediator
The Mediation Process
Collaborative Divorce
Arbitration
The Prelims – Gathering the Evidence
Discovery
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Releases
Interrogatories
Depositions
Subpoenas
Working Discovery’s Usefulness
Going After Hidden Assets
Personal Fault Issues
32
Taking Your Ex Out
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I KNOW WHAT YOU’RE THINKING!
33
1-800-MOBSTER
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Speak to me after this session for a direct
contact!
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Litigation
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Avoid at all costs!
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Anything Other Than Litigation
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Mediation
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Collaborative Divorce
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Arbitration
36
Going After Hidden Assets
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Discovery
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Interrogatories
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Subpoenas
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Checklist for Hiring a Mediator
1.
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11.
What is your style of mediation?
Do you have a specialty?
Do you see couples separately and/or together?
How do you charge and what are your fees?
How many mediations have you performed? Is this your full time
job?
What kind of background or training have you had? Are you a
judge?
How do you work with spouses who each have their own attorney?
Are attorneys part of the process or do you refer legal issues to
them directly?
What do you do if you see the mediation process breaking down?
Do you work with and refer spouses to other professionals, such as
CPAs, CFPs, attorneys, therapists, etc.?
How is confidentiality handled?
Are you willing to testify in court, if need be?
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Rattiner’s Planning Tips
1.
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It never pays to take your ex out. Be smart about the entire divorce process. Look at the big picture.
Avoid litigation at all cost. It is too expensive, too demanding and will not enable you to get the result you
are trying to achieve. You can’t control the ultimate outcome.
Mediation is a better bet if you and your ex can agree to it. Having an independent person be the referee
allows for a more equitable settlement. Remember, you’ll never be happy with the final outcome, but it
will help minimize the damage and hopefully provide you with a settlement you both can live with.
Hire a former judge as the mediator. That person has the experience necessary to understand the
issues, close the gap and wrap up the case. You always want to employ a no nonsense approach to be
implemented by a no nonsense judge.
Make sure you understand the mediation process before moving forward. It puts both spouses on the
same playing field looking for similarities between the parties rather than differences.
Collaborative divorce is another good option because the whole goal is to avoid going to trial. You need
both sides to be open, honest and cooperate with each other. And you need both attorneys to feel the
same way.
Arbitration is usually a winner take all scenario. If binding, you lose your right to challenge the decision. If
non-binding, you’re probably not going to get from it what you should.
Discovery is a necessary step because it helps gather all the information you need to make the right
decisions about the final outcome of the case. If you have your doubts about things, it forces the other
spouse to act.
To go after hidden assets, make sure it is a worthwhile investment. It can be expensive if you get other
people involved and not worth the cost.
Trying to prove personal fault issues are not really necessary in the grand scheme of things. It doesn’t
get you closer to your ultimate goal of settling the case and moving on with life.
39
Chapter 5: Alimony and Child
Support Issues
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The definition of alimony: The screwing
you get for the screwing you got!
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Chapter 5: ALIMONY AND CHILD
SUPPORT ISSUES
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Alimony (Maintenance and/or Spousal Support)
Calculation and Length of Alimony
Can the Payee Spouse Receive an Extension
for Alimony Payments?
Remarriage
Initial Payment of Alimony
Modification of Alimony Payment
Hiring a Vocational Expert
Deductibility
Alimony Requirements
41
Alimony (Maintenance and/or
Spousal Support)
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Definition - Alimony is designed to help the spouse with the lesser
earnings potential gain the necessary training to re-enter or advance
in the workforce
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Temporary award – Concerned with the future needs of that spouse
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Factors Involved – Length of marriage, each spouse’s age,
vocational skills of each spouse, standard of living during the
marriage, conduct of each spouse, who will maintain the household
for the children, liabilities of each spouse, previous sacrifice of of
one’s earning potential
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Calculation and Length of Alimony
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Each spouse’s ability to earn income
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Past earnings and projected future earnings
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Can both spouse’s support themselves
individually – then maybe no alimony is awarded
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Your age
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Hiring a Vocational Expert
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Absolutely necessary for the at-home
spouse
44
Alimony Requirements
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Payments must be made under a divorce or separation
instrument.
Payments must be made in cash.
No designation of the payment from one spouse to the
other is considered to be alimony.
If separated under a decree of divorce or separate
maintenance, the spouses cannot live in the same
household.
Payments must end at the death of the payee spouse.
Payments can not be considered child support.
You and your ex cannot file a joint tax return with each
other.
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Alimony Recapture (Too Much Alimony Paid
Too Soon)
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If the spread of payments is greater than
$15,000 per years 1 and 2, or years 2 and
3, with payments going downward,
alimony recapture may be an issue
46
Nick pays his ex-spouse, Carla, $60,000 alimony during the first year, $35,000 during
the second year, and $12,000 during the third year. Calculate the amount of alimony
recapture.
Example: Recapture of Alimony
Note. Do not enter less than -0- on any line.
1. Alimony paid in 2nd year
1.$35,000
2. Alimony paid in 3rd year
2.$12,000_
3. Floor
3.$15,000_
4. Add lines 2 and 3
4._27,000_
5. Subtract line 4 from line 1
5. $8,000
6. Alimony paid in 1st year
6. 60,000_
7. Adjusted alimony paid in 2nd year
(line 1 less line 5)…………
7.27,000_
8. Alimony paid in 3rd year
8.12,000_
9. Add lines 7 and 8
9.39,000_
10. Divide line 9 by 2
10.19,500_
11. Floor
11.$15,000
12. Add lines 10 and 11
12.34,500_
13. Subtract line 12 from line 6
13. 25,500
14. Recaptured alimony. Add lines 5 and 13
*14.$33,500
*If you deducted alimony paid, report this amount as income on Form 1040. line 11. If you
reported alimony received, deduct this amount on Form 1040, line 31a.
IRS Publication 504
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Child Support
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Many states have a state calculator to help
you figure out the amount yourselves
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Modification can occur
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Alimony and Child Support –
Tax Summary Chart
Alimony
Child Support
Deductible by Payor
Yes
No
Taxable to Payee
Yes
No
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ALIMONY AND ITEMIZED
DEDUCTIONS
IF you must pay all
of the…
Mortgage payment
(principal and
interest)
AND your home is …
Jointly owned
Real estate taxes
and home
insurance
Held as tenants in
common
Real estate taxes
and home
insurance
Held as tenants by the
entirety or in joint
tenancy
THEN you can deduct and
your spouse must
include as alimony…
AND you can claim
as an itemized
deduction…
Half of the total payments
Half of the interest as
interest expense
(if the home is a
qualified home)
Half of the total payments
Half of the real estate
taxes and none of
the home
insurance
None of the payments
All of the real estate
taxes and none of
the home
insurance
Source: Adapted from IRS Publication 504 Divorced or Separated Individuals (2007) p.12
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Rattiner Planning Tips
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
Alimony is deductible for the payor spouse and taxable to the payee
spouse.
Child support is neither taxable nor deductible by either spouse.
Alimony is generally not awarded for short term marriages which have
durations of less than five years.
Make sure you call in a vocational expert to help assess the at home
spouse’s ability to earn income after the divorce.
If spouses agree to a lump sum award of an alimony payment, it cannot be
altered in the future.
Regular monthly payments of alimony can be modified by the courts in the
future.
Alimony payments always end at the death of the spouse and usually at
remarriage.
If you front load alimony to the tune of greater than $15,000 between years
one and two or between years two and three, some of the alimony may
need to be recaptured.
Child support payments can always be modified.
Awarding temporary alimony may not always be a good idea because it can
be used as a precedent for awarding permanent alimony.
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Chapter 6: Divorce Can be Taxing
(Income Tax Section)
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Marriage is the only war in which you
sleep with the enemy.
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Chapter 6: INCOME TAXES
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Divorce Can Be taxing
Property Settlements (IRC Section 1041)
Exceptions to IRC Section 1041
Purchases Between Spouses
Transfers in Trust
Passive Activity Loss Property
Deferred Tax Liability
Recordkeeping Requirements
Gift Tax Issues
Property Basis
Filing Status
53
Divorce Can Be taxing
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There are many things to consider.
Attorneys are probably not the best
source for this type of information
54
Property Settlements (IRC Section
1041)
Transfers between spouses pursuant to a
divorce are done income tax free
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Purchases Between Spouses
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Original basis and holding period
accompanies the transaction. Property
basis is the original basis from the
transferor spouse
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Deferred Tax Liability
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You may have future tax issues when you
sell property. Many times attorneys don’t
facto in the net effect. Examples include
depreciation recapture, capital gains,
primary residence sale, and future tax
rates
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Filing Status
(S/H) Single
 (M/J) Married Filing Jointly
 (M/S) Married Filing Separately
 (H/H) Head of Household
 (Q/W)Qualifying Widow
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Exemptions
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Have the divorce decree state clearly who
is entitled to the dependent exemption
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You’ll always get a deduction for yourself
59
Is there any way for the dependency
exemption to be awarded to the non
custodial parent?
The answer is yes if all of the following apply:
1. The parents
a. Are divorced or legally separated under a decree of divorce or
separate maintenance
b. Are separated under a written separation agreement, or
c. Lived apart at all times during the last six months of the year
2. The child is in the custody of one or both parents for more than half
of the year
3. The divorce decree or separation agreement provides the
noncustodial parent can claim the child as a dependent or the
custodial parent signs a written declaration (Form 8332) that he or
she will not claim the child.
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Form 8332: Release of Claim to
Exemption for Child of Divorced
or Separated Parents
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Custodial parent needs to sign
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Can be released for one or more years
61
Sale of Principal Residence
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Residency Requirements - Must live in the
house for two of the last five years
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$250,000 – single
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$500,000 – married filing jointly
62
Co-Owning the House
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NOOOOOOOOOOOOO!
63
Remarriage
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You can use the new spouse’s time in the
house to meet residency requirements
64
Single Spouse selling the house
after the Divorce
Sales Price
Cost
Gain on Sale
Exclusion
Taxable Amount
Tax Liability @ 20%
$600,000
$200,000
$400,000
$250,000
$150,000
$30,000
65
Married Filing Joint Taxpayers Selling the
House During the Divorce Process
If you are not officially divorced, you are still considered married and
can thus continue to file married filing jointly. In that case, the couple
can still take the $500,000 exclusion.
In the next example, look what happens if the spouses sell the house
while still legally married and filing jointly.
Sales Price
Cost
Gain on Sale
Exclusion
Taxable Amount
Tax Liability
$600,000
$200,000
$400,000
$400,000 (can go as high as $500,000)
$0
$0
66
Exception to the Two Year Rule
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An exception exists to the two year rule if
the house is sold due to unforeseen
circumstances. In these cases you can pro
rate the gain on the house.
67
Unforeseen circumstances include
moving for any of the following
reasons:
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job change
health issues
divorce
68
John and Jane Smith purchased a house for $300,000. Six months later they were
legally divorced. Jane, who is now single, and is the sole owner of the house,
decides to sell the house for $400,000 after the sixth month. How much of the gain
would be taxable to Jane?
Step 1:
Sales Price
$400,000
Cost
$300,000
Profit
$100,000
Step 2:
$250,000 single exclusion x 6/24 = $62,500 can be excluded from the sale of the
house
Step 3:
Profit
$100,000
Excluded Gain
$62,500
Taxable Gain
$37,500
Note1: The 6/24 represents living in the house for 6 months out of 24 months (2
year requirement).
Note 2: If Jane sold the house at the end of 2 years (instead of six months), then
the entire gain (up to $250,000) would have been excluded from capital gains tax.
IRS Publication 523.
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Tax Deductibility of Divorce Costs
Deductible if:
 In connection with the collection or refund of any tax
 For the production or collection of income (i.e., alimony)
Aggressive position, but probably doable.

Itemized bill from the attorney specifying investment
and/or tax advice
Where: Schedule A: Itemized Deduction, Miscellaneous 2%
70
Like Kind Exchanges Under IRC
Section 1031






Like kind does not mean “identical”. It means “similar”
Sell property first
Identify up to 3 properties to purchase within 45 days
Close on any of the 3 within 180 days (both from the
date of escrow)
Can be multiple properties
What happens if that doesn’t work? – reverse like kind
exchange
71
Nonstatutory Stock Options (NSO)




NSOs do not meet specific IRC requirements for
special tax treatment.
Who is entitled? Employees and Independent
Contractors
Difficult to value because of future market
valuations
Restricted Stock Options – Section 83(b)
Election
72
Tax Credits Regarding Children
Child Tax Credit
 Dependent tax Credit
 Adoption Expenses Credit
 Education Tax Credits

 American
Opportunity Credit
 Lifetime Learning Credit
73
Rattiner’s Tax Planning Tips
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
A transfer of property between spouses pursuant to a divorce does not create a
taxable event for either spouse.
The recipient spouse keeps the same tax basis for property transferred from the
transferor spouse.
Filing status is determined as of the last day of the calendar year (December
31st)
Filing married filing separate keeps the liability issue separate between the
spouses.
Head of household should be used as a filing status for a divorced spouse who
maintains a household for dependent children.
If you are planning on selling your house as the recipient spouse, you may want
to do it during the divorce process in order to take advantage of the $500,000
exclusion.
Divorce qualifies as unforeseen circumstance. That means if you sell the house
within a two year period, you may be able to exclude part of the capital gain.
You don’t have to worry about the capital gain exclusion from a home sale where
you transfer the sale to the other spouse as part of the divorce.
If you retain a rental property from the divorce and wish to exchange it for
another more expense property, you can do it under IRC Section 1031 and defer
the capital gain.
If you claim a child under the age of 17 as your dependent, you may qualify for
the $1,000 per year child tax credit.
74
Chapter 7: Retirement Plans:
(Rules, Types and Valuation)

The secret to successful investing for
retirement is to keep your first spouse!!!
75
Chapter 7: RETIREMENT PLANS
8 Critical Elements To Think About








What the employee spouse is entitled to due to vesting schedules
and other issues
Type of retirement plans to divide
QDROs
Valuation of retirement benefits
How much of the valuation are you entitled to receive?
Whether to accept the retirement benefits or an equivalent amount
of other assets
Protection of your retirement benefits if your spouse remarries or
dies
Discovery of overlooked or hidden assets
76
Vesting Rules
Qualified Plans
Defined Benefit:
5 year cliff

3-7 year graded
Defined Contribution Plans

3 year cliff

2-6 year graded
Personal Retirement and Nonqualified Plans

Immediate vesting

77
Types of Retirement Plans
Qualified Plans
 Defined Benefit
 Defined Contribution – includes 401(k) plans
hybrid - 403(b) plans
Personal Retirement Plans
 SEPS
 SIMPLEs
 IRAS
Nonqualified Plans
 Deferred Compensation
 Supplemental Executive Retirement Plans
78
Qualified Plans
Defined Benefit Plans
 Defined Contribution Plans

79
Personal Retirement Plans
IRAs
 SEPs
 SIMPLEs

80
Nonqualified Plans

Deferred Compensation
 Rabbi
Trusts
 457 Plans
81
Qualified Domestic Relations
Orders (QDROs)

Method of dividing up retirement assets
82
Inquiries to the Plan Administrator
Participant's account or benefit statements
from the date of the marriage
 Summary plan description
 Current QDRO procedures
 Distribution policy and forms

83
Valuation of Retirement Plans
Defined Benefit Plans – employer master plan
Methods for Dividing a Pension
 Buyout method (immediate offset method with other
assets)
 Wait and see method – split at date of retirement
 Reserved jurisdiction method – ask the court to wait and
value later because of too many unknown variables; i.e.
stock options, bonuses to be paid on dependent factors,
and other sources of compensation that can’t be
determined until later on)
84
Valuation of Retirement Plans
Defined Contribution Plans
Personal Retirement Plans

Participant knows the value in each of
these accounts
85
Using Retirement Assets to
Balance Out Equity

Very effective tool
86
Overlooked Plans

Past plans

Frozen plans
87
Rattiner’s Retirement Plan Mistakes Checklist
1. Has the attorney identified all past and present retirement plans?
2. Does the attorney understand the differences among all the types of
retirement plans that you or your ex possesses (i.e. qualified vs. personal
vs. nonqualified plans and/or corporate vs. government plans)?
3. Was a QDRO obtained during the divorce process and not afterwards?
4. Has your attorney stepped up to the plate and either prepared the QDRO
or is on top of someone else preparing the QDRO?
5. Has an outside party been hired to help value the retirement accounts?
6. Does the value of the retirement plans ask for accrued benefits as opposed
to vested benefits?
7. Does the value of the retirement plans include all the activity within the
retirement account, such as gains and losses, interest and dividends
received?
8. Has the attorney noted what will happen if the parties die during the
process?
9. Has the attorney acknowledged and completed the issues necessary for
continuation of medical care coverage for the non-participant spouse?
10. Did you walk away from the divorce comfortable with the approach used by
the attorney and others as to the way the calculations were made in the
division of retirement plan assets?
Yes
No
Yes
Yes
No
No
Yes
Yes
No
No
Yes
No
Yes
No
Yes
No
Yes
No
Yes
No
88
Valuation of Retirement Plan Assets
Name of Asset
Current Value
Rate of Return (%)
Date Full Benefits Begin
Defined Benefit Plans:
Company Ret Plan-Yours
Company Ret Plan-Ex:
Defined Contribution Plans:
Company Ret Plan-Yours
Company Ret Plan-Ex:
Personal Retirement Plans:
IRA #1 - Yours
IRA #2 - Yours
IRA #1 – Ex:
IRA #2 – Ex:
SEP – Yours
SEP – Ex:
SIMPLE-Yours
SIMPLE – Ex:
Nonqualified Plans:
Yours:
Ex:
Other:
Yours
Ex:
89
Chapter 8: Valuation Issues:
(Property Division and Business
Concerns)

I was married by a judge. I should have
asked for a jury.
-- George Burns
90
Chapter 8: VALUATION ISSUES
Valuation issues are always tricky and
seldom accurate!
And they certainly don’t measure what will
happen in the future (i.e. the economy or
your profession) when you are valuing
assets to pay for future debt!
91
Property Division

Common Law

Community Property
92
Common Law

Equitable distribution

41 states plus Alaska
93
Community Property

Equal Distribution

9 states plus Alaska
TWIN CLAN W
 Texas
 Wisconsin
 Idaho
 Nevada
 California
 Louisiana
 Arizona
 New Mexico
 Washington State
94
Closely Held Business Valuation
To consider if the business is marital property, you’ll need to address
these issues:

Was the business established before or after the marriage?

Did it grow substantially during the marriage?

If the business did grow, was it due to the fact that your ex was a
stay-at-home spouse who did not work full-time in the business?

Was separate property from either spouse invested in the business?

Was it a joint business run by both spouses?
95
Business Valuation Documents Needed
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
Last five years of individual tax returns and documents (Form 1040)
Last five years of business tax returns and documents [Form 1120S (S
Corporations); 1120 (C Corporations); 1065 (partnerships, limited liability
companies, limited liability partnerships)]
K-1s for 1065 or 1120S
Income (Profit and Loss) statement
Balance sheet
Listing of shareholders or partners who own a piece of the company
Capital accounts of the partners if the business is a partnership
Retained earnings statement
List of cash accounts and any investments
List of aged accounts receivable (money due the business)
List of aged accounts payable (money the business owes others)
Business plan and projections
Key officers compensation
Key officers life insurance
List of existing contracts
List of partnership agreements in affect
96
Valuation Report
The business valuation report should include
 Full description of the business
 Method of valuation
 Name and qualifications of the evaluator
 Names of relevant documents that were
reviewed
 Full explanation for the rationale for the
evaluation
 Date the business was valued
 Reason for the valuation
 Relevant industry standards
97
Professional Practices - States that consider
professional practices part of the marital
estate at this time include:









Arizona
California
Colorado
Connecticut
Indiana
Kentucky
Maryland
Michigan
Montana









Nevada
New Jersey
New Mexico
New York
North Carolina
Ohio
Oregon
Virginia
Washington
98
Key Stock Option Questions
1.
2.
3.
4.
Is the stock option part of marital
property? In other words, was it earned
and received during the marriage?
How is the option valued?
When is the option valued?
What are the tax consequences when
the option is exercised?
99
Chapter 9: Redesigning Your
Personal Financial Plan After the
Divorce

Americans divorce so much we are called
the land of the free, and we get married so
often that we are called home of the brave.
100
Chapter 9: REDESIGNING YOUR
PERSONAL FINANCIAL PLAN
AFTER THE DIVORCE

You are ready for Stage 2 of Your Life. You
will need to re-examine all the prior
aspects of your life and then start anew.
101
The New and Improved Game of
Life





Start with a budget
Save 10% of your gross income
Establish an emergency fund of 3-6 months of
gross living expenses
Purchase essential insurances
Revise your legal documents
All of this can be accomplished through a financial
plan
102
Planning for Life’s Uncertainties








Job change/unemployed
Revise your cash flow
Remarriage
Protecting the kids from a prior marriage – QTIP plan
Withdrawing money from your retirement accounts.
Develop a retirement needs analysis
Ownership designations on invested assets and
disposition of closely held business interests
Changed tax filing status
Constant monitoring of life events
103
GOING THROUGH THE PERSONAL
FINANCIAL PLANNING PROCESS
1.
2.
3.
4.
5.
6.
Gather all Necessary Data
Objectives need to be set
Process all the information into
meaningful financial statements
Develop recommendations
Implement those recommendations
Monitor your situation annually
104
LIFE CYCLE ANALYSIS
Based on following the previous
discussion of the personal financial
process that you need to follow very
closely, and where you want to end up, the
following chart shows you what you should
be doing at the appropriate time in our life.
105
Ages
20-29; and 30-39:








Have an emergency fund equal to six months of gross living
expenses
Make sure you always have adequate and continuous insurance
coverage for life, disability, health, homeowners, automobile, and
umbrella.
Be careful if moving between jobs and short changing your pension
benefits or other deferred compensation arrangements.
Roll over any retirement benefits into an IRA or to your next 401(k).
Minimize your income tax bite buy maxing out your deductions.
Contribute regularly to your 401(k) and/or IRA, and any other
retirement fund.
Purchase a home with a 15 year mortgage so that by the time you
retire, your housing costs will be under control.
Write a will. Discuss retirement plan benefits with your human
resource personnel.
106
Ages
40-49:





contribute regularly to your 401(k) and/or IRA, and any
other retirement fund.
Check your social security statement annually to ensure
that all your wages have been credited correctly. If not,
contact them immediately.
Analyze personal assets, and work out a plan for funding
an adequate retirement income.
Actively manage your IRA and other retirement funds
with appropriate emphasis on capital gains oriented
investments.
Review your will every three years or when moving to
another state. Review it with an experienced attorney.
107
Ages
50-59:







contribute regularly to your 401(k) and/or IRA, and any other
retirement fund.
Check your social security statement annually to ensure that all your
wages have been credited correctly. If not, contact them
immediately.
Analyze personal assets, and work out a plan for funding an
adequate retirement income.
Review your retirement income an expense projection staking
inflation into consideration.
Confirm the beneficiary designations on life insurance policies,
annuities and retirement plans.
Join AARP (American Association of retired Persons).
Review your will every three years or when moving to another state.
Review it with an experienced attorney.
108
Ages
60-64










Discuss early retirement offers with a financial planner
Collect the documents necessary to process social security benefits
Determine whether it makes sense to sell your primary residence
and take the tax consequences into effect.
Prepare detailed cash flow projections from estimated year of
retirement until age 90, taking inflation into consideration.
Practice living for a month under your new retirement income
Determine the status and duration of ongoing loans and mortgage
commitments.
Determine which activities will keep you active during retirement.
Consider different retirement locations
Inquire about possible retirement entitlements from previous
employers
Consider long-term care insurance
109
Ages
65+
Live and enjoy life!
 Take care of your health
 Be active, if health permits

110
1. Cash Flow Management: It All
Begins Here
Tips Improving Your Cash Flow for
 Organize Yourself Better.
 Dedication.
 Leave home with Less Cash.
 Kill the credit cards.
 Give yourself and family members weekly spending
money – an allowance
 Set “Saving” as a priority expense.
 Refinance your debt during times of lower interest rates.
 Give yourself “Incentives” for a job well done.
111
2. Budgeting: Be Smart
When establishing your budget, keep the following
purposes in mind:
 Set a forecasted amount for each revenue and
expense item
 Identify variances between actual and budgeted
numbers
 Define possible problems in spending patterns
 Identify opportunities to overcome these
problems, and
 Help you realistically plan to improve your
spending patterns
112
Consider the following tips when
developing your budget:
Design a budget form that is suitable to
you.
 Forecast your income.
 Summarize past expenses.
 Estimate future expenses.

113
3. Debt Management: A Difficult
Task
Don’t overextend!
114
Rules of thumb in assessing whether a home
mortgage will be offered to a prospective borrower.






Monthly housing costs (including principal, interest,
taxes, fees and insurance) should be no more than 28%
of the prospective borrower’s gross income.
Total monthly payment on all debts should be no more
than 36% of gross monthly income. According to the
underwriting guidelines for the Federal National
Mortgage Association (Fannie Mae), this includes:
monthly housing expense (including taxes and interest)
monthly payments on installment/revolving credit
monthly mortgage payments on non-income producing
property)
monthly alimony, child support, or maintenance
payments
115
Debt Management Tips
Don’t go crazy.
 Shop Around.
 Review credit card bills. It happens. Credit
card companies do make errors.

116
4. Insurance Planning
Essentials: Protecting Your
Financial Assets

Rattiner’s Rule: If you can’t afford to
replace the loss or if it would kill you to
write the check to replace the loss, then
you need insurance!
117
Types of Insurance








Types of Insurance
Life Insurance
Disability Insurance
Health Insurance
Homeowners Insurance
Automobile Insurance
Umbrella (Liability) Insurance
Long Term Care Insurance
118
Life Insurance

Rule of Thumb – Needs analysis should
equate to roughly 7 times gross salary
119
Disability Insurance

You have no one else to depend on.

60% of gross salary
120
Health Insurance

Get as much as you can afford!
121
Homeowners Insurance

Purchase an HO3 and HO15 or HO5

Purchase riders
122
Automobile Insurance

Liability and uninsured/underinsured
coverage should be identical

Collision and Comp – Use Rattiner’s Rule
123
Umbrella (Liability) Insurance

Don’t underestimate!
124
Long Term Care Insurance

Ask your kids if they are up to the
challenge!
125
5. Investment Planning –
Investing for a Secure Financial
Future






The Uncomfortable Realities About Saving and
Investing.
Know why you are investing
Invest for growth
Diversify across investments
Diversify within investments.
Take control over your investments
126
Investment Parameters
Risk Tolerance
 Time Horizon
 Liquidity
 Marketability
 Tax Consequences
 Diversification

127
Asset Allocation: Brinson Hood
Beebower Study
94% of the volatility of the portfolio return
is due to the asset class selected
 4% is due to security selection
 2% is due to market timing

128
Investment Types
Cash/Cash Equivalents
 Fixed Income
 Equities
 Hard Assets: Real Estate, Gold, Precious
Metals
 Collectibles

129
Tips For Investing In Bonds









Seek expertise when necessary
Keep an eye on price volatility
Ladder maturities
Compare interest rates
Don’t chase yield
Diversify
Keep maturities relatively short
Use mutual funds for investing in unusual bonds
Consider the tax effects
130
Types of Stocks
Blue Chip
 Income vs. Growth
 Cyclical
 Interest Sensitive
 Defensive

131
Tips for Investing in Stocks
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
Never buy stocks indiscriminately
Select a promising industry
Diversify
Buy low and sell high
Stay abreast of market trends
Use stop-loss orders to protect against loss
Buy value
Buy low P/E high dividend stocks
Buy stocks in companies with strong dividend
payment records
Finally, rely on your own experience and judgment.
132
Hard Assets: Real Estate, Gold,
Precious Metals

An inflation hedge
133
Real Estate: Direct vs. Indirect
Ownership

Don’t overload here
134
Collectibles

Don’t bank on this!
135
6. Retirement Planning: How
Long Will Your Money Last

Running Out of Money is Your Biggest Challenge
Retirement Needs Analysis – The 3 Step Process
Step 1: What will be your shortfall at retirement?
Step 2: What will be the lump sum needed at retirement?
Step 3: How much do you need to save today on an annual
basis to arrive at the lump sum needed at retirement?
136
Common Retirement Planning
Mistakes





Not taking advantage of contributing towards your
retirement plan, such as a 401(k) or 403(b) plan
Neglecting to prepare retirement income and expense
projections during your working years
Expecting social security to cover all your needs at
retirement
Accepting an early retirement offer from your employer
without thinking it through
Failing to take out required Minimum Distributions
(RMDs) after age 70 ½
137
7. Estate Planning
Common Issues to Think About








Minimizing the problems and expenses of probate and avoiding family
conflict
Providing your new spouse with too much responsibility and flexibility
Providing for the conservation of your estate and its effective management
afterwards
Minimizing taxes at the time of death
Avoiding leaving the children too much too soon
Provide for adequate liquidity to cover taxes and other expenses without a
forced sale of assets
Providing for estate management in the event of incapacity
Organizing all your important papers affecting your estate plan – the death
folder
138
How Much Will You Leave Behind
for Your Heirs?

The concept of “zeroing out”
139
Letter of Instructions

Plans out exactly what should be done
140
Qualified Terminal Interest Property
(QTIP) Trusts

Protects the kids from a prior marriage
141
FINANCIAL PLANNING SUMMARY WORKSHEETS
Debt Solvency Worksheet – 10 Basic Questions
Take this quick 10 question survey to help you manage your debt.
1. Is more than 20 percent of your take-home salary used
for credit card payments?
2. Are you charging more each month than you are paying off?
3. Have you received calls from credit card companies because
of paying bills late?
4. Do you charge things impulsively?
5. Are you approaching the limit on your charge cards?
6. Do you find yourself paying only the minimum payments on
your charge cards?
7. Have you defaulted on a mortgage or rent payment more
than once?
8. Are you uncertain about how much money you owe?
9. Are you using the cash advance on one credit card to pay
off another card?
10. Is the balance in your savings account shrinking?
Yes
Yes
No
No
Yes
Yes
Yes
No
No
No
Yes
No
Yes
Yes
No
No
Yes
Yes
No
No
142
INSURANCE POINTERS
When reviewing your client’s life insurance policy:
a)
b)
c)
d)
e)
f)
g)
h)
i)
j)
k)
l)
m)
n)
o)
p)
q)
separate long-term needs from short-term needs
recalculate needs regularly
review ratings of existing carriers
review reasons why current insurance was purchased
determine how original needs have changed and identify new needs
review beneficiary designations
review policy riders and options
review each policy’s features
compare client’s current health if debating whether to switch policies
if it’s a term policy, evaluate conversion and renewability features and feasibility
if it’s a permanent cash value policy, evaluate the true cost of insurance with the value received
determine it makes sense to gift one of the client’s life insurance policies
determine whether it makes sense to name a charity as a revocable or irrevocable beneficiary
and establish a wealth replacement trust
determine whether it makes sense to establish a charitable trust to own the life insurance on the
client
evaluate the effect of current life insurance ownership on its value in the estate
determine if any incidents of ownership exist for insurance that is intended to be outside the
estate
determine if beneficiary designations of any policies owned outside the estate will cause
inclusion within the estate
143
2. When reviewing your client’s health and
disability policies:
a) Inquire whether your client opted for the best type of medical
coverage based on their family situation.
b) Determine the monthly disability needed
c) Determine whether sufficient coverage exists under the client’s
current policy, or was the existing coverage purchased many years
ago when the client was earning a lower salary.
d) Determine whether the policy provides a definition of “own
occupation”
e) Determine whether the policy noncancellable and guaranteed
renewable
f) Determine whether a provision for residual and partial disability
exists
g) Determine whether a guaranteed insurability rider or COLA rider
have been added
h) Determine whether the elimination period is appropriate
144
3. When reviewing long-term care insurance:
a) Identify qualification triggers for benefit eligibility. The
use of ADLs and/or physician referral is preferred.
b) Compare existing policy triggers to current products.
Consider replacement of policies requiring prior
hospitalization.
c) Determine levels of care provided. Avoid policies that do
not cover all levels of inpatient care. Evaluate client’s
needs regarding home care versus inpatient care.
d) Review elimination period and relate to other resources
for coverage.
e) Review benefit level relative to current costs and other
available income.
f) Review benefit period relative to family history of client.
g) Compare premium histories of guaranteed renewable
policies.
145
4. When reviewing homeowners
insurance coverage:
a) Ensure whether coverage is adequate to replace dwelling only. The
replacement cost and the value may be two very different numbers.
b) Is the proper form of insurance in place? A homeowners policy on a
property currently being rented out is not acceptable.
c) Determine the last time the client reviewed the cost of the coverage.
d) Determine whether the client have replacement cost coverage or actual
cash value (ACV) coverage.
e) Determine whether the policy contain an inflation-adjustment rider.
f) Determine whether personal property coverage is adequate based on
assets owned.
g) Determine whether replacement cost protection on personal property exists
h) Determine whether your client understand the limitations on high value
items
i) Determine whether your client has floaters for all high value personal
property
j) Determine whether an HO 15 rider exists.
k) Determine if disaster coverage is necessary and appropriate.
146
5. When reviewing your client’s
liability coverage:
a)Determine whether current policies include
adequate coverage for the client
b)Determine whether current coverage is enough
to qualify the client to obtain an umbrella policy.
c) With the client’s current circumstances,
determine whether the client’s umbrella policy
sufficient and cost-efficient.
d)Determine whether the client has any high-risk
assets, such as a swimming pool, that would
warrant additional or special coverage
147
6. When reviewing your client’s
auto policy:
a) Consider whether state-mandated levels are
met and whether they are adequate.
b) Consider the deductible relative to other assets.
c) Determine whether it would be appropriate to
remove collision coverage on older vehicles
d) Determine whether all owned vehicles are
included on the policy
148
7. When reviewing business
insurance:
a) determine whether coverage is
appropriate.
b) determine whether insurance agents
have been performing an adequate job of
discovering all of the pertinent exposures
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Investment Pointers
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
Summarize all of your investments
Determine how your investment are allocated, in total, amount the
three investment categories: stock, fixed income and cash.
Factor in your objectives when designing the right allocation of your
investments
Put “savings” first. Save on a regular basis.
Constantly monitor your portfolio. Don’t be rash in making changes.
Substance over form. Make sure the investment merits outweigh
everything else.
Taxes should be a secondary reason to invest.
Don’t time the market, Long term buy and hold will usually work
best.
Use mutual funds as your primary investment vehicle.
Don’t chase returns. Keep with your long term strategy and don’t
deviate from your long-term objectives.
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Retirement Pointers
If the client’s savings program will not result in a sufficient amount to fund his or her retirement lifestyle,
there are basically four courses of action:
a)
save more,
b)
earn more (a higher investment return on the retirement savings fund),
c)
retire later, or
d)
retire in a more modest lifestyle.
2. Wherever possible, the client should be saving through a tax-deferred vehicle such as a qualified plan, or
personal retirement plan, such as an IRA, SEP or SIMPLE.
3. In determining the client’s retirement savings need, use appropriate assumptions for investment rate of
return, inflation rate, years till retirement and years during retirement.
4. Retirement plan funds should be maintained in tax-deferred accounts to maximize the benefits of tax
deferral. Urge the client to consider alternate sources of funds needed during the pre-retirement period, so
that retirement plan balances will not be eroded.
5. Review beneficiary designations on all retirement plan accounts to ensure that they are consistent with
the client’s goals.
6. Keep retirement planning in view as short-term decisions are being made regarding the use of income
and assets.
7. Review the client’s retirement projections periodically; revise the analysis periodically, and in the event of
material changes in the client’s situation (change of employment, divorce/marriage, death of spouse)
8. As the client approaches retirement, plan on incorporating the stretch (multi-general) IRA to enable the
retirement funds to grow tax deferred as long as possible.
9. Fully analyze any projections made by other professionals when projecting a pension maximization or
other recommendation.
10. Monitor the client’s investment return; compare to assumptions that were used to build the retirement
fund. If the client’s investments are not realizing the expected return, the client may need to shift the
investment allocation or modify the retirement lifestyle.
11. Monitor the client’s expenses compared to projections; modifications in lifestyle may be necessary.
1.
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Estate Planning Pointers
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
21.
22.
23.
In considering any gift or estate strategy, analyze the basis aspects of any particular property being planned for use in the
strategy.
Where spousal transfers are involved, always check the citizenship of the transferee spouse.
Where necessary, be willing to pay a small tax to achieve an important personal objective.
Recommend a will even in situations where the plan in place will avoid probate completely.
Encourage the use of a durable power of attorney and the medical proxies available under state law.
Strongly recommend filing a will and other estate documents for safekeeping with the appropriate court.
Among retirees consider all charitable giving techniques that would enhance current income.
Review all indications of domicile and try to consolidate domicile as much as possible.
Avoid presenting clients with probate and revocable trusts as an either-or proposition.
Use joint ownership arrangements sparingly as an estate planning technique.
Estimate estate liquidity needs and identify sources of liquidity.
If life insurance is to be purchased as a source of liquidity, avoid even initial ownership by the insured.
Discourage clients from using joint, mutual or reciprocal wills, and/or joint trusts.
Compile a family tree for the client, clarifying relationships and identify critical dates (e.g., marriages, births, deaths, gifts,
etc.).
Construct a net worth statement for the client, extrapolating from that the degree of planning appropriate.
Identify items that would be classified as income in respect of a decedent in a prospective gross estate, and attempt to
determine how best to handle those items.
Make sure the client understands the planning limits imposed by spousal rights in community property states and common
law states.
Determine and present to the client the estate plan that the client currently has (even if it is all intestacy).
Don’t allow the generation-skipping transfer tax to discourage clients from making transfers to grandchildren or others until
the exemption is fully utilized.
Consider carefully what plans are in place for the disposition of pension plan benefits and whether different dispositions
should be explored.
Assess the adequacy of provisions for minors and dependents, and make recommendations as needed.
Where there is a closely held business interest, determine definitively how the succession in interest is to be achieved,
whether by a buy-sell agreement or through another technique.
Survey the postmortem elections that might be available to the particular estate and adopt strategies that will preserve the
availability of these elections.
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Guidelines for Preparing a Will
10 Item will preparation Checklist
The following items should be included in a will:
1. Statement that the document is a will.
2. Statement revoking all previous wills.
3. Your full name and location of principal residence.
4. Specific transfers of property to the named beneficiaries.
5. Instructions for dividing the balance of the property.
6. Identify trusts, including the names of selected trustees and
successor trustees.
7. Names of guardians and alternate guardians for minor children or
special needs relatives.
8. Designation of what monies are to be used to pay death taxes.
9. Names of the executor and back-up executor.
10. Signature and date. The will should be signed in the presence of all
of the witnesses.
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Chapter 10: Afterwards: The 25
Steps to Future Success

Did You Know?
In a recent poll, American men and women
were asked if they would marry the same
person if they had it to do all over
again. 80% of the men responded that
they would marry the same woman. 50%
of the women responded that they would
marry the same man.
154
Chapter 10: AFTERWARDS: THE
25 STEPS TO FUTURE SUCCESS

An ex-spouse is like an inflamed appendix, they
cause a lot of pain and suffering, but after it's
removed you find you didn't need it anyway!
RECAP:
SO WHAT DID YOU REALLY GET FOR
$100,000+…?
155
Financial Planning Responsibilities That
Need to Be Followed Up
1.
2.
3.
4.
5.
Read the Divorce Decree Hopefully
One Last Time
Obtain Certified Copies of the Divorce
Make New Deeds for Real Estate
Transfer Car Title
Update Insurance Coverage and
Beneficiary Information
156
Financial Planning Responsibilities That
Need to Be Followed Up
6.
7.
8.
9.
10.
11.
12.
13.
Update Your Retirement Plan Beneficiary Designations
Update Your Retirement Plan Accounts
Update Your Estate Planning Documents, including
Wills, Trusts and Powers of Attorney
Confirm that All Bank Accounts, Brokerage Accounts,
and Stock Certificates are Separated into Your Own
Name
Confirm that All Credit Cards, Other Obligations, and
Possessions are Separated by Having Your Ex
Removed from the Accounts
Keep Meticulous Records
Remove Personal Assets
Name, Address and Work Related Changes
157
Other Critical Issues That Need
Your Follow-up
14.
15.
16.
17.
18.
19.
20.
21.
22.
23.
24.
25.
Your Children
Moving Away
Modifying Child Support
Your Kids and Post Divorce Syndrome
Modifying Spousal Support
Dating Again: Having Your Kids Cope
Cohabitation Agreements
Prenuptial Agreement
Getting Married Yet Again (Remarriage)
Mix and Match with the New Extended Family: Your version of
The
Brady Bunch
Support Groups and Persons
The Bottom Line: Take Care of Yourself
158
Rattiner’s Planning Tips
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
When it’s time to recap the events, you will have learned much from the process. It would
have been easier, cheaper and healthier to work out the differences and the divorce
during the process with minimal input from the lawyers.
Chapter two of your life states that you’ve been through the worst already and now it’s
your time to take care of yourself going forward. Remember, if you don’t no one else will,
and there’s a lot of people counting on you.
Read the divorce decree carefully. If you don’t agree with the conclusions, you need to
correct it ASAP. Once the ink dries, it’s too late.
Obtain certified copies of the divorce decree because there are many documents and
many instances where it is a necessity. Most entities you’ll need to deal with won’t accept
unofficial legal copies.
Change the deed on real estate to your own name so you can apply for financing to buy
your spouse out of his or her share of the housing interest. No tax liability is included in
this transaction.
Transfer the car titles to the spouse who ends up with the car. Make sure you have all
documentation for paperwork regarding paid off loans or other liens.
Update all your insurance policy beneficiary designations. Remember, insurance passes
by contract of law and that will always supersede a will. If you don’t change them, then
the person you want to get the benefits may not be legally entitled to them.
Go on COBRA health insurance if you are the non-working spouse who is in between
jobs. Coverage can be extended for up to 36 months.
Update your retirement plan beneficiary designations. Look at the list you prepared for the
court disclosing all the different types of retirement plans so you don’t forget any during
the process.
Make sure you have completed a QDRO to actually split the money from a qualified
retirement plan. The spouse who is likely to benefit from receiving those monies needs to
be the one to pursue this along. IRAs don’t need to complete QDROs.
159
11. Updating your will and other estate planning documents is important. The most current will
is the one that is relied upon because it supersedes all previous wills. You need to make
sure that it states that you are not married. Also change your health care proxies and
powers of attorney so your ex can’t control any of your decisions going forward.
12. Confirm that all bank and brokerage accounts have been separated into your name only.
Pass along a certified copy of the divorce decree to show that joint ownership is not to be
applied in any circumstance
13. Make sure your ex is off any joint credit cards. Debts that he or she rings up could be your
responsibility if you don’t follow through. Again, a copy of the certified divorce decree
should be filed.
14. Keep meticulous records of all transactions involving the ex spouse. You may need them
in court later on.
15. Remove all personal assets from your prior residence before the divorce becomes final.
After that, it could turn into a “he said, she said” contest as to what belongs to whom.
16. Update various organizations relating to name, address and work related changes
including notifying the IRS of an address change.
17. It’s always about the kids. Need I say more?
18. If you are moving away, you better have good reasoning to do so. The noncustodial parent
will take exception to that and make your life a living misery.
19. If you need to modify child support, perhaps start by discussing it with your ex. If that
doesn’t work, go to mediation or back to court only as a last resort.
160
20. Your children may never ultimately accept the divorce. It is your role to help them
through the process, no matter how long it takes, so they can gain closure on the issue.
Be persistent.
21. You can try to modify spousal support. Good luck.
22. After the divorce you need to be focusing on your new life. Dating is a starting point.
How you work it in with your kids is the tricky issue. Don’t involve the kids early in the
process. Only involve them when it becomes serious. One year is probably a good time
frame before introducing he kids to your new love interest.
23. If you are living with this new person, have all your issues tied to writing to prevent any
future misunderstandings either while alive or at death before marriage through the use of
a cohabitation agreement.
24. Prenuptial agreements are a necessity. It sets the expectations from the beginning so
everyone knows the deal ahead of time. You always must manage the other side’s
expectations both before and after the process, if there is an afterwards.
25.Remarriage is tricky business. Make sure your kids and even your ex is ready for it.
Protect yourself before it happens.
26. The Brady Bunch may have been shown on TV in the 1970s but it exists more today
than during any prior time period. Blending the families will be a constant challenge, so
setting the ground rules in advance, managing expectations, and retaining important
traditions and values will help go a long way.
27. Support groups and individual counseling can help you get over the hump regarding
the divorce and put you in a better place to succeed the next time around.
28. When push comes to shove, you need to protect yourself and take care of your main
asset – you! Nothing else matters if you can’t walk away from this grueling process happy,
healthy and focused.
161
Chapter 11: Planning for Same Sex
Couple Divorces

Love may be blind, but marriage is a real
eye-opener!
162
Chapter 11: Planning for Same
Sex Couple Divorce
Issues Specific for Same Sex Couples




Domestic partnership agreement/cohabitation
agreement
Last Will and testament
Income Tax Issues
Estate Planning Issues
163
The Personal Financial Planning
Process
Step 1:
First obtain copies of all of your and your
partner’s financial information – assets,
liabilities and income. You may have to
focus on just compiling yours and then
exchange it with your ex-partner since you
likely have no legal access to their
financial records.
164
Step 2:
Compile your financial information into a net worth
statement. On the left-hand side of the page list
all of your assets. On the right-hand side of the
page list all of your liabilities.
These should be assets and liabilities held in your
name alone, your ex-partner’s name alone and
joint held. Indicate whether you came in to the
relationship with this asset or liability. If possible
indicate any additions or six attractions that have
occurred during your relationship for each asset
or liability.
165
Step 3:
Gather information regarding the income both
you and your partner were making at the time of
your long-term commitment. Also, list changes
to income for either party, changes to pursuit or
attainment of education or career advancements
that were made to benefit the partnership. And
list the income each of you were making at the
time of dissolution, plus a note regarding earning
potential.
166
Rattiner’s Divorce Summary

The best option is to stay married, when possible. If not, then you need to
be smart, practical and shrewd about getting divorced. It’s an occurrence,
that if not done right, can have devastating financial and emotional
repercussions for the rest of your life! Your own personal financial
planning for divorce can never be more important or have a bigger impact
than now! All of the information shared today can be found in detail in my
latest book published by John Wiley and Sons.
167
Parting Thoughts!





If Love is Blind and Marriage is an Institution, then Marriage is an
Institution for the Blind.
Sir, if you were my husband, I would poison your drink. --Madam, if
you were my wife, I would drink it. - A conversation between Lady
Astor and Winston Churchill
Men marry women with the hope they will never change. Women
marry men with the hope they will change. Invariably they are both
disappointed. - Albert Einstein
"I bought my ex a gift for her birthday, but she didn't use it so I'm not
going to get her another." "What did you get her?" “A cemetery plot!"
We were very happily married for eight months.
Unfortunately, we were married for ten years!
168
The Lesson!

A cop tries to pull over a guy for speeding who tries to
outrun him. Finally the guy gives up and pulls over. The
now ticked-off cop walks up and yells at the guy, “Hey,
what's the big idea?" The guy responds, Well officer, I
have a very good reason for not stopping sooner. The
cop replies, “if you can give me a reason that I have
never heard before in all my 30 years on the force, I will
not issue you a ticket!” The guy responds, "Last week my
wife ran off with a cop and I was afraid he was trying to
catch me to give her back!" "Off you go," said the officer.
169