HELPING CLIENTS NAVIGATE THE TURBULENT WATERS OF DIVORCE THEA GLAZER CFP®, CDFA™

Divorce - Three Divorces in One  Emotional  Financial  Legal

Divorce Models  Pro Per  Litigated Divorce  Mediated Divorce  Collaborative Divorce

Pro Per  “Do it yourself divorce” - Couple completes paperwork and files themselves – no attorneys or other professionals involved

Litigated Divorce  Underlying position is adversarial  Unresolved issues are decided by a judge  Substantial cost of “Discovery”  Delays  High Cost – Financial & Emotional

Mediated Divorce  Couple and one Mediator  Attorneys not actively involved, but often advise  Financial and Emotional Dynamics of the Marriage Continue in Mediation  Cost effective

Collaborative Divorce  “Out of Court” Solution  Team Members – 2 Attorneys, 1 Financial, 2 Coaches  Other Team Members: Child Specialist  Transparency of Information  Couple Crafts Settlement with Advice

Financial Information to Gather  Living Expenses – Family and Individual  Income Tax Returns – Personal & Business  Pay Stubs  Real Estate – FMV, Mortgage & Basis  Bank and Credit Union Statements  Investment Account Statements and Basis

Financial Information to Gather, Con’t.  Life Insurance – Cash and Face Values  Annuities – Fixed and Variable  Retirement Plans – IRA, 401(k), 403(b), Defined Benefit Pension, Profit Sharing  Deferred Compensation  Employee Stock Options and Restricted Stock

Financial Information to Gather, Con’t.  Employee Stock Purchase Plans  Medical, Health and Long Term Care Ins.  Business Appraisal  Other Assets – Country Club, Air Miles, Collectibles, Cars, Jewelry, Toys, Etc.  Debts – Credit Cards, Loans, Taxes

Big Issues  Support: Child Support Spousal Support  Division of Assets

Child Support  Litigation & Mediation - Determined By Formula  Collaborative – Needs Based, Negotiated  Factors: Income Percent of Time Exemptions and Tax Filing Status Medical Insurance Expenses

Spousal Support  Litigation and Mediation – Use Guidelines  Collaborative – Negotiated  Factors: Length of Marriage – 10 Years = Long term Ability to Pay / Ability to Work Taxable or Not Buy Out – Present Value

Income  Salary and Wages  Bonus  Self Employment Income  Rents and Royalties  Employer Match to Retirement Plan  Company Paid Expenses

Expenses  Living Expenses  Major Expenses – Private schools and College  Managing with Less

Division of Assets  Community Property  Separate Property  Combination – CP and SP

Division of Assets  Assets are Not Created Equally Liquidity Risk Tax Consequences

The Biggies  The House  The Family Business  Employee Stock Options  The Pension Plan  Retirement Plans – 401(k), IRA, etc.

The House – Sell Or Keep?  Keep Best for Kids? Trade House for Other Assets Refinance to Remove Spouse from Mortgage Embedded Capital Gains Lack of Liquidity Non Income Producing Asset

The House – Sell or Keep?  Sell Capital Gain Exclusion – 2 out of last 5 Years as Primary Residence “Unforeseen Circumstance” – Reduced Exclusion As Married - $500,000 CG Exclusion As Single - $ 250,000 CG Exclusion

The Business  Spouse remains as co-owner  Trade Value for Other Assets  Give Spouse a Note for Share

Employee Stock Options (ESOs)  Nonqualified Options Transferable if Allowed by Plan (DRO) No Tax Consequences from Transfer Exercise Generates Ordinary Income If Not Transferable, Employee Must Exercise on Behalf of Spouse “Alternate Optionee” receives 1099

Stock Options Continued  Incentive Stock Options (Qualified) Are Not Transferable As Qualified – Become Nonqualified If Transferred No Tax Upon Exercise LTCG if Held 2 Yrs. from Grant Date or 1 Yr. from Exercise Date May Create AMT

ESOs – Other Considerations  Value of Options – Vested and Unvested Time, Stock Price, Volatility Black Scholes vs. Binomial  Risk – Value and/or Forfeiture  Option Exercise Considered Income for Child Support Calculations

Retirement Plan Division  Defined Benefit Pensions – Share Benefits or Present Value and Trade off  401(k)s, 403(b)s, ESOPs, etc. – Trade or Divide by QDRO  IRAs – Trade or Divide – No QDRO  Can Avoid Tax Penalties If $$ Taken Directly from Qualified Plan per QDRO

Other Financial Considerations  Health Insurance COBRA – 3 Years Health Condition Now vs. 3 Years  Life & Disability Insurance – To Secure Support Payments  Estate Planning – Death During Divorce