The Twelve Financial Pitfalls of Divorce For most people, divorce is the biggest financial transaction of their lives © WIFE.org, All Rights Reserved © 2014 WIFE.org, All Rights Reserved

FINANCIAL PITFALLS OF DIVORCE About Me and Our Firm Your name, address, phone, email, firm logo – whatever you want to put about yourself here © WIFE.org, All Rights Reserved © 2014, WIFE.org, All Rights Reserved 2

FINANCIAL PITFALLS OF DIVORCE #1. Not Enough CASH Cash = Power & Independence….. Divorce is a very cash hungry situation Legal fees, mediators, therapists, etc What if your spouse stops paying the bills? Costs to move out and replace items Sources of cash Savings and investments Credit cards – approach with caution Home equity loans – be careful here too Friends and family Loans from retirement plans IRA withdrawals –last resort because of taxes and penalties © 2014, WIFE.org, All Rights Reserved © WIFE.org, All Rights Reserved 3

FINANCIAL PITFALLS OF DIVORCE #2. Too Little PREPARATION Look before you leap ….. Preparation makes you less afraid, better able to act Talk to your attorney before you talk to your spouse Right timing is important – for Social Security, finances, support, family situation Get into shape before you go – fix the car, buy clothes, get dental work done, repair property you want to keep Inventory safe deposit boxes and vaults © 2014, WIFE.org, All Rights Reserved © WIFE.org, All Rights Reserved 4

FINANCIAL PITFALLS OF DIVORCE #3. No RECORDS Document, document, document ….. Copy everything you can find Get copies of your tax returns and read them – they are a treasure map Review bank statements, credit cards and check registers to analyze your spending List all your assets and debts Trace separate property © 2014, WIFE.org, All Rights Reserved © WIFE.org, All Rights Reserved 5

FINANCIAL PITFALLS OF DIVORCE #4. Overlooking ASSETS Half of everything is yours ….. Frequent flyer points, accumulated vacation & sick pay Hobby equipment, collections, art work Your Ph.T degree (Putting Honey Through) Business assets and goodwill – how they are valued Retirement plans –current and former employers © 2014, WIFE.org, All Rights Reserved © WIFE.org, All Rights Reserved 6

FINANCIAL PITFALLS OF DIVORCE Retirement Plans Social security for divorced spouses Divorced spouse benefits available if greater than your own benefits and married 10 years Government pension offset of divorced spouse benefits Effects of remarriage Death of former spouse Dividing retirement plans Using a QDRO to divide qualified plans IRAs often don’t require a QDRO Federal plans require special documents No need to divide if each keeps their own plans Military retirement & benefits © WIFE.org, All Rights Reserved © 2014, WIFE.org, All Rights Reserved

FINANCIAL PITFALLS OF DIVORCE #5. Ignoring TAX CONSEQUENCES Hidden tax issues can turn a sweet deal sour ….. Hidden taxes in highly depreciated rental property Retirement plans aren’t worth the same as home equity because of eventual taxes that must be paid Child support isn’t taxable when you receive it, alimony is for support agreements executed before January 1, 2019 Claiming your children for tax purposes, or using Form 8332 to relinquish the exemption for child Indemnification clauses to protect you from future tax issues Tax issues regarding house © 2014, WIFE.org, All Rights Reserved © WIFE.org, All Rights Reserved 8

FINANCIAL PITFALLS OF DIVORCE Dealing with the Family Home Buyout by one spouse and transfer of title isn’t taxable When you sell you won’t pay tax on first $250,000 of gain If sold while in both names, each spouse can exclude $250,000 of gain if the resident spouse is given exclusive use of the property during period before sale Can you really afford to keep the home? What assets will you give up in order to do so, and what will your future be like without those assets? © WIFE.org, All Rights Reserved © 2014, WIFE.org, All Rights Reserved

FINANCIAL PITFALLS OF DIVORCE #6. Believing IGNORANCE IS BLISS In divorce you’ll pay a high price for ignorance ….. Divorce is not fair, so don’t waste money trying to get exactly your share – do the best you can and move on Take an active role and learn as much as you can about your financial situation Learn as much as you can about the legal process and explore alternatives © 2014, WIFE.org, All Rights Reserved © WIFE.org, All Rights Reserved 10

FINANCIAL PITFALLS OF DIVORCE #7. Mixing Money and EMOTION In divorce it’s easy to confuse your feelings with the facts ….. It’s expensive to cry in your attorney’s office, so don’t do it (Whining is expensive, too) Don’t try to make him pay for what he’s done Don’t try to “win” the divorce – it’s the two of you solving the problem of dividing things up Don’t just take whatever he offers because you feel powerless © 2014, WIFE.org, All Rights Reserved © WIFE.org, All Rights Reserved 11

FINANCIAL PITFALLS OF DIVORCE #8. Not Fighting for WHAT’S YOURS Divorce is about survival, not manners ….. Don’t make nice just to smooth things over and make him feel better, or to try to get him back – it won’t pay off Don’t underestimate your needs – you’ll need to pay for health insurance Discuss the kids’ needs – their expenses while in school, who pays for college costs Don’t waive alimony unless you get something very valuable in return – consider carefully the impact on your future finances © 2014, WIFE.org, All Rights Reserved © WIFE.org, All Rights Reserved 12

FINANCIAL PITFALLS OF DIVORCE #9. Not Taking CONTROL No one cares as much about your future as you do ….. Don’t worry in the dark - make lists of what needs to be done, go back to sleep, and tackle it in the morning Take control of bank accounts and investments so they don’t disappear – control, don’t conceal Consider breaking joint tenancies so he doesn’t get it all if you die during the divorce Protect your support with life insurance on his life This is your divorce, not your attorney’s, so do what makes sense for you © 2014, WIFE.org, All Rights Reserved © WIFE.org, All Rights Reserved 13

FINANCIAL PITFALLS OF DIVORCE #10. Not Being READY for the Worst Don’t let fears rule you – face them and move forward ….. What’s the worst that can happen, and how will you survive? Being ready for the worst prevents panic Join a divorce group where you can get the support and input from others in your situation © 2014, WIFE.org, All Rights Reserved © WIFE.org, All Rights Reserved 14

FINANCIAL PITFALLS OF DIVORCE #11. Not Developing a CAREER There’s a big difference between a job and a career ….. Two households are expensive, so divorce may push you into working If you need more income, what career would work for you, and what education would you need? Negotiate to get more support while in school and less once you are more self-supporting Nothing bolsters self-esteem like a fulfilling career © 2014, WIFE.org, All Rights Reserved © WIFE.org, All Rights Reserved 15

FINANCIAL PITFALLS OF DIVORCE #12. Not Getting Good ADVICE Divorce is too complicated to go it alone ….. Hire an attorney to whom you can relate, not the most expensive or the cheapest one Find a good therapist to help you emotionally – this isn’t the time to tough it out Use a financial professional to help you make the best financial decisions for you and get your financial life in order after your divorce is final © 2014, WIFE.org, All Rights Reserved © WIFE.org, All Rights Reserved 16