When splitting retirement accounts, we have the choice of dividing an account by shares or by value. The wording is important; if not worded correctly there can be problems down the road. This is primarily because of the time lag between finalizing the terms of the divorce and effectively dividing the accounts. IRAs can be split pretty quickly since the custodian needs only the divorce decree and letter of instruction. But 401(k)s and other company retirement accounts need a QDRO, which can take months to secure. By then the account value may have changed significantly.
Read MoreMany older couples stay married because they are on a fixed income and it's just not financially feasible for them to split up and have two separate households. But in cases where they do want to get divorced, it can be a struggle to determine how they can afford it. Even if one or both spouses are still working, clients who are close to or at retirement age face some unique issues and challenges.
Read MoreYou are likely aware that the stock market has been down this year. The S&P 500 Index, a broad measure of the overall US market, has lost 20% of its value as of late October. Typically, when stocks are down bonds show positive returns because investors look for safe areas to move their investments and avoid further pain. This year, however, bonds have been down as well, giving investors no place to hide. Thus, most investors are facing significantly lower account values.
Read MoreIt has come to our attention that a recent communication we sent out regarding the sale of Cornerstone Financial Planning has been interpreted to mean that we are retiring. That is not the case – we are still here!
Read MoreOver the years we have received calls, from time to time, from women who are in the process of a divorce and have been cut off financially by the estranged spouse. These women are left in highly vulnerable positions, unable to pay bills and also unable to hire an attorney to help them resolve this unfair practice.* While they may not have access to the bank account any more there may be some other sources of cash available.
Read MoreEnsuring a fair and equitable outcome for your client can become more complicated when stock markets are going through a significant downturn, as they are this year. Investors understand (or should understand!) that stock markets are volatile, but the short-term ups and downs lead to long-term gains. We counsel our financial planning clients to ignore the day-to-day gyrations and focus on the long-term outcome. However, in a divorce, significant investment account fluctuations can complicate negotiations.
Read MoreLouise is working out her divorce from Matt. They have agreed that Louise will keep a small bank account, the equity in the house and a $600,000 IRA.
Louise is 57 and is going to need some money from the assets she is awarded until she is eligible for Social Security. That is a minimum of 5 years (if she chooses to begin Social Security at the earliest age of 62.)
Read MoreYour client’s living expenses are an important piece
of the divorce process. Behind all of the negotiations
is the underlying question, “Will I be okay?”, and this
can only be answered if you know what your client
needs. Therefore, it is critical to have a good picture
of the day-to-day expenses.
It is often the case that the marital home is sold as
part of a couple’s divorce, and the proceeds split.
When this happens, any costs associated with the
sale of the home are essentially split between the
parties. This is because these expenses come out of
the proceeds, which are then divided between the
two individuals.
Most homeowners are aware that when they sell their
primary residence, if they sell the home for more than
they paid for it, the IRS allows some portion of the gain to
go untaxed. However, many homeowners still think that
the old “rollover rule” still applies, although this was
replaced in 1997! So, although this is old news, let’s look
at the rules that apply to real estate sales.
