Misunderstanding the Type of Retirement Plan to Be Divided in a Divorce:

divorce retirement plan

This is probably one of the most common mistakes in settlement agreements and even final judgments, since often times attorneys prepare the final judgment which the judge simply signs. It often erroneously states “retirement plan” without ever defining the type of plan(s) to be divided.

Retirement plans can be defined contribution plans, defined benefit plans or some type of hybrid. These plans are vastly different and have different implications when trying to divide them. In defined contribution plans, an employee and/or employer make contributions into an account maintained in the employee’s name. These plans have a known account balance at any given time, since the underlying account is nearly always invested in publicly traded securities. In a defined benefit plan, the employee accumulates credits towards their retirement based upon years  of service to an employer, and often based on compensation earned.

retirement plan divorceTypically, when a settlement agreement says the parties will “divide a retirement plan” it can be interpreted that the non-employee is going to receive a lump sum amount. However, if the plan is a defined benefit plan, they may not be receiving any money until the working party retires. Further, they may never receive a lump sum – but rather a monthly benefit payment.

Knowing the plan type and the benefit that can be divided (a lump sum now, a lump sum later or a stream of income) can substantially affect how you may choose to negotiate a resolution.

Tips:

Include the plan type in your agreement if it is not part of the name of the plan.

Describe in the agreement if the receiving party will get a lump sum now, a lump sum at a future date or payments over time and when those payments will begin and end.

EXAMPLE: The husband participates in the “ABC Company Pension Plan” which has a cash balance plan with a defined benefit component. If the parties desire to divide the cash balance equally and the defined benefit component based on the marital coverture, the language must be specific. In this case “divide the retirement plan equally” would not be an acceptable reference for the plan administrator to implement a QDRO.

Has Your Spouse Changed Their Financial Habits? Divorce Might Be Next!

money

While divorce rates hover around 50% for first time marriages (and higher than that for subsequent unions), the reasons for splitting up often center around finances. Disagreements over what to spend and how much to save are often blamed for the failure of a relationship.

But finances play another role in divorce, too, according to a recent report in Barron’s. A change in financial behavior might signal that divorce is on the horizon.

Things to look out for?

·     Account statements, tax returns or other financial documents go missing.

·     A spouse who has been hands’ off with finances suddenly taking an interest in household money management.

·     One spouse suddenly acquiring new credit lines.

·     Statements from unfamiliar financial institutions begin to arrive, or passwords to existing ones are suddenly changed.

·     Changes in the contribution amounts to retirement accounts without explanation.

While these signs don’t always point to divorce on the horizon, they do at least merit a frank discussion between spouses.

Source: Has Your Spouse Changed Their Financial Habits? Divorce Might Be Next | Robert Hetsler,J.D. CPA,CVA,CFF,FCPA,MAFF,CMAP,PFP | Pulse | LinkedIn

Splitting Up Military Retirement Accounts

military retirement qdro

military retirement qdroToday you may not think twice about splitting military retirement benefits during a #divorce. But it wasn’t always that way. A 1981 U.S. Supreme Court decision, McCarty v. McCarty, actually precluded state courts from dividing military retired pay as an asset of the marriage. In response, Congress passed the Uniformed Services Former Spouses’ Protection Act (USFSPA in 1982. This legislation specifically gave a state court the authority to treat military retired pay as marital property and divide it between the spouses.

Of course, the actual process to divide these unique accounts is slightly different than standard retirement accounts. Rather than using a Qualified Domestic Relations Order (“QDRO”), military retirement accounts are divisible using a Military Retired Pay Division Order.

The Defense Finance and Accounting Service (“DFAS”) has very specific rules about how and when military retirement pay can be divided. For a division of retired pay as a property award to be enforceable under the USFSPA, the former spouse must have been married to the service member for at least 10 years, and during that time the service member must have performed at least 10 years of creditable service. This is referred to as the 10/10 requirement.

In addition, no more than 50% of retired pay can be awarded as marital property. Because the DFAS has very specific requirements relative to division of military retired pay, it is important that the parties understand these technical requirements early on. There are many ways that a former spouse can lose his or her right to division of retired military pay, so relying on an expert in this unique area is very important.

Source: Splitting Up Military Retirement Accounts | Robert Hetsler,J.D. CPA,CVA,CFF,FCPA,MAFF,CMAP,PFP | Pulse | LinkedIn

2016 Changes to Social Security for Divorced People

social security

social-security-2

2016 has arrived, and for the tens of millions of Americans who receive Social Security benefits, the New Year is a good time to review what they can expect from the program over the coming year. While there are changes every year, 2016 has some unusual changes that you need to know about if social security is part of your current retirement planning.

Recipients will need to deal with the fact that there will be no cost-of-living adjustment for Social Security benefits in 2016 and for higher wage earners; the maximum Social Security benefit will fall in 2016 by $24 to $2639.

Recently (November 2) the bipartisan budget act was signed into law and with it came a number of social security strategy related changes. Those strategies include the following:

  1. File and Suspend
  2. File and Suspend for retroactive benefits
  3. Restricted Applications
  4. Divorced Spousal benefits

To review, let us look at an example of how file and suspend is used:

A husband and wife are both age 66 and at their full retirement age (FRA). The husband, with a monthly benefit of $2000 wants to wait until age 70 to collect his benefits. He wants to take full advantage of the 8% annual increase that would make his monthly benefit $2640. The wife, with no work history, is entitled to 50% of his benefit ($1000 per month) at her FRA. Since she will always be entitled to only 50% of his FRA benefits, it makes sense for her to file now. To do this the husband has to file for his benefits, and then suspend them until age 70.

So what are the changes with file and suspend in 2016? After April 30, this option is going away. In order to take advantage of file and suspend, the filer must be age 66 prior to or on April 30, 2016 and must have actually filed and suspended benefits. After April 30, 2016 file and suspend is not available.

These changes also apply to File and suspend for retroactive benefits. Under this strategy, the recipient is entitled to a lump sum of the benefits they would have received from the time they filed and suspended benefits to the current date. Again, as of April 30, 2016 file and suspend is no longer available and neither is the ability to collect retroactive payments unless you are 66 prior to April 30, 2016 and have filed and suspended.

When both spouses have a work history, another strategy they could utilize is Restricted Applications. In this scenario, the husband or wife is already collecting a SS benefit – the spouse at his/her FRA will collect a spousal benefit only from age 66 to age 70 and then at her age 70 switch over to his/her own benefit. Because he/she did not collect on their own benefit until age 70 his/her SS benefits received the 8% annual increase.

Under the new law the ability to receive a spousal only benefit (restricted application) will no longer be available to individuals who turn 62 after December 31, 2015.

Lastly, there are changes that impact divorced individuals social security strategies. Currently, law allows a divorced individual who qualifies for their own benefit to apply for only a spousal benefit on the ex-spouse’s earnings record if:

  • They were married for at least 10 years
  • Spouse B (who plans to collect the spousal benefit) is not remarried
  • Spouse B is full retirement age or older
  • Spouse B has not started collecting on their own record
  • Spouses have been divorced for at least 2 years

This also changes in 2016. Individuals can no longer file for a divorced spousal benefit then switch to their own benefit later unless they are age 62 before December 31, 2015.

It takes some work to keep up with Social Security’s changes. But doing so will leave you better prepared to handle what’s coming next year and give you the ability to manage your future Social Security strategies more effectively. If you are already taking advantage of any of these strategies, the recent changes do not affect you.

40 Secrets Only Divorce Attorneys Know

divorce process

divorce process

The Divorce process is a stressful process that can easily bring out the worst in people. Some people even see divorce as a way to seek revenge on a spouse by seizing money and assets.

Although divorce can get you out of an unhappy marriage, it can also milk you for all you are worth if you don’t know your rights. Check out these 40 secrets from top divorce attorneys to help you protect your assets and stay on the winning side.

1. Don’t Let Emotions Lead Your Financial Decisions

People often want to take out their hurt feelings on their exes; however, it’s important not to let emotions interfere with the business at hand. In the long run, being spiteful could harm your own finances.

“Asking your lawyer to write a letter to your ex over who gets the $50 coffee table book is kind of nonsensical,” said Brendan Lyle, a former divorce attorney and CEO at BBL Churchill, a divorce finance firm. He went on to reveal that a short letter could cost you $500 in attorney fees.

2. Everything Is Divisible and Is Fair Game

Individuals often make the mistake of assuming that assets that are in their names can’t be claimed by spouses in a divorce. However, divorce experts caution that the opposite is true.

“Practically everything is divisible, including frequent flyer air miles or royalties from a book you wrote,” said Ann Narris, a Massachusetts attorney with the Narris Law Office & Family Mediation Partners.

Because the same holds true for liabilities like debt and credit cards, couples should be sure to consider all factors when doing their financial planning.

3. Make Big Purchases Before Filing for Divorce

Have a big purchase in mind, such as a new car?

“Most states issue automatic financial restraining orders prohibiting people from making big purchases or liquidating assets after the divorce is filed, absent a court order or an agreement,” said Narris.

In her practice, she advises those considering divorce to buy big items before filing.

4. Keep Track of Your Spouse’s Money

If you’re thinking of filing for divorce or legal separation, it’s a good idea to take a look at your spouse’s financial situation. According to Narris, spouses should start by tracking the partner’s new credit card and loan applications.

“People are more generous in their income reporting on credit or loan applications than they are in, say, their 1040,” said Narris, who went on to stress that loan applications could be crucial parts of a divorce discovery.

5. Gather Key Evidence Before Filing for Divorce

If you’re thinking of filing for divorce, it can be tough not to walk out the door when your spouse pushes your buttons. However, Narris recommended that individuals take time to collect evidence before a split. Along with taking pictures of assets, individuals should make copies of account statements and jot down any important numbers. Preparation is key if you hope to come out ahead in court.

6. Get Property Valued Before You Part Ways

When it comes to the divorce process, almost all property is fair game. However, spouses can’t hope to get their fair shares if they don’t know the value of assets.

“No sense in guessing on the worth of his baseball cards or your engagement ring — never mind a house or a business,” said Narris, who reminds couples that there are experts available who can appraise just about anything.

Doing your homework now is the best way to come out ahead down the line.

7. Don’t Hide Assetshiding-money

You can try to deceive your spouse by hiding or concealing assets, but don’t forget that you’re also messing with the law.  According to Narris, if what you’re hiding is discovered, you’ll lose your credibility in court. There could also be stiff penalties, including monetary sanctions. To protect yourself and your property during a divorce, it’s best to declare all assets upfront in the divorce process.

8. You Can Write Off Alimony Payments on Your Taxes

People who pay alimony are rarely grateful for the opportunity. Paying alimony can actually help you out come tax time, however. According to Narris, people who pay alimony to their exes can write it off as a tax deduction. On the other hand, those who receive alimony must report it as taxable income.

It’s important to note that alimony is different from child support, which is neither taxable nor deductible.

9. If Not Considered Alimony, the Income Is Not Taxable

If the transfer of money in a divorce is not considered alimony, the receiving spouse is in luck: These funds aren’t regarded as taxable income, according to Christian Denmon, founding partner of Denmon & Denmon, a personal injury, divorce and criminal defense law firm in Tampa, Fla.

Not so lucky is the payer, as there is no tax break for money transferred during the divorce process.

10. There Are Hidden Tax Implications to Watch Out Fortax

During a divorce, it’s important to stay alert to hidden tax obligations.

“A husband might have purchased stock for $50 during the marriage,” said Denmon. “The stock has gone up in value so that at the time of the divorce, the husband ends up transferring $75 to the wife. If not otherwise addressed in the divorce settlement, the husband will be on the hook to pay taxes on the $25 gain on the stock.”

According to Denmon, spouses who are receiving real estate, stocks or bonds need to understand that taxable gains can leave them vulnerable.

11. Get Job Training or Update Your Education Before Filing

If you are currently being supported by your spouse, you might want to consider taking the time to dust off your resume and freshen up your skill set before seeking a divorce.

“Even if you receive support, the courts can impute income and expect you to be working if your kids are school aged and you are not of retirement age or disabled,” said Narris, who cautioned against “depend[ing] too much on a hopeful spousal support award.”

Updating your education now can help protect you later if things don’t go your way in court.

12. Familiarize Yourself With Your Finances Before You Splittax return divorce

Normally, one person in a household manages the finances. However, this arrangement can create a “power imbalance when it comes time to negotiate settlements,” according to Narris. So what can you do to protect yourself?

Seek professional help to guide you in making more informed decisions about finances being filing for divorce. Doing this will help you come out swinging when you get your day in court.

13. Consider Mediating Your Divorce

It’s no secret that divorce can be expensive. In fact, according to Narris, the average cost of legal fees in a divorce is $15,000. One way to cut down on these expenses is to use a mediator.

A mediator doesn’t work on behalf of any one party, just facilitates agreements. If you want to keep your divorce details behind closed doors while cutting costs, a mediator might be the best bet for both you and your bank account.

14. Know What Is Your Biggest Asset

According to Narris, many people mistakenly believe that their house is their biggest asset when it is actually a retirement or pension account. Even if your retirement account is less than robust now, the court will likely consider its future value when dividing assets.

“There are many ways to divide your portion of your spouse’s retirement asset (called a qualified domestic relations order) so give that due consideration,” said Narris.

15. If Your Lawyer Recommends a PI or Forensic Accountant, Hire One

Many individuals are hesitant to shell out for a private investigator or forensic accountant when going through a divorce, but sometimes, these professionals’ services are necessary.

According to Eva Cockerham, an attorney with Burke Jaskot law firm in Baltimore, “Private investigators are useful for investigating people who own small businesses, as independent data about numbers of customers, employees and resources can give a much fuller picture of a person’s true finances.”

Likewise, Cockerham noted that forensic accountants can give “insight as to whether a person going through a divorce is getting accurate information from their soon to be ex-spouse.” By spending a little now, you might be able to save yourself a bundle in the future.

16. The Most Expensive Lawyer Isn’t Always the Best

Pick your divorce lawyer wisely because your choice could save your bottom line.divorce

“Find one that is experienced and knowledgeable but is also a good fit for you,” said Narris. “You have the power to set the tone for your divorce. The attorney should advise you but also respect your position on how to approach the negotiations.”

Just because an attorney has a high hourly rate doesn’t necessarily mean he or she will honor your wishes. For best results, go with your gut feeling.

17. Understand Debt Obligations

According to Heather Sunderman, a divorce attorney with Mirsky Policastri in the Washington, D.C. area, too many clients assume partners’ debts are joint when they’re not.

“Some states do not divide marital debt if it’s just in one person’s name, so if possible, during separation you may want to pay down that debt preferentially,” said Sunderman.

The last thing you want is to be on the hook for debts you didn’t accumulate.

18. Don’t Forget About Beneficiary Designations

Divorce attorneys note that many clients fail to remove former spouses from their beneficiary designations.

If you fail to remove these designations, “those amounts may end up being paid out to a former spouse,” said Sunderman. “Usually that’s not the result you want.”

For best results, handle beneficiary designations and other tedious paperwork as soon as possible.

19. Pay Court-Ordered Attorney Fees

Court-ordered attorney fees are no joke.

“The court can order one spouse to contribute to the other spouse’s attorney fees,” said Denmon, who went on to explain that this type of debt was treated in a special manner. When it comes to court-ordered attorney fees, the judge can throw the offending spouse in jail for failing to pay.

In light of these regulations, Denmon advises that spouses who are receiving financial help have language drafted into agreements clarifying how much money must be paid and by what date. Doing this gives spouses the ability “to enforce the agreement should the paying spouse fail to follow through with his agreement,” said Denmon.

20. Consider Your Income Before Asking for All the Deductible Items

Clients typically strive to get as much as possible in a divorce. However, according Russell Luna, a certified divorce financial analyst in Colorado, higher incomes can disqualify individuals from important tax deductions.

“If you file single and make more than $380,750, your personal exemption of $4,000 is not available,” said Luna.

In light of this fact, individuals might not want all the items they originally requested in a divorce. For best results, speak to a financial professional about your specific fiscal situation and options.

21. Take Advantage of Free Legal Advice

Most attorneys will offer free consultations, said Narris, who advises clients to “take advantage of that and get some basic information, see if the lawyer is the right fit.”

To ensure you make the right choice, be sure to consult with a few attorneys before coming to a hiring decision. After all, the outcome of your divorce depends in large part on the quality of your legal advice.

22. Be Mindful of the Date When Initiating Divorce

calendar
calendar

While you might be tempted to file as soon as possible, it’s important to note that property division is based on the date of marriage separation in some states. Typically, the court uses a formal date of separation (DOS) to determine property division and the value of certain assets.

“If you are expecting a large increase in the value of a major asset upon a certain occasion, be mindful of that when you decide to initiate the divorce,” said Narris.

23. Design a Joint Parenting Arrangement Wisely

Unlike claiming a child as a tax dependent, claiming head of household is not assignable, said Narris, who went on to explain that individuals either met the criteria or did not.

If you’re negotiating who will claim a child as a dependent, Narris said, “You can include a provision that the right to claim the child is dependent on the parent being up to date on their support obligation.”

24. Plan Finances for After the Divorce

Clients often neglect to consider how their financial planning can change after a divorce.

“Your risk aversion may be very different than your former spouse[‘s] and you do not need to keep the same investment trajectory you had before the divorce,” said Narris.

If you don’t know where to begin, you might want to hire a financial advisor. Remember to think long term when planning finances after divorce.

25. Have a Paper Trail

While most assets are divisible in divorce, there are some exceptions to the rule. Documents can help preserve what you believe to be separate property when it comes to divorce proceedings and should be collected beforehand.

“Too many times the necessary documents seem to disappear after a divorce starts, so to the highest degree possible, gather those documents before you start the divorce,” said Jeff Anderson, a Dallas family law attorney.

26. The Division of Property Can Be Complex

Dividing assets and properties isn’t always a simple numerical transaction.

“Negotiating the division of property is an art form all its own,” said Keith Nelson, a family law attorney with Orsinger, Nelson, Downing and Anderson, LLP in Dallas. “It’s a three-step process: Characterize the asset, value it, divide it.”

After the asset is identified as community property, separate property or both, figuring out the value can be tricky. “For instance, a bank account with cash in it is pretty easy to value — look at the balance,” said Nelson. “But a retirement account, a house or securities can have more complex issues.”

27. Retirement Accounts Are Not Worth the Statement Balancedivorce money

Just as it can be difficult to value assets, couples often struggle to determine the true value of their retirement accounts. One reason that retirement accounts pose problems is that deferred tax will have to be paid at some point. In light of this fact, Nelson cautions clients that retirement accounts might be worth even less than the balance minus tax.

“If one of the parties will be liquidating a retirement account early, then the highest marginal tax rate and the early withdrawal penalty might need to be subtracted from the value of the account,” said Nelson, who went on to explain that the value of these assets is often drastically reduced as a result.

According to Nelson, “Even if the account is not going to be liquidated, the taxes which will be paid on the money at the time of retirement can be considered and a reduction of the overall value of the asset might [be], and very often is, appropriate.”

28. ‘Division of Property’ Depends on Where You Live

When a divorcing couple heads to court for a property dispute, state law is used to divide the property using one of two classifications: community property or equitable distribution. With community property, both spouses own income and assets equally, and items can be divided evenly. Additionally, individuals can keep separate property.

According to NOLO, a legal advice website, community property applies to the states of Alaska, Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin as well as Puerto Rico. Every other state uses equitable distribution, which involves “fairly” divvying up assets and money accrued during marriage. Knowing the law of the land can help you avoid surprises during your divorce proceedings.

29. Some States Are Better for Getting a Divorce

According to the government research site InsideGov, the five states with the easiest and most lenient divorce laws are Alaska, South Dakota, Wyoming, Iowa and Washington. The ease of filing, fees and processing times are all considered as part of the rankings. If time and cost are of the essence, you might want to consider where you live before filing divorce papers.

30. Be Mindful of the Worst States for Divorce

Based off InsideGov’s data, the most difficult states to get a divorce include Arkansas, New Jersey, Rhode Island, South Carolina and Vermont. Arkansas takes the longest amount of time at 540 days. If you live in one of these states, you and your spouse might want to consider relocating to expedite the divorce process.

31. When in Doubt, Seek a Professional — Or It May Cost You

Todd Huettner, president of the residential and commercial real estate mortgage bank Huettner Capital and a financial analyst who has helped many individuals dealing with divorce, advises clients to seek professional help at all costs.

“A simple mistake that drops your credit score 40 points can cost you thousands on your next mortgage,” said Huettner. “Making a mistake separating accounts, renaming beneficiaries or not setting up life insurance properly can cost you hundreds of thousands and impact you for years.”

32. Make Sure You Actually Implement the Divorce

Despite their eagerness to be divorced, many people actually fail to complete all the steps needed to make their divorces legal, according to Huettner. For the best results, clients should make sure all their bases are covered and check up on spouses to ensure they have completed the necessary steps.

“You don’t want to find out that your ex-spouse never refinanced the house five years ago like he was supposed to and [it’s] now in foreclosure,” said Huettner. “By the time you find out about it, your credit will be destroyed for years.”

33. Compromise Could Help Youdivorce attorney

You win some, you lose some, right? Unfortunately, divorcing spouses often refrain from compromising out of spite.

While you might be tempted to fight every battle that comes your way, agreeing to compromises could save you a lot of headaches and money on legal fees when going through a divorce. As an added bonus, your decision to compromise could encourage your spouse to do the same.

34. Don’t Forget About Health Insurance

Although federal law might dictate that you have health insurance access under your former spouse, Narris cautions clients against relying on COBRA coverage long term due to the high cost.

Her advice: “Start doing legwork for available options that may be less expensive. Better yet, find a job for yourself that has benefits.”

35. Belts Are Always Tightened During a Divorce

While individuals tend to factor the price of getting divorced into their budgets, they don’t always consider other everyday expenses incurred during the process.

Narris recommends that clients carve out a little extra money to care for their personal needs during this difficult time. “Factor in a gym membership, therapy co-payments, massages,” said Narris. “You will want to be as healthy as you can to help your kids through the process, and you never know when you may have a bad day.”

36. Take Action but Be Wary

Savvy divorce attorneys advise their clients to be cautious when filing for divorce.

According to Luna, it’s important to make sure you have the current statement for your spouse’s brokerage account before announcing and filing for the divorce. After all, a deceitful spouse could very easily liquidate the account with no paper trail by neglecting to cash checks until later. The last thing you want is to find out your spouse set up a new account after the divorce settlement while leaving the current brokerage statement with a zero balance.

37. Avoid Underestimating Living Expenses

You need to know what your spouse earns monthly, as well as where the money goes. According to a Divorcenet.com article, when considering the cost of future living expenses, it’s important to take into account the effect of inflation.

Narris recommended keeping receipts so you have a good idea of what everything actually costs. Doing this will help you maintain quality of life after a divorce.

38. Don’t Let Emotions Get in the Way of Selling the Family Home

Whether you have an emotional attachment to your family home or are just being vindictive toward your former spouse, be sure you’re thinking wisely about your decisions with regard to shared property. You don’t want to discover later that you gave up other assets just to keep a home in which you can’t afford to live.

39. Know What You Valueqdro

When contemplating divorce, it’s important to consider what assets you value most and be prepared to let some things go.

“A major mistake in divorce that everyone can get trapped into is spending hundreds or thousands of dollars fighting for something that you don’t even want,” said Narris.

Take your time so you can make the most rational and intelligent decisions.

40. Dress Appropriately for Court

It might seem like a small matter, but buying nice clothes for court can boost one’s confidence.

“You will feel better and likely fair better with the judge,” said Narris.

Of course, clients should remember to keep it professional and avoid dressing in a manner that’s flashy or overly pompous. Play it safe by keeping clothing neutral and accessories to a minimum.

It’s important to remember that divorce law varies by state, and some of these tips might not be applicable in your region. Be sure to find a divorce attorney in your area to advise you on how to get a divorce. Doing this will help protect your assets and property while ensuring the divorce process goes as smoothly as it possibly can.

Source: 40 secrets only divorce attorneys know

10 assets you might forget to include in your divorce

divorce assets

divorce assetsOften the divorcing couple doesn’t remember they have these items, or doesn’t consider them to be assets.

When you’re working through your divorce settlement, deciding who gets what, you are likely focusing on major considerations: house, cars, retirement accounts, investments. While these items are clearly important, many other assets are easily overlooked. Often the divorcing couple doesn’t remember they have these items, or doesn’t consider them to be assets.

Even if you think you don’t care about how they’re divided, keep in mind they have value; adding them to the pot not only increases the total amount of assets to be divided (which increases your share), but they also represent chips in your ongoing negotiation. If you were the more enthusiastic traveler in the marriage, for instance, you might be willing to give a little back on the home sale in order to secure frequent flier miles.

Here are some often overlooked assets to consider when you’re tallying up during a divorce:

Stock options: Your or your spouse may have stock options from your employer. This might seem like something with no value (particularly if they aren’t fully vested), but these options do have monetary value and can increase the total value of your joint assets.

Intellectual property: Copyright, patents, trademarks and even things like books that one of you has written—even if the copyright paperwork hasn’t been completed—have value.

Digital assets: Websites or blogs that either of you owns are assets. Even your social media accounts should be included in your settlement. Most likely, these accounts have no value (unless you have a large number of followers who have potential value for business reasons) but it’s important to establish who will own the accounts after the divorce.

Digital downloads: Movies, music, and e-books are expensive to replace, so be certain to include these items when tallying assets.

Frequent flyer miles and loyalty programs: You and your spouse probably have memberships in lots of loyalty programs and many of them accumulate points, particularly airline programs. Any loyalty program in either of your names is a marital asset and should be divided in the divorce.

Capital loss carryovers: Capital losses can be carried over from one year to the next on income taxes and such losses can reduce future taxes. If you are carrying a capital loss, make sure it is included in your settlement.

Loans: If you or your spouse has made personal loans to friends or family during the marriage using marital funds, the balance and interest due on those loans should be divided in your settlement.

Vacation pay: Paid time off accumulated at a job has a value and is a marital asset. Make sure this is taken into account.

Pets: Emotional attachments to pets can sometimes give rise to nasty “custody” battles, but beyond that aspect, your pet may also be a purebred or particularly valuable for some reason; if that’s the case, you should also include this in your list of assets.

Prepaid memberships: Any personal (for example, a gym) or professional memberships and subscriptions that have been paid for this year and for future years should be included if marital funds were used to pay for them.

Adding items to your total list of assets results in a larger total to divide and more for your half, but beyond that, thinking through what matters to you and to your soon-to-be ex can help devise a settlement that feels advantageous for both sides. A good lawyer can assist you in finding these “hidden” assets, and help decide what’s worth negotiating for as you work through your divorce.

Source: 10 assets you might forget to include in your divorce – AvvoStories

Dividing Military Retired Pay Benefits In Divorce

military retirement divorce

Dividing Military Retired Pay Benefits In Divorce

military retirement divorce

The Uniformed Services Former Spouses’ Protection Act (USFSPA) was passed by Congress in 1982, specifically to give a state court the authority to treat military retired pay as marital property and divide it between the spouses. This legislation was in direct response to the preceding year’s U.S. Supreme Court decision in McCarty v. McCarty, wherein the court precluded state courts from dividing military retired pay as an asset of the marriage.

While military retired pay is not divisible using a Qualified Domestic Relations Order  (“QDRO”), it is divisible using a Military Retired Pay Division Order.

The Defense Finance and Accounting Service (“DFAS”) has very specific rules about how and when military retirement pay can be divided.  For a division of retired pay as a property award to be enforceable under the USFSPA, the former spouse must have been married to the service member for at least 10 years, and during that time the service member must have performed at least 10 years of creditable service. This is referred to as the 10/10 requirement.

In addition, no more than 50% of retired pay can be awarded as marital property. Because the DFAS has very specific requirements relative to division of military retired pay, it is important that the parties understand these technical requirements early on. There are many ways that a former spouse can lose his or her right to division of retired military pay, so relying on an expert in this unique area is very important.

Military Retirement Divorce

Source: Dividing Military Retired Pay Benefits In Divorce | Robert Hetsler,J.D. CPA,CVA,CFF,FCPA,MAFF,CMAP,PFP | LinkedIn

Don’t Forget These Marital Assets in Your Divorce Settlement

marital property

marital propertyDivorce marks the end of one chapter of your life and the beginning of another, and odds are, you’ll look back at this time and see it as a positive turning point in your life. However, before you achieve that perspective, there’s plenty to go through – and much of that comes down to finances.

Financially speaking, divorce is mostly about the division of marital property (and debts). Most couples today have complex financial portfolios that include many kinds of assets, and at first, figuring out how to divide everything fairly can seem overwhelmingly complicated.

For example, valuations of even the most common assets, such as real estate and bank accounts, cars, boats, and the like, can be points of contention in a divorce. Then, there are investments and employee compensation plans–including life insurance policies, retirement plans, pensions, stock options, restricted stock, deferred compensation, brokerage accounts, etc. –which must also be inventoried and evaluated for the purpose of division in a settlement agreement. Complicating matters further, the current dollar value of assets such as these isn’t necessarily the best basis for determining their worth.
Plus, there are many more types of assets to consider: valuable home furnishings, art, antiques, horses, wine collections, rare coins, classic cars. . . . and if you or your husband have been given significant gifts, or have interests, passions or other ventures that you’ve invested in during the marriage, it’s likely these have resulted in marital assets that are now subject to division, as well. (Interestingly, these types of assets often prove the most difficult to Think Financially, Not Emotionally® about. Even if your husband has never shown any interest in your beloved collection of rare first editions, don’t be surprised to hear him express a sudden attachment to it once he learns the collection is subject to division.)
Many women find there are marital assets that didn’t come immediately to mind, yet would have significant value or consequences should they fall to one or the other spouse. Please don’t forget that you may be entitled to:

Benefits from previous employers

Your check list should include stock options, restricted stock, retirement accounts (401Ks and pension plans) and deferred compensations plans from previous employers.

Capital loss carryover

Check tax returns for this one. If capital losses exceed capital gains, and also exceed the tax deduction allowable for a single year, the loss can be carried over to future years. If the loss occurred during the marriage, it is a mechanism for reducing tax liability and should be addressed in your divorce settlement.

Cemetery plots, or equivalent

Given that you’re divorcing, it’s a fair bet you’ve changed your mind about wanting to be buried by his side. A cemetery plot can have significant value and should be negotiated.

Collections and memorabilia

Think about what you have in storage, as well as on display in your home. Comic books, gold and silver coins, stamps, books, art and antiques are all potentially valuable items, as are some sports and election memorabilia. If an item or collection is specifically noted in your homeowner’s insurance policy, it’s probably important to your divorce settlement, as well. But, even if you forgot about it when buying insurance, be sure to remember it now.

Country club, golf course and other memberships
It could be that your husband is the only golfer in the family, and that the club membership is not something you particularly valued during the marriage. However, many clubs require substantial initiation fees to join, as well as annual dues, presenting an asset to divide.

Gifts you gave each other during the marriage

Gifts received from each other while married are marital property, subject to division in divorce. Gifts given before you were wed, such as your engagement ring, are separate property. (Read about the difference between separate and marital property here, and remember: Separate property can lose its separate property status if you commingle it with marital property or vice versa. For example, if you re-title your separately owned condo by adding your husband as a co-owner or if you deposit the inheritance from your parents into a joint bank account with him, then that property will most likely now be considered marital property.)

Intellectual property

This includes trademarks, patents, copyrights and royalty rights. While these may not have generated much income during your marriage, that doesn’t mean they won’t in the future. Intellectual property rights should be specifically addressed in a divorce settlement agreement.

Lottery tickets

If a winning lottery ticket was bought during the marriage, the winnings are marital property.
Money loaned to others, payable to either spouse

For example, if your husband loaned his sister $10,000 during your marriage, the money she’ll pay back to him is subject to division in divorce.

Pets

Divorce laws of most states treat pets as property, not family members. Pets may be more commonly assigned to the spouse with a more flexible schedule, and/or who has historically taken care of the animal. If custody of a pet is important to you, make sure your attorney knows to make it a priority.

Photographs and keepsakes

These are literally invaluable assets. With the prevalence of digital photography, it should be no problem for each of you to keep the entire library of recent family photos, but many of us still also have collections of older photographs and negatives. If necessary, make an agreement to share the cost of having them copied. You’ll also need to make arrangements about keepsakes that can’t be duplicated.

Retained earnings

This refers to the portion of corporate income that is retained by the corporation rather than paid out as dividends to shareholders. If your husband owns a business, this is one of many things to watch out for.

Tax refunds

Depending what time of the year finds you in the thick of divorce settlement negotiations – or if the process spans more than one year – it could be surprisingly easy to overlook a pending or past tax refund.

Term life insurance

Whole life insurance policies with cash value are obviously subject to division, but term policies can also be important to negotiate, especially if yours is a “grey divorce” or if one of you is ill and/or uninsurable.

Travel reward program points

These can make for some nice luxury travel for the spouse that keeps them. Check out my article about who gets the air miles.

There is, to put it mildly, lots to consider, and state laws vary greatly, especially between Community Property and Equitable Distribution States. Fortunately, there is also excellent professional expertise available to work through various financial strategies for dividing each of these types of assets, and to help you be sure that nothing falls through the cracks. Knowing that your divorce settlement leaves no stone unturned, you can turn with confidence to that next chapter you’ve been looking forward to.

Source: Divorcing Women: Don’t Forget These Marital Assets

 

 

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