Your 401k

DIVORCE 911 consulted with Steve Shewmaker of Shewmaker & Shewmaker for this blog. We also have a video covering this topic.

A 401k is one of several types of retirement plans. Under principles of federal law, a 401k is formed and it is only titled in the name of one person. You can have a personal 401k but you can not have a joint 401k with someone else, the way a bank account can be joint ownership. It is not a legal option. In a divorce, it is not uncommon for both parties to have 401k’s. It is also not uncommon for only one person in the marriage to have a 401k. Even if they both have 401ks, people don’t always save evenly.  It’s very common to have the husband’s 401k have 2 or 3 hundred thousand dollars in it and the wife may not have a 401k or have very little.  

There is a common misperception (in a divorce), that taking money out of a 401k will result in taxes and penalties. That is not necessarily true. If a 401k is divided by a court order, entitled a Qualified Domestic Relations Order, there will be no taxes or penalties. A Qualified Domestic Relations Order or “QDRO” is simply a piece of paper signed by the superior court judge that is a directive. It directs the 401k plan administrator to divide the 401k and to transfer money to the recipient spouse and into another retirement account, usually an IRA. This is tax-free. Usually, there will be no penalties and no taxes assessed on that transfer.

Now, what is not widely known, with the 401k (unlike the IRA or other investment accounts) you are allowed (as the recipient spouse) to take out cash in this transfer one time without a 10% penalty. You will be assessed ordinary income tax on it but not the 10% penalty. This is not true with an IRA or other types of retirement. There’s a way to get creative and sophisticated here. For example, suppose the parties were going to divide a 401k evenly but they had $20,000 in credit card debt that they wanted to pay off. They could transfer more money in the 401k transfer and the recipient spouse could take that money out in cash to pay off the $20,000 credit card debt. This could be useful for both parties and be successfully implemented by mutual agreement.

This information is deemed to be accurate. Reader / User is required to perform their own due diligence with the appropriate professionals. DIVORCE 911 is not a law firm, financial institution or advisor, registered mental health resource, does not practice law, and does not offer legal, financial, or therapeutic advice.

Your Inner Badass

DIVORCE 911 consulted with Wendy Dickinson of Grow Counseling for this blog. We also have a video covering this topic.

When someone is going through hard stuff that is overwhelming we lose sight of who we are a lot of the time. We can feel like we’re invisible, we feel like we’re weak, or we feel like the best parts of ourselves have sort of gotten lost in the process of being overwhelmed. It’s important to have someone that can speak hope & life over you. It’s important to hear “I know there’s an inner badass in there!”. Seeing a counselor or therapist can help call forth that inner strength that will empower you to get back to being the best version of yourself.

Events and relationships can be very emotionally charged. This can lead to you being in a situation where you are unable to think straight. Once again, it is very important to seek out a professional to help encourage you, assist and sort through all of your emotions and conflicts. This will allow you to figure out and prioritize what you need to do to get back in control.

While a trained therapist is most often the better option, it doesn’t always have to be. It can be friend or family member that you chose to confide in. Most importantly, it needs to someone that can see the strength in you and help you overcome when you have lost your way. At DIVORCE911.com and GROW Counseling we like to say that “counselors are vendors of hope”!

This information is deemed to be accurate. Reader / User is required to perform their own due diligence with the appropriate professionals. DIVORCE 911 is not a law firm, financial institution or advisor, registered mental health resource, does not practice law, and does not offer legal, financial, or therapeutic advice.

Let Me Apologize In Advance

This blog is courtesy of Russ Thornton of Wealthcare for Women.

In investing, being well-diversified means always having to say I’m sorry.

That’s because, in a diversified portfolio of investments, some of your investment will almost always be down in value. At least relative to your other investments.

Of course, the hope is that at the same time, while some of your investments may be down, some of your investments will also be up in value.

This is the essence of diversifying your investments. Or not putting all your eggs in one basket.

If all your investments are going up in value at the same time, while it might feel good to watch your account balance grow, you’re not diversified. And everything won’t go up in value forever.

The same holds true if all your investments are doing down in value at the same time.

So you might be asking about now if I’m truly diversified in my investments will I ever make any money? Or will investments going up in value be offset by other investments going down in value?

This brings up the concept of correlation among investments.

Correlation is a statistical measure that calculates how closely the performance of one investment mirrors the performance of another investment.

If two investments have a perfect negative correlation, it means they move in opposite directions all the time.

If they have a perfect positive correlation, it means they move in the same direction all the time.

The more your investments approach perfect positive correlation, the less diversified they are. They will all be up or all be down because they all move in the same direction at all times.

But this isn’t a statistics class.

Just remember that you want to construct a portfolio that reduces the chance that all your investments move in the same direction at the same time.

And please note: even proper diversification isn’t perfect all the time. For an example, look at the markets in 2008 when pretty much all investments fell at the same time regardless of their correlation measures.

But more times than not, diversification works. Especially over long periods of time.

I believe the best financial strategies are those which are simultaneously simple and effective.

But simple and effective isn’t always easy. Just as it isn’t always easy to remain diversified when the broad market is going up.

And while diversification isn’t the only element of sound, long-term investing, but it’s certainly a key component. And one that I believe in and utilize with my clients as well as with my own investments.

But even if, like me, you believe in the benefits of diversification, there will be times where some of your portfolio will down in value.

That’s part of the bargain with diversification. But it’s a small price to pay in the short-term for what will hopefully be smoother, less erratic wealth building that stretches over decades into your future.

If fact, I take back my apology.

When it comes to diversification, I have nothing to apologize for.

However, if you’re not broadly diversified across your portfolio, you might wind up being the one who’s sorry.

 

This information is deemed to be accurate. Reader / User is required to perform their own due diligence with the appropriate professionals. DIVORCE 911 is not a law firm, financial institution or advisor, registered mental health resource, does not practice law, and does not offer legal, financial, or therapeutic advice.

Marital House and Names Shown on the Debt

DIVORCE 911 consulted with Matt Dickason of Dickason Law.

We also have a video covering this topic.

 

Divorce is a very emotional event and is often difficult to handle. There are different things a Real Estate law firm/title company can do to help. If the law firm understands that the transaction with the marital home is happening because of a divorce, whether it’s being sold or refinanced there are things that are very easy for us to do. One simple and effective way to help is to split the closings. When a law firm allows for the divorcing or divorced couple to not have to handle things in the same room together, it is great appreciated. That’s just the emotional side of it.

One of the things a law firm can really appreciate on every closing; is that the clients are participating in what is probably the largest transaction a person will ever have. Professionalism and candor for sure, but when you add that element of divorce it’s different.  Instead of selling or buying the house a person wants to buy or sell… it’s occurring for a different reason. It might be that one person gets to keep the house and the other is leaving or that neither party stays in the house. This might be because of a financial issue or maybe the emotions attached to that property are just too much to manage.

A decision is made (by the court or the individuals) to put the house on the market. Depending on how the title is vested, which means how you own the property if it’s a joint title it can be worked through. One example: The husband owns the property in his name but he needed the wife’s income to support the payments. Different payments and payoffs have to be taken care of before any money is divided up between the parties. Things must be paid off that are attached to the name(s) shown on the title.

A family law attorney might say “$250,000 is owed on the mortgage, you’re selling it for $300,000. Real estate commissions, property taxes, HOA fees, any additional leans, etc…that are on the house and property itself must be paid off before any remaining funds are disbursed.”.  Whether the debt is under one or both names, a clear title must be delivered to the subsequent buyer. So no matter what, if you signed off on that mortgage or REFI, or Equity Line of Credit, etc… (regardless if it was your idea or your spouses’) these loans/liens must be paid off. You will come to realize that part of the divorce negotiation process is not just determining the fair market value of the house and then only subtracting the mortgage payoff. You must investigate further to determine what other debts are associated with this property. One of the owners might feel as if these debts (loans or liens) are not his or her’s responsibility… And so the debate amongst the divorcing parties begins… 

Your first objective, hire an experienced real estate agent that specializes in Divorce Care. They must have a full & complete team of legal and financial professionals to bring you the best information needed DURING the mediation/divorce process.

This information is deemed to be accurate. Reader / User is required to perform their own due diligence with the appropriate professionals. DIVORCE 911 is not a law firm, financial institution or advisor, registered mental health resource, does not practice law, and does not offer legal, financial, or therapeutic advice.

Forward Thinking Résumé

DIVORCE 911 consulted with Howard Cattie of Career Oyster for this blog.

We also have a video covering this topic.

 

People often think of a resume as being about what a person used to do. However, just because this is the prevailing opinion does not mean it is prevailing. So, when new ideas come out people often react with “gee, isn’t that different”.  When you think about a prospectus or a company looking to make money, they write what they’re going to do in the future. In a career, why can’t you write a resume that projects your past experiences but projects it to the future of what you want to do? Brilliant!

This is especially important for people that are making transitions, have gaps, have been home for a while, have volunteer experience, or are underemployed. This is the case because these people don’t want the same job, the low-end work, or something menial from their past. These people really want to get on a new track.

There are 3 things you need to do to make this a reality:

  1. You define a vision and write your resume forward looking to where you’re going with the objective of your background and the desire to support it.
  2. You get the confidence up to sell that through an interview and you’ll be able to present what you want to do and why.
  3. You don’t go through the posted ads because that’s American Idol. That is where everybody is competing and you’re just not going to get through the consensus. Instead, you find the companies you want, target the managers, and have an exploratory where you share your forward thinking ideas.

Think you can’t do that? Sure you can! It always possible as long as you prepare properly, understand how to put your background together, and find what you want. You can get that job.  This is a proven and successful way of finding the job you want and deserve. The corporate environments are doing this. They tell you about what they’ll be able to do in the future. It only makes sense for you to take the same approach. It’s a paradigm shift to have a forward thinking resume!

 

This information is deemed to be accurate. Reader / User is required to perform their own due diligence with the appropriate professionals. DIVORCE 911 is not a law firm, financial institution or advisor, registered mental health resource, does not practice law, and does not offer legal, financial, or therapeutic advice.

Child Custody

DIVORCE 911 consulted with Patty Shewmaker of Shewmaker & Shewmaker for this blog post. We also have a video covering this topic.

Child custody is a very complicated and hot topic. Jurisdiction and child custody create a lot of contention. It’s topic that can’t be covered in a single blog but we’re going to hit the high points at the very least in this post. Jurisdiction is just a big fancy word for whether or not the court has the authority to hear a particular matter. In this case with the jurisdiction of child custody matters, it’s controlled by a law called the “Uniform Child Custody Jurisdiction Enforcement Act”. What that says is that “the state that has jurisdiction for child custody matters is the state that the child has lived in for the last 6 months”. It’s what we call “the home state” of the child. This determines jurisdiction for initial child custody determinations.

What makes this interesting and tricky is that jurisdiction for child custody may not be the same as the jurisdiction for divorce. An example of this would be as follows: In Georgia for a divorce someone has to live here for 6 months. Typically, it’s the plaintiff sometimes it’s the defendant. In this situation, the father has lived in Georgia for 6 months. However, his wife and minor child had been living in Nevada. This caused Georgia to have jurisdiction for divorce. It did not allow for Georgia to have jurisdiction over child custody because Georgia is not the home state of the child.

So it can be tricky when we start talking about jurisdiction with child custody and how that interplays with divorce and other matters. It is highly suggested to seek legal guidance when facing a situation involving child custody. Deciding on the best place to deal with child custody issues can have many factors. It’s an issue that has many layers with many decisions to be made when trying to resolve all of the different problems. Reaching out a to a professional is the best way to make this happen.

This information is deemed to be accurate. Reader / User is required to perform their own due diligence with the appropriate professionals. DIVORCE 911 is not a law firm, financial institution or advisor, registered mental health resource, does not practice law, and does not offer legal, financial, or therapeutic advice.

The Family Business

DIVORCE 911 collaborated with Wendy Hayes of Mitchell Hayes for this blog.

We also have a video covering this topic.

 

Family businesses may be another asset in a marriage. You have to consider all of the sweat equity as well as whatever monetary equity that went into building that business. You also have to consider that the purpose of putting all of that sweat equity and capital into a business is to expect a future stream of revenue. Another consideration is to possibly sell that business down the road so that you can finance your retirement or other goals.

First, establish a fair market value for the business. This allows us to consider the entire financial portfolio of a divorcing couple so that we can make sure that the spouse that will not be a part of that business is going to get their fair share. However, we also don’t want to cripple the future business owner. It doesn’t help either party if we’re bankrupting the business to be to able to pay off the other party. There are creative ways that we can create and design that settlement so that both parties can win.

Understand that the business is only one item on the marital balance sheet that makes up the couple’s entire net worth.  It is also important to understand the cash flow the business provides and how adding debt to the business would impact cash flow and operations of the business.  In dividing the assets, allowing the business owner to keep all or more of the business means that the other spouse will receive other assets to compensate or offset the value of the business.  If a lump sum payout at the time of the divorce is not in the couple’s best interest, a promissory note could be used to pay the spouse over time.  There are many options.  Remember that no one wins if you prevent the business from providing the future earnings that are in dispute.   Work with a team of professionals who can craft an agreement that will allow you both to realize the financial benefits of the business as well as your other assets.

 

This information is deemed to be accurate. Reader / User is required to perform their own due diligence with the appropriate professionals. DIVORCE 911 is not a law firm, financial institution or advisor, registered mental health resource, does not practice law, and does not offer legal, financial, or therapeutic advice.