Divorce Analysis 

Once a marriage has broken down and a decision is made by one or both parties to divorce, the impact can be devastating. Divorce is devastating—not only to the individuals involved, but also to the children, family, friends, and employers of the divorcing couple. Divorce not only has a traumatic emotional impact, but a financial impact as well.

Because of the financial complexity of many divorces, financial professionals are being asked to play an active role in helping individuals and attorneys sort through the financial issues related to divorce. By including a financial professional, Attorneys have found new ways to help their clients obtain an equitable financial settlement. Attorneys, mediators, arbitrators, and judges are looking for experts that are knowledgeable about the financial issues of divorce. At ARTAAD Financial, we try to help clients and attorneys avoid the following common mistakes:

• Negotiating to retain the marital home when the client cannot afford it
• Not obtaining complete information on all retirement plans, employee benefits, and stock options
• Not evaluating the defined benefit pension plan correctly
• Thinking that retirement assets have the same value as an equal dollar amount of nonretirement assets
• Not understanding the different division methods of a retirement asset and not knowing which one is in your client’s best interest
• Not understanding the purpose of a Qualified Domestic Relations Order (QDRO) or the need to get it completed and filed at the time of the divorce or immediately after the divorce is final
• Not looking at the long-term impact of a financial settlement
• Failure to factor in inflation and investment returns when looking at the long-term impact of a settlement, or using unrealistic numbers in the evaluation
• Not being aware that it is possible to take a distribution from a retirement plan prior to age 59 ½ and avoid the 10% penalty
• Not protecting the survivor benefits for the non-employee spouse
• Not protecting spousal and child support payments through life insurance
• Not understanding the importance of making the spouse who receives the spousal and child support payments the owner of a life insurance contract
• Improperly structuring spousal or child support payments
• Using a QDRO to divide an IRA
• Making isolated financial decisions versus looking at the big picture and analyzing how each financial decision impacts other decisions
• Not taking into account transaction costs when evaluating a settlement offer
• Failing to understand the tax implications of alimony payments versus child support payments
• Believing that a 50/50 division of property is an equitable division of property
• Not understanding methods or tax implications of dividing stock options
• Failing to consider the cost basis of property
• Not understanding the capital gain taxes upon the sale of the marital home or how the sale can impact each party
• Not understanding how to divide debt
• Not taking into account the effect of deferred taxes when dividing the assets

At ARTAAD Financial, we help clients who have to make financial decisions such as these, attorneys arguing their case, mediators working through the financial issues with a divorcing couple and judges who could use the information to assist in making a fair decision.

ARTAAD Financial and LPL Financial do not provide tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor.