A Divorce Plan

How do financial divorce professionals help?

Financial divorce professionals understand that divorce is very difficult even when both parties agree. The division of assets – house, all property, money, retirement funds, everything that has worth – is one of the most difficult issues that must be decided. Not only are current worth and tax consequences important, but future worth and future tax consequences must be calculated as well.

Financial divorce professionals specialize in the financial issues of the division marital assets. They work with divorcing clients by showing long-term consequences of any suggested settlement proposal. As a result, both parties know what to expect and can rebuild their lives on reasonable financial information and planning.

The power of seeing the end result.

What’s missing in most divorce processes is financial expertise which can accurately forecast the long-term effects of the final settlement. Divorce planning software graphically reveals the economic consequence of divorce settlements and court orders.

This can lead to settlements between parties instead of lengthy, expensive court trials; less anger and bitterness as each party takes part in the decision-making process and less upset for the children.

Divorce planning software includes input of net income, expenses, assets, retirement pay, social security, investments, child support, and maintenance. It automatically applies formulas for salary increases, inflation, return on investment, taxes on maintenance, and recent tax law changes.

Output includes financial status, cash flow, net worth of each individual spouse, an infinite variety of settlement scenarios over a life plan, and columnar and graphic formats.

Let’s look at a case study.

This Case Study will show you the power of divorce planning software:

Paul and Karen are 40 years old and have two children. They own a home worth $365,000 with net equity of $177,500. Their IRAs and 401(k) retirement plan total $422,500 in value. Paul earns $90,000 a year. Karen earns $18,900 a year.

Paul proposes that Karen and the children will get the house, which will be deeded to her. She will also receive $122,500 of the retirement moneys and Paul $300,000, thus dividing the assets equally. Paul will pay Karen alimony of $1,600 per month for 5 years and child support of $500 per month. He will also pay for college which will start in 4 years. Paul’s expenses include his normal living expenses, child support, alimony and college costs. Karen’s expenses include support of the children and are reduced when each child leaves home.

This appears to be a reasonably fair settlement. However, an analysis creates the financial future illustrated in the following graph.

Graph #1

Graph I shows that within 10 years Karen’s assets are gone (including the house) while Paul’s net worth has increased.

Using divorce planning software, a financial divorce professional will show you the financial result of any given proposal.

Graph II

 

Graph II shows how more alimony for a longer period of time helps Karen while Paul is still able to increase his net worth.

The sample case illustrates the value of financial planning as a means of more equitable divorce settlements. If the court’s intent is to treat both parties in divorce as equitably as possible, it is essential to analyze the marriage as a financial contract, with tangible investment into it by both parties.

Remember, with Collaborative Divorce, you and your spouse agree with your lawyers that you will settle the case and not go to court. This is usually less costly and takes less time. It produces “win-win” settlements and allows you and your family to retain your dignity through this stressful time.

Call a financial divorce professional to schedule an appointment. This could be the most important phone call you’ll ever make.

Courtesy of Financial Divorce Association