Decisions That Can Cost You in a High-Net-Worth Divorce Video from Savant Wealth Management

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Hi, I am Michelle Smith. I am a financial advisor and managing director with Savant Wealth Management and creator of the Wife2CFO course and platform. I’m a certified divorce financial analyst. I’ve been a financial advisor for 30 plus years, and I am so thrilled to have with me on this webinar, Jeff Neavor, also a certified divorce financial analyst. Jeff?

Hi, Michelle. Thanks so much for having me today. I’m in the Savant Peoria office and I’m a CFP and financial advisor, and I work with Michelle on the Wife2CFO team. And as she said, I’m also a certified divorce financial analyst. Thanks for having me today.

Welcome to our webinar on the decisions that can cost you in a high net worth divorce. For three decades, I have been on the front lines navigating their high net worth divorces, and it comes down to one pattern, and that is decisions. How are you making them? Are they different in a high net worth divorce? Are you participating in your strategy or are you transferring your decision making to your attorney? It’s all about making informed decisions, and we’re going to dive into that today by talking about why high net worth divorces are different.

So in a more typical divorce, there can be a house that’s being split, some bank accounts that are being split, maybe an investment account and a retirement account. When it comes to high net worth divorces, there are more things. There might be a trust that wasn’t fully explained. An LLC might own real estate. You might have a complex pension. You may have some property that was acquired before the marriage or gifted or inherited during the marriage. There’s marital property and what that consists of. There’s sometimes art. There could be carried interest in hedge funds. There could be early stage investments that are almost impossible to value and split right now. And there are for business owners, were expenses run through the business? What do we have to take a look at? What do we have to stop and pause and think about the questions we need to ask? One of the things we do when we help women navigate their high net worth divorces is even help them raise questions they’re not even thinking to ask.

And this is the part that matters the most to me. It is, are you participating in your strategy or are you transferring decision making to other people, including your attorney? Actively participating in your strategy looks like this. It doesn’t mean you need to understand the law. It doesn’t mean that from the beginning you have to be a financial expert, but it does mean you need to understand the process, where you are in the process, what are the next one, two, or three most important things that you need to do? You need to ask what the strategy is before a court date. So often we hear women say to us that they don’t even know what they’re going into court for. They don’t know what the plan is. They don’t know what the strategy is.

Well, everybody’s busy, but at the end of the day, this is your divorce and you have to be in the driver’s seat to feel prepared, to ask every question you need answered, and sometimes just to say why. You don’t need to have a math gene to oversee the strategy. You just have to view yourself as a copilot in that plane to understand what’s on the horizon. Sometimes it might not be your lawyer, it might be you, but sometimes it might be your lawyer. And I know, Jeff, that you have a little bit to say about this.

Yeah, that’s a great topic. I actually recently had a phone call where the woman had concerns that what she was hearing from her attorney wasn’t correct. And what was happening is her husband’s attorney wanted to put the health insurance that had been on her plan under her soon to be ex’s employer. Her attorney was in agreement this would be great. This would provide her with better take home pay because that wouldn’t be coming out of her paycheck. But when we sat down and we just slowed things down and had a conversation about it, how much actually do you take home? Because the health insurance costs, those are pre-tax. So for her, it was only 65 cents on the dollar that she would get back.

What does that do? Have you been contributing to an HSA? You know you’ll now only be able to do a single, not a family HSA contribution during the year. What does it look like if the husband lives in another state? Are your children’s providers, are they still in network? What does that actually do to out-of-pocket and copay? So those are all questions where we just need to just slow things down. And as you like to say, Michelle, think about what could we be missing and trust your gut. So transferring agency often sounds like I’ll let someone else make the decision or my spouse always handled the money. What does my attorney think? My advisors tell me to do this. I just assume the numbers are correct. But trust your gut, so when you have those times where things feel like the information might not be correct, don’t transfer your agency. Slow things down and think about what we could be missing.

The one that bothers me the most is the, “I just want this to be over.” And that can be a sign of deal fatigue. That can be a sign of you just don’t feel like you have the capacity to make one more decision, you just want this over. While that is valid and that feeling is often real towards the end of a divorce, it can also be the most expensive sentence you’re ever going to utter in your divorce, and it’s the most human one. It is truly decision fatigue.

And so if you’ve been making a thousand decisions, if you’re not sleeping, the point is to say, “Okay, which five of these do I really need to narrow this down to? Which five matter the most,” and don’t sweep everything under the rug towards the end based on deal fatigue. It is really exhausting if this is your first divorce, even if it’s your second, but if it’s your first divorce and you never handled the money and all of a sudden you’re in a legal jargon world, which often has Latin words attached to it, you’re in a brand new financial jargon world, which absolutely has inaccessible… It’s like the medical profession, right? You hear about a disease or you hear about an illness or you have something and all of a sudden you have to decode the language. So understanding what you own, what you owe, that is active participation.

There is help available for this. Asking how a recommendation that you’ve been given will affect your future decisions. Often you’re told by an attorney and they might be right that this is a good deal, you should take this. Often when women aren’t sure if it’s a good deal is because they don’t feel like they really understand why. The one default question you can always ask anytime you feel confused, concerned or unsure is why are you recommending that? Why are you saying this is right for me? Why? And you need to be curious and open-minded here to understand from your lawyer’s perspective why they are saying it’s right. You should always review alternatives before you agree.

So what does that look like? It could be, “Okay, you should keep that asset. We’re fine giving him on his side of the balance sheet that.” You can always ask, “Are there any other alternative settlement options I should be thinking about?” And you should always make decision based on your goals. What do you need? What are your priorities? Not everything. On a scale of 1 to 10, is a 10 in a divorce. It might feel it in the moment, but you really need to give time to what are your priorities in this divorce? What are your goals? Most people will say, “I want my kids to be okay and I don’t want to run out of money.” Two very basic human, completely natural and common things in divorce. So you need to make your decisions in that framework.

So transferring your agency can be very costly in many ways. So one of the topics that is important is assumptions that go unchallenged. So I have credit in my name, right? I have good credit. I can get a loan. Not necessarily. The credit might not be in your name. Some of the short-term relief, keeping the status quo, staying in the home for the children, that may in the short term relieve pressure, but if we don’t look long-term at the costliness of maintaining say a five or six-bedroom home that we no longer need, the children may be grown. So oftentimes those short-term quick decisions can be very costly in the long run.

Also, equitable does not always mean equal. If say the home in Indiana, the family home, does that have the same growth potential as the Gulf Shore property? Likely not. Is there an income potential from that property? Over the course of 10 years, the price that those two equitable properties at the time of the marriage had, they can be completely different values. And then there’s also the tax consequences that appear years later if we take say highly appreciated stock because we don’t notice that on the balance sheet they look equal, but they actually have completely different tax consequences down the road when we go to unwind those assets. And then Michelle, I know you have some illiquid assets.

Yeah. So illiquid assets are interesting. So what’s an illiquid asset? Obviously it could be real estate. It could be the second home, maybe the third home. It could be a hedge fund. It could be a limited partnership. It could be an investment that was made because you or he or both of you have a friend that started a company. And what we want to make sure when it comes to illiquid assets is that we’re actually protecting two sides of the same coin.

One, not getting bought out prematurely at prices that are impossible to value right now, and two, balancing that with how much illiquid can you take and absorb now hoping for the future growth, that is the hope when you invest in illiquid things. So it’s a balancing act between what you can absorb and keep to hope for that later payoff and not feel that you’re bought out at a completely discounted make-believe number now versus these illiquid assets for the time being cannot produce enough cash to support your lifestyle.

This all comes down to calculating. You take the balance sheet, you sit with it, hopefully with a financial expert, and you go through it and say, “If I wanted to keep this, I really believe this one is going to be valuable. I was involved in it.” Or, “He used to talk about this one the most.” Okay, let’s take that, put it over here into non-income producing. And then on the other side, can the rest of your liquid assets, including any child support and spousal support, support you while you’re waiting for that illiquid asset to hopefully monetize?

So divorce is like peeling an onion, every layer seems to reveal five other layers that have to be peeled, and it is and that’s a good thing because you just think of that onion analogy, just peeling back one layer at a time often reveals another evaluation, another question, and things that you need to think about before quickly agreeing to assumptions that you’re not challenging, things that were not modeled. We’re explaining math in plain English today. It can be explained in this way. So again, back to the beginning, divorce is about decision making.

Some decisions might be difficult to reverse. Real estate is always a lead story. If it was the marital home, if the kids grew up in it, a vacation home, the beach house, the lake house, that’s where you spent all your summers. It’s often the most emotional asset in a divorce, and you have to really slow down here and not just default to, “I can’t afford it, we just need to sell it,” or, “I’m going to keep it because there’s too much change. I don’t want another change for me, for the kids. I want to stay in this house.” Okay. Unfortunately, divorce usually happens quicker than we’re able to make a lot of these very high stakes decisions, but it is the construct and we have to.

So with your house, again, it comes down to financial modeling. What does this do with carrying costs and taxes and repairs that might be needed in the next three to five years? What about if you keep the house and now you can only exclude your half of the 500,000 in gains? So you may be inheriting a bigger tax if in a few years you deem that you really don’t even want the house anymore or it just became more costly than you’re willing to commit to.

So needing to think about those things often, you can also speak to your attorney about things like could we wait a year and then agree to sell the house in a year or you or he gets the first right of refusal to buy the other person out at the right value at the time. So there are ways with these big decisions that you can also build a slowdown defer mechanism in that gets attended to in 12 months or 24 months or whatever you do believe is in the best interest of your children, that you can negotiate on to buy yourself a little time than just ripping that bandaid off all at once.

You have to understand the costs of every asset you’re agreeing to. This comes into play with illiquid assets as well. If capital and money was committed, for example, the marriage committed to fund this $1 million private investment, you need to understand what’s outstanding of that capital. Did a hundred go in? Did 800 go in? If only a hundred went in and a million was committed and you want half of that, you have to be willing to fund your half of that 900 remaining. If 800 of a million went in and 200 is left and your half is 100, that may be a little bit more palatable. So before you agree to keep or get rid of, slow it down and think of these what ifs. You cannot sign your settlement documents without complete information.

Very often there’s an element that enters into a divorce when your soon-to-be-ex may be getting frustrated with how long this is taking, “Your lawyer asked me for that a hundred times.” Well, in a divorce, we do have to update values and marital balance sheets a few times. You can’t just do it in the beginning and two years later not look back. So don’t feel rushed into signing because somebody’s mad at you, you’re being forced. You need the time you need to properly understand what you are signing because this is about as binding of a contract as it gets. We just addressed accepting that illiquid asset without having enough cash flow to support yourself while you’re either waiting for it to monetize or if you have to commit more. And like Jeff just described, failing to account for taxes or what a future expense may be. It’s really important peeling that onion, one question, uncovering one blind spot at a time, and really good attorneys and financial advisors in this process will help you do that.

So very often we hear, “I didn’t handle money. I don’t know where to start. I don’t know what my name is on.” And our answer is you know more than you think you do. So one of the most critical components and numbers in your divorce is what does your life cost? You may have your own credit card, an additional one on his account that all your discretionary spending goes on it, your Venmos, your PayPals, your Zelles, all of that that you can kind of control, calculate and see. But what about the expenses that he may be paying for out of a separate checking account on his credit card?

And if you are in the situation where you need to substantiate your needs based upon the historical standard of living for purposes of establishing a need for spousal and child support, you got to get this number right. Too often we see women walking out of lawyers’ offices with what I call DIYing it, do it yourself. Here’s our state’s budget worksheet, here’s our state’s balance sheet, assets, liabilities, and they send you off to do it.

What are the benefits of being professionally assisted with this? Well, financial advisors who work in this process know how to make sure the numbers are right. You can’t add in things that happened once that were large, like a huge home renovation and act like that is an ongoing expense. It’s the first thing that will damage the credibility of your budget report. So you want to make sure whether you’re getting professional assistance or not, that you are looking at your spending, itemizing it right, and getting rid of what is not a recurring expense so it doesn’t inflate.

A great example of an expense women miss is their health insurance. We’ll talk about this in a bit, but when you get divorced, if you are not covered by your own plan, you can go on his for three years and keep your same insurance under COBRA. Well, once you go on COBRA, it’s at your expense, so you need to know what that plan is going to cost you per month. You can pick up the phone, dial the number on the back of your insurance card and ask, “What would my single COBRA premium be for me to keep this insurance on a monthly basis?”

What about your unreimbursed medical? What about your deductible? Again, you can grab this information. You can go on your health insurer’s website, pull down your own EOB’s explanation of benefit statements, and look at the past three years worth of what was out of pocket, what was deductible, so that you make sure you’re capturing what you’re truly out of pocket for your medical, your dental, therapy, all of it. So again, computing the cost of your life, it seems big, it seems impossible. If you feel like you haven’t paid all the bills, you can back into the bigger things that are missed, and as importantly, getting off your budget report things that shouldn’t be on there because they were one time only. The credibility of the documents you submit either to the other lawyer and your spouse or the court, it is all about how defensible and credible are the numbers that you’re putting forth.

So let’s talk about unpredictable expenses that you might not be thinking about or what we call the known unknowns. The first one here is easy, your true spending and lifestyle, like we just discussed from your credit card, thinking about medical insurance, requesting copies of his credit card so that you can see if you have an additional card, you will not be able to access his card to see what was spent on your behalf. What does that look like? Dining out, vacations, plane tickets, hotels. If you cannot get that documentation in a timely manner, you can have a conversation like this, sitting across from somebody and walking through what you do on an annual basis, on a monthly basis, how you travel, what are you giving in maybe teacher’s gifts and Christmas tips and things that you pay for in cash. You know more than you think you do.

You do have to include the periodic big ticket items. What does that look like? Well, if you do have to repaint your house once every five years, you take that expense and you divide it by 60 months over five years, not over 12 months. So while a divorce and your current cost of life doesn’t necessarily allow you to say, “Well, I want a Jaguar when this is over,” if you never had a Jaguar, it does necessitate you thinking through those healthcare expenses, the things that you’re not thinking of, what is household big maintenance or repairs that do happen every two or three or four or five years that have to be amortized and accounted for differently even if they didn’t happen over the last 12 months, right?

Look, as women, it’s a fact, the stats and the research are out there. We live longer, and while we may not spend the same as we get older, I probably won’t be buying high heels at 80 like I am now, but I may spend more on wellness. So you also can’t just automatically say things like, “Well, I won’t be spending that much in 20 years. I’m just going to cut my budget by 30%.” Our experience is that as we age, our spending often shifts to wellness and longevity.

So when we look at marital property versus separate property, we need to look at who actually has ownership of property coming into the marriage. So were these assets, were these either accounts, it could be retirement accounts, were those something that was only contributed to prior to the marriage or has there been contribution during the marriage? So really understanding what assets are separate property versus marital property is something that not everyone understands until they sit down and really look at it. It’s not just fifty fifty of what everyone has today. We have to look at what came into the marriage, what was created during the marriage, and how those different properties are put as marital or separate property.

Another thing that’s often overlooked is inheritances and gifts. If during the marriage, if you inherit something and keep it in a separate account in just your name or a gift that’s given to you, say a piano that was your mother’s, those can and should maintain separate property. The issue is the next bullet point, co-mingled accounts.

So if you’re looking at the divorce right now and assets may be coming in, really take time to make sure that you don’t take any gifts or inheritances and put them into an account that have both of your names on it. Once that happens, those assets have become co-mingled and they become marital property. But if we can keep those separate in accounts that are just in your name, things that come in as gifts, inheritances, and also assets prior to the marriage, as long as you don’t move those into commingled accounts that are in both names, those can maintain that separate property naming.

This is a tricky one, and most marriages don’t start with you thinking about what you have to keep track of, how it moves, where it’s titled, where it went, how long it might’ve been commingled. Some states allow a short in and out and they’ll give a little bit of leeway for the duration of time, something. It’s called for convenience. If I had to move money into a joint account because it was convenient, as long as it’s short term, that can often be clawed back in. Again, state law dictates all of this, your attorney needs to advise you on it, but what if you’re on the other side of this? What if he’s making all of these separate property claims? And what if you’re feeling like a lot of women that we talk to that say, “I feel like I was born with a mine is ours gene and an ours is ours gene, and he seems to have been born with a mine is mine and ours is mine.”

The person that’s making the separate property claim, the person that’s saying, “I had 150,000 in my retirement account before we got married, I inherited that. That was mine. That was not given to both of us. That was a loan that my dad or my mom made a loan to me.” Well, it’s called burden of proof. The burden of proof is on the person claiming this is mine, I either acquired it during the marriage, I came into it with it before the marriage. And if there’s no prenup or postnup, but more importantly, a prenup here, saying what happens to the growth of that, that opens up a whole other can of worms. So this often feels unfair. It often feels blindsiding when a separate property claim is made like, “I cannot believe you were saying that when I shared the $100,000 inheritance I got, and now you’re telling me that that’s been in your own account.”

Here’s where we have to separate the emotional decision from what business has to be attended to. Well, he’s got to prove it. If you’re making the separate property claim, you have to prove it. This is known as a tracing. So if I can come up with the balance in my 401k account, the month before I got married or however as close to the date of the marriage as I can, I’ve got a pretty good shot of getting that back. I may or may not get the growth of that back, on it back, but I’ve got a pretty good shot of getting that back. If he’s claiming that the $500,000 that was used to buy your marital house was a loan from his parents or from anybody, come up with the promissory note. Show us that it was executed and show us that the check went from these people to you and went right in to buy the house. What if it then is in joint title?

So there’s layers and layers of tracing and documents that are needed to substantiate a separate property claim. In a contentious divorce where nobody’s going to give an inch, if you can’t prove it, you don’t get it. In a divorce where you might really be trying to do the right thing by each other and you know that absolutely you wouldn’t have been able to afford this house without a gift from his parents or vice versa, then a negotiation can happen outside of a courtroom where this document must be produced to prove it. It’s a concept known as where else could it have come from? Of course, my parents gave it to us. So tracing is important. Burden of proof is on the person saying it’s mine and your state law affects how property is characterized, commingling, transmuted, all these fancy words. Bottom line, it means somebody said that’s mine, you’ve got to prove it.

So retirement assets that we need to really think deeply about that may look equal on paper but may not be. When we look at the investment accounts, money in a 401k is actually pre-tax. So it’s not the same as money that’s in a regular brokerage account. They’re taxed at two different rates. So the pre-tax dollars are often coming to you with a tax bill attached. Understand that when we access those funds, when we sell those investments for cash, we’re going to pay normal income tax rates on anything that was in a 401k or an IRA. It has a much higher tax rate than we would pay on a normal brokerage account. Those are only taxed on the growth of those investments and those are taxed at capital gains rates which are much more favorable. So looking again, what’s on paper may look equal, but it might not be.

Also, looking at survivor benefits on pensions. If the QDRO doesn’t secure a survivor benefit, your share of the pension can stop when your ex dies, and most likely it does. In most cases, if you look at the actual wording of the documents for the plan sponsor, when your ex passes away, that pension no longer is provided to you.

Let’s talk about beneficiary designations for a moment. So if there’s a retirement account, if there’s a life insurance policy, just because the divorce decree says that you have to be the beneficiary on insurance because insurance was needed to maybe secure the income stream that you’re getting for child support and spousal support if he dies, well, you have to be sure that you are the named beneficiary. So very often we, as part of the divorce agreement, state that on an annual basis, the person covering the insurance on your behalf, providing the death benefit for an obligation or something that was agreed to in case they die, you have to be shown that you are in fact still the beneficiary. Sometimes you can ask to become owner of the policy. It doesn’t change that he’s the insured or the other person is insured, but you will get the notices as the owner if a premium wasn’t paid, if any change was made. So as the owner, it doesn’t do anything else to the policy.

Caveat here, if it’s not held in a trust, if it’s held outright, you can request as part of the divorce post-divorce to become the owner. So you make sure that that premium is paid every year and the beneficiary can’t be changed. You’re the owner.

If his name is still on your retirement account, then your divorce decree doesn’t dictate that he doesn’t get it. The form on direct beneficiary accounts usually overrules what your divorce agreement says. So whatever you’re supposed to be the beneficiary of, whatever he is not supposed to be the beneficiary of, you need to just take a pause and think, what do I need to do and when to make sure that I change beneficiaries when I’m allowed to? Laws dictate when you can and can’t make changes once a divorce is filed. Take a pause here. It’s why we title this retirement assets require special handling, insurance is part of this. Take the pause and say, what do I need to be thinking about?

Also, this QDRO, QDRO, it’s an acronym in divorces that split pensions and retirement accounts. It stands for Qualified Domestic Relations Order. So if there is a 401k or a pension and you’re not the employee, a QDRO expert has to grab the plan documents, submit the form to the plan administrator, which says this split is incident to a divorce, therefore it can go into a rollover account for you without taxes, a spousal rollover.

Well, often, often if you don’t get this QDRO paperwork before you sign your divorce agreement and make sure you’re paying the QDRO expert, the QDRO forms were signed simultaneously with the divorce agreement, this can be a chase for up to a year after. When the divorce is done, your lawyers are out of it. So you want to make sure any retirement or pension benefit that needs to be split to you after your divorce, that paperwork is executed, signed, the expert was paid simultaneously with your divorce agreement so you are not chasing or incurring legal fees down the road to make sure that that form is completed and sent to get your money. Also, you need to think about by the time a QDRO is started to the time you get your money can be months. Make sure you’re talking to your financial advisors and your lawyer about how do we deal with market fluctuation in between.

If you specify a dollar amount and the market goes up and that plan does a lot better, you’re only getting that dollar amount back. So often you can express this as a percentage, but this isn’t intended to be a QDRO class. It’s intended to be what are the things that we see in high net worth divorces that you may not realize you have to make decisions about? This is one of them. So when you see QDRO, you pause and you ask questions.

Let’s talk a little bit about your spouse owns the business or they work for somebody and there’s a bunch of executive deferred compensation that comes in stock, not cash salary or cash bonus that’s deferred. And what if your spouse owns a business? That’s known as a closely held business interest. So the value of the business depends on a lot of assumptions and valuation experts often get called in to value this. Sometimes we call it dueling experts. You’re going to have an expert that will understandably want it valued higher than maybe his expert does. What if you are in the boat where all of a sudden, mysteriously, the year before the divorce, the year of the divorce, there’s a claim that the business is failing, we’re not making any money, something turned.

Well, valuations typically don’t happen on one point in time. You look at the past, you look at a future trajectory, and this is what valuation experts do. And so when you are talking about how, if you are not in the business actively day-to-day and it’s his business, but there’s a marital share, you have to understand how this process plays out with valuations. The number one thing we see women get the most nervous about is what I just pointed out, that all of a sudden the business is worth nothing. It’s rarely just a point in time. You just need to make sure that you’re speaking with, through your attorney, the right valuation experts for the business and you’re getting a true picture of what that looks like, what the value could be, and sometimes it’s not automatically a 50/50 split. So definitely need special consideration, special conversations, and additional experts.

Stock options and restricted compensation often come post-divorce. Maybe the stock, this is restricted stock units, RSUs, stock options, deferred cash. If they were granted during the marriage, but vest down the road while they’re marital property, marital might not be 50/50 depending on your state law and how vesting after date of filing affects the distribution.

You also want to make sure that you are tracking what you’re owed. If the restricted stock is going to be given as part of his compensation every February and you are entitled to the next two years worth of a piece of that, you need to make sure that you are on top of making sure that you not only get it, but you got it with the right taxes withheld. If he is the employee, you cannot receive that compensation directly. That goes through him, his W-2, and then you have to be furnished with a document that shows the tax that was withheld so that you are sure you got the percentage you’re owed at the right tax bracket. That’s called a tax true-up, and it just needs to be on your radar screen that that’s how these are typically handled.

Deferred compensation, same thing. Anything that is paid after, but a portion of it might be considered marital, you just have to stay on top of it and track it. And we make a little calendar. We make sure 60 days before anybody’s owed a tranche of this, a deferred piece of that, that we request the right documentation, we make sure the tax true-up happened, and that you got your fair share. The same goes for bonuses and incentive plans. In general, any compensation, anything, and this includes running personal expenses maybe through a closely held business, things that you need to be aware of, things where decisions need to be made, but more important, slow it down and think about what needs to be asked and what decisions need to be made.

So we talked about credit. This is huge. Jeff, did you want to take this one away?

Yeah, actually, oftentimes after the divorce, if you’ve just come out of the divorce with several million dollars in assets, you would think you would be able to go into a bank and get a loan. That’s not the case. Oftentimes, those banks are going to look for earned income as their way of determining how much credit you can receive from that bank. So this is often a step that we need to really take time and think about also as we’re working through the divorce, making sure that we have the cash flow to maintain this lifestyle and understanding that we might not be able to just go out and get a conventional loan the way that we think we could.

And securing credit, what if you don’t have any credit in your own name? What if all of that credit was done in your ex’s name, if you were only a secondary cardholder on accounts? Do you really have the credit history that you think and the credit score that you think that you have? These are just immediate steps, and I know Michelle, you deal with this quite a bit.

Yeah, so important here. So you can grab your own credit report. First of all, everybody should check their credit score. Second of all, you need to have your lawyer request his credit report. Sometimes things show up in credit reports. We want to make sure all of that is attended to before you sign on the dotted line. And if you find out you are in the position that so many women are where, “Oh my gosh, I didn’t realize that I just have an additional card on his account. I need to establish credit history now.” You need to talk to your lawyer, say you’re applying for a new credit card, you need to be able to check the box that says married with the marital income, and then start using that credit card and making sure it’s paid every month so you can establish three, six, nine months worth of your own credit history.

We don’t want to make this look like it’s a surprise new credit card that you’re spending nefariously on. No, this is a, “I need my own credit. I just checked. This is not a card in my name. I don’t have a good credit score. I need to secure credit, so we need an agreement that I’m going to start using this card and instead of him paying my additional card, this now needs to pay my own card.”

If you are nearing the end of the divorce and this did not happen and it cannot happen, you are just going to have to call the credit card companies and see if you can even get a securitized credit line of even a thousand dollars or $2,500. I know it sounds ridiculous, but you have to do it. Use that card, pay it off quickly, and then let your credit score increase so that you can get a credit increase on the card. Very important and often, often overlooked. Another thing misunderstood, and Jeff, you’re going to take this away, is Social Security.

Yeah. People often think that as part of the divorce, they need to negotiate Social Security. If you have been married for at least 10 years, you’re going to be able to have a claim on Social Security either your full Social Security amount or half of your ex-spouse’s. And that 10-year rule, it can apply at no cost to your ex, and it can actually apply to multiple spouses. So if a person is married for 10 years and gets divorced, that first ex can claim Social Security based on his record. If he gets married and is married for another 10 years, gets divorced, that second spouse. So it’s not anything that’s at a cost or needs to be negotiated. We need to be over age 62 in order to claim Social Security on an ex, and then also we need to look at how we actually go about claiming that.

At that point, we need to reach out to either Social Security either via their website or you can call them directly. They’re going to look for your ex-spouse’s name. They’re going to want to know date of birth, and if you have it, Social Security number will help. But then we’re going to also look at when we were married. Once we do that, you’re going to be able to claim Social Security. It’s not something that we need to worry about negotiating.

So this next slide, if you want to walk through this, this is just a flow chart to show you, okay, is your ex-spouse still alive? Yes. Were you married for at least 10 years? Yes. Did you have another marriage that lasted more than 10 years? If no, we move the no, that brings us up to, did the divorce occur at least two years ago? Yes, it did. Are you married to someone else? No. So at this point, are you at least 62 years of age? Yes, you can now claim 50% of your ex-spouse’s primary insurance amount. You’ll see that listed as PIA. That’s the monthly amount that you’re given as part of your Social Security benefit. And another thing that’s misunderstood is when your ex passes, if you are taking 50% of their Social Security, you’re most likely now going to get 100% of their benefit.

Very misunderstood. And the key takeaway here is you can collect it without his permission. You just have to know how. We’re going to quickly touch on Medicare in that the most important point here is penalties can apply if you don’t enroll in a timely manner, right? Eligibility starts at age 65. This matters if you are older and COBRA ends, and now you need to enroll in Medicare and supplemental insurance. You need to know that it’s about a three month before and a three month after window, not about it is, a three month before and a three month after your birth month or initial enrollment period. Special enrollment periods might apply if you work past age 65.

Medicare premiums for higher earners are based on a tax return from two years ago, and there is something called an SSA 44 form where divorce is one of the life-changing events listed on that. So the takeaway from this slide is you got to enroll. There are choices and decisions that need to be made. Get on it early before penalties apply and sit down with qualified experts that can walk you through Medicare, what you should choose, and the things that apply to you that might be nuanced.

So let’s talk about COBRA and transitioning your healthcare from the marital policy now to your individual plan under COBRA. You have to do this within a finite time period after your divorce is official and signed by the court and the judge. It is your responsibility to make sure you get the COBRA package. This is not his responsibility, it is yours. So make sure that if you’re waiting for your attorney to say, “Oh, here’s your divorce decree. It was signed by the judge.” If it goes past a finite number of days, you could be in trouble for securing your own COBRA coverage from that policy. If it is a policy that is valuable to you and your doctors are on it, you have to stay on top of COBRA so that you can continue that coverage for three years at your monthly expense.

Another often overlooked part of the divorce is say we have maintenance and child support that’s set up that’s going to make sure that we’re able to maintain our lifestyle post-divorce. What happens when the ex passes away? If we don’t have life insurance connected as part of the divorce agreement to ensure that those obligations are covered in the event that your ex passes away, that’s something that really needs to be looked at. Again, slow down and make sure that we’re thinking about the what ifs, and one of those is what if your ex-spouse passes away and those support obligations are no longer covered? And as Michelle touched on earlier, we need to make sure that our beneficiary designations, for all of our accounts, that we’ve reviewed those and we have updated those. If in some point we’ve missed one and our ex is still covered as the beneficiary, it’s still going to follow the beneficiary designation of that particular contract.

Property and liability coverage, this sounds like how could that ever happen? And it regularly happens. You need to make sure if you are staying in the marital residence and you got your car in the divorce or valuables, that your coverage now matches your new life. You shouldn’t be covering his car insurance. You just need to do a property and casualty coverage review post-divorce to make sure what should be on the policy as yours is included and what should be removed is removed.

Very important, if your house is owned by your revocable trust and you do your estate planning post-divorce and you decide that your house is going to now be owned by your revocable trust, you need to make sure that the insurance company knows that so that the title of your insurance policy matches the title of the house so that any claims you might make cannot be denied for something that is as simple as making sure titles match and the insurance company is aware.

And of course, you can’t just make changes to things during a divorce. Every state is different, but most states have some form of you can’t do anything different without each other’s approval in writing through your lawyers hopefully. So just make sure that you’re not changing beneficiaries, changing insurance until it’s legally permitted.

One thing that comes up often in divorce is, especially if the children are younger and there’s 5, 10 years left of their expenses, make sure that words like reasonable, extraordinary and shared are better defined because if you are sharing in some of the children’s expenses, we don’t want the language to be either too restrictive or too broad where there can be an argument about what an intended expense to be covered would be. So who pays for travel soccer, the summer program, braces, the therapist, a semester abroad, right? If it isn’t named, plan on negotiating it later. So this is just to think about when you’re talking about the kids’ expenses, if you’re sharing in some of it, and even if you are not, what is named?

Also, be sure to discuss with your lawyer, especially if your children are younger, an annual cost of living adjustments. So a $5,000 a month payment now isn’t really worth 3,000 in a few years because of inflation that you are getting an annual step up in inflation. So it’s not a birthright that a cost of living adjustment is made on spousal and/or child support, but it’s a conversation you should be raising and asking to have a COLA be considered.

So some of these are review, making sure that we review our beneficiary assignments when permitted, making sure that we retitle accounts and property, could be the title to the car, could be how the home is titled, but then also investment accounts, bank accounts, making sure that we complete the required retirement plan orders. We talked about QDROs earlier, those Qualified Domestic Relations Orders, updating your insurance and emergency contacts. Is your ex still listed as your emergency contact with your employer, with your hospital? Making sure that we update all of those documents, make sure we establish an independent budget and a cash reserve. We’ll talk quite a bit about that in our program, The Wife2CFO. And also create a secure financial document file where you keep all of the important information about your financial life using all of those different steps to make sure that as we move forward, the property that remains yours is titled correctly, has the correct beneficiaries, and that you have your own budget moving forward.

Often women can lose the operations and the framework of how finances were dealt with in the marriage. If the husband had an assistant who did it, there was a family office that he had the primary connection to, so it’s time, if that is you, for your own new board of directors, and it obviously needs to include a divorce attorney, a certified divorce financial analyst, a therapist or a coach to get you through the emotional pieces of it and of course, family and friends are important, but sometimes the most well-meaning, and family and friends’ intentions are good, but it might not be the right divorce advice for you and your particulars because while every divorce is the same, every divorce is definitely different, and your particulars and your fact pattern are yours and yours alone.

So just be careful of listening to people that really don’t understand where you are in the process, what your financial situation is. Them getting this, them getting more of that may not necessarily apply to you and your individual fact pattern, so it’s important to keep your right team members and your board of directors in their proper spots. But it is important to be surrounded by and surround yourself with a lot of professional and emotional support during this process so you can get through it as whole as possible.

Absolutely. Yeah, you’re losing one team, but you’re building another.

So if you liked what you heard, and we hope you did, we’re so passionate about this, you are free to connect with us and schedule a complimentary consultation to discuss your own unique particulars. And after 30 years of women asking me what course can I take and what book I can read, it hit me, Wife2CFO is that course. We have launched our eight-week course that is on demand, on your terms, online, and you can learn more about it at wife2cfo.com. And it is sessions that map all the important things we talked about today, like your financial baseline, what are hidden risks, where’s my decoder ring for all of this jargon? What is the timing and the impact of all these decisions I have to make? So we’d love to have you be part of the community and you can learn more at Wife2CFO. We do have a couple of questions that… I’ll take the first one.

Okay.

So this is a common one, and I’m glad it came up and we addressed it during this webinar, but somebody asked that, “I never touched the money. He always handled the finances. I honestly don’t know what we have. I don’t even need to start… I don’t know where to start, and is it too late?” And so it’s not too late, and you’re not behind. This is common. You’re in really good company. Maybe you’ve been running the household, the CEO of the household. You managed the entire family. Now we just have to add the financial side. So hopefully you heard a few of the things today. You can back into the cost of your life. You can look at your credit. We can. You can even request if you sign a joint tax return and you don’t have the relationship with the accountant and you’re nervous to send an email or make a call because it would raise a red flag. You can order your transcripts directly from the IRS for a fee on irs.gov.

So you may not have dealt with it, but there are ways to get the information now. It is not too late. It’s always a good time to start and you can be backed into more things than you’re aware of. You know more than you think you do, and you have access to more than you think you can access.

The next question is, “Our settlement is a 50/50 split already. That is on the table. Why isn’t that fair? And why would I need anything beyond my lawyer for that?”

I could take that one if you want, Michelle. That’s a great question. And 50/50 can often describe the paperwork in the divorce, but fair really depends on what each half is made of. So as we discussed earlier, two $500,000 accounts could have very different taxation. Two properties could have very different growth potential. Two properties can have very different income driving potential. And cash flow needs can be completely different. So 50/50, again, can look real great on the paperwork, but it really depends on what’s inside of each half that makes it fair.

Really great answer. And the last question I see is, “Should I keep the house?” Whoa. So I don’t know you, but it’s a question we get all the time. And it again comes down to where is the decision coming from? The decision is allowed to be emotional. It shouldn’t just be a default, sell it or keep it. And like we discussed earlier, if you can build a little time into deferring the decision to keep it or sell it, that is always a great option because it is a highly emotional asset for arguably really good reasons, including children and memories. And so should I keep the house depends on all of the factors we discussed and most important, can you buy yourself a little time to make the decision? So it’s been a pleasure speaking with you today, and we would love to welcome you to learn more about our Wife2CFO platform. And thank you, Jeff, for co-hosting with me.

Thank you, Michelle. This has been great. Appreciate it.

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