Harold and Sue Ann Hamm Divorce For $18 Billion – Business Insider

This could be America’s largest ever divorce settlement. The article attached reports that Mr. Hamm may be forced to sell his stake in Continental Resources in order to pay for the settlement to Ms. Hamm. While this is certainly a possibility I seriously doubt there is a real likelihood Mr. Hamm would have to sell his entire stake. In the perfect world the couple would have resolved their differences outside of court and been able to fashion a financial settlement that did not put Continental Resources in jeopardy.

With an estate of this size the couple could have found a much more economically sound, private and effective way of coming to an agreement outside of the court system which by design has limits to the types of orders they can fashion.

Harold and Sue Ann Hamm Divorce For $18 Billion – Business Insider.


Negotiating Against Yourself in Divorce

We are starting to notice a few Divorce Financial Planning trends in 2013 and will write about a couple over the next few weeks.

The first trend is what we call Negotiating Against Yourself. Negotiating Against Yourself in a divorce financial settlement happens when one party makes all the offers for settlement.

Assume a Husband makes an offer for a financial settlement in a divorce. Wife has four options. 1) Respond yes and accept the offer 2) Respond no and decline the offer 3) Respond with a counter offer 4) Don’t respond at all.

Each of the options can be a negotiation tactic. Negotiating Against Yourself is a common result and often the desired result for the negotiator who chooses option 4. The recipient of a settlement offer, the Wife in this case, may choose not to respond hoping the other party will grow tired of waiting and make another offer.

Most people in the Husband’s shoes in this example will grow restless, assume their original offer was simply not good enough and make another.

Making two offers before the opposing party in your negotiation makes their first is Negotiating Against Yourself. The Husband in this case must make progressively better offers in order to garner his wife’s response. As offers get better for her they get worse for him.

Divorce Financial Planning: Concentrated Stock Holdings During Divorce

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Your Investments

We have many clients with significant wealth tied up in the stock of their employers. During Divorce Financial Planning it may become necessary to create liquidity to pay fees, facilitate an equalization payment or create diversification where there previously was none.

These stock holdings are through vehicles such as Employee Stock Purchase Plans, Stock Options and Restricted Stock. They may be vested, unvested or co-mingled, meaning they have different liquidity constraints. Each vehicle also has a different tax consequence at sale. Here is a quick review of some Divorce Financial Planning considerations to consider when seeking liquidity and diversification during during divorce proceedings.

Stock Holdings

For stock held outright we look at tax basis for guidance in our divorce financial planning. Shares with a low tax basis can be sold today to lock in tax rates and later repurchased if the client wishes to continue to hold the stock.

Restricted Stock

Restricted stock generally releases or distributes into a common brokerage account at vesting so it would be treated as normal stock holdings with divorce financial planning decisions based upon review of tax basis. The tax basis is based upon the stock price on the day of vesting and distribution.

Employee Stock Purchase Plans

Stock held in an Employee Stock Purchase plan has a complicated tax picture. The discount, typically 15%, given to the employee on the initial purchase price is taxed at ordinary income tax rates. The difference between the fair market value at purchase and the fair market value at sale is taxable at capital gains rates. ESPP assets often have low tax basis because employees buy and hold the stock  so this may be the first place to look for harvesting gains and resetting basis during your divorce financial planning.

Stock Options

Non-Qualified stock options carry a more complicated set of tax implications and divorce financial planning considerations. Options are taxed as ordinary income for the difference between the strike price and the price at exercise. Options can be exercised today in a same day exercise and sale transaction to lock in tax rates. If you wished to hold the stock you could still exercise the options and lock in the ordinary income tax rates for 2012 but you would have to come up with cash from another source to fund the option exercise. Stock options also become a complicated logistics issue post divorce as the non-employee spouse may not be able to hold the options. For this reason alone it is worth considering liquidation during your divorce financial planning.

Wellspring Divorce Advisors builds long term distribution schedules and detailed analysis of current versus future values including opportunity cost and present value of money to help clients decide how to manage concentrated stock positions during and immediately after divorce proceedings.


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Wellspring Divorce Advisors helps individuals and couples address the financial aspects of divorce in a civilized, equitable, and efficient manner by providing expert divorce financial planning and advice.

Contact us to find out how we can help you through this process.







Financial Crisis Still Causing Complications in Finances of Divorce

Four years later we are still encountering financial complications of our 2008-2009 financial crisis in divorce proceedings. Many bank and brokerage companies were forced to merge during the crisis. Morgan Stanley merged with Smith Barney. Bank of America merged with Merrill Lynch. Wells Fargo took over Wachovia and Lehman Brothers went out of business.  On top of the logistical problems; many people lost a lot of money. Here are three complications to watch out for.

1. During mergers many firms changed client account numbers. I have seen more than one occasion where a Marital Settlement Agreement was written with two different account numbers for the same account. Even worse, the two different account numbers might be treated differently. One awarded as separate property and the other to be divided.

2. During the crisis itself many investors lost large sums of money in their investment accounts. The S&P 500 lost 56% during the crisis and I have seen some situations where clients lost money then sold the assets locking in the losses. Now the spouse with no involvement in the investment management is wondering where all the money went. They may even be considering the possibility that they spouse responsible for managing the investments could have taken the funds and hidden them elsewhere in preparation for the divorce.

3. Some brokerage companies and banks did go out of business. It makes it difficult to track down account statements and verify funds when the custodian of the account no longer exists or has been consumed by another institution.

I suspect the effects of the Financial Crisis will continue to complicate the financial negotiations of divorces for a few more years maybe longer in situations where separate property claims must be traced back to 2008 and earlier.

We can help you and your attorney piece together the information that is available and make intelligent decisions about building your financial case.



Post-Election Income Tax Planning for Divorce and Beyond

We now have a bit more clarity about the future income tax landscape in the United States and the State of California specifically.

Here is what I know.

In 2013 the 0.9% Medicare surtax kicks in on taxable income over $200K for single filers and $250K for married filers.

In 2013 the 3.9% Medicare tax on unearned income such as dividends, interest and capital gains kicks in for single filers with taxable income over $200K for single filers and $250K for married filers.

President Obama wants the top rate on capital gains to rise to 20% for single filers with taxable income over $200K for single filers and $250K for married filers. He also wants the top tax rate to go higher from it’s current 35%.

What does this mean to you? It may be a good idea to sell appreciated assets in 2012. Taking gains in these assets in 2012 could save you the 0.9% Medicare surtax, the 3.9% Medicare tax on unearned income and 5% or more from the increase in capital gains tax rates.

For divorcing parties this might mean selling some appreciated assets such as stock positions or real estate in order to lock in the 15% capital gains rate and avoid the 3.9% additional Medicare tax rather than retaining them post divorce. It might mean exercising non-qualified stock options in 2012 to lock in the maximum 35% income tax bracket and avoid the additional 0.9% Medicare surtax.

California passed Proposition 30. Proposition 30 raises taxes on EVERYONE.

  • The income tax increases are RETROACTIVE to January 1st 2012
  • Sales tax rates  are increased by 3.45%
  • Three new high-income tax brackets are created raising rates from 9.3% to 10.3% for taxable income over $250K but below $300K (10.6% increase), from 9.3% to 11.3% for taxable income over $300K but below $500K (21.5% increase), from 9.3% to 12.3% for taxable income over $500K but below $1,000,000 (32.26% increase), and from 10.3% to 13.3% on taxable income over $1,000,000 (29.13% increase).

There is nothing to do about Proposition 30 at this point since the changes are all RETROACTIVE. It has amazed me how many people did not realize the measure was retroactive.