Tag Archive for: Wellspring Divorce Advisors

Divorce Costs how much?

February 26, 2016/in Divorce Financial Planning, General, Lists Worth Knowing /by Justin Reckers

It depends on the situation; for example, if you have substantial or complicated assets your divorce cost may be higher. If you own a small business and take liberties with deducting your personal expenses as business expenses on your taxes your divorce cost will be higher. If you or your spouse have significant separate property claims your divorce cost will be higher. If you cannot have productive and respectful discussions with your spouse your divorce cost will be higher. In our experience the most expensive divorces are fought by two parties who HATE each other for one reason or another. Sadly the legal system is structured in a way leaving these two hateful individuals more angry at the end of the process than they were at the outset. It also depends on the attorney’s hourly rate and if he or she is inclined to encourage a settlement. Hiring the most expensive attorney in town known for being a shark will increase you divorce cost.

Wellspring Divorce Advisors coaches clients to think of their potential divorce cost as a continuum from highest to lowest rather than absolute dollar terms. Click here for a brief overview of your main options from proceeding or call us for an overview and consultation to help you choose. Our experience has shown the engagement with Wellspring Divorce Advisors will reduce your overall cost significantly.

Ranked below are your process options ranked highest to lowest in cost. We have seen litigation cases cost millions of dollars in fees and mediation cases with equivalent amounts of assets done for $15,000.

Litigation
Adversarial with Settlement
Collaborative Divorce
Mediation
Pro-Per

Caveat: A failed mediation can easily land you in a litigation model and cost even more. Make sure you understand mediation before opting in. The model is often misunderstood and full of less than reputable professionals.

What is financial discovery during divorce?

October 29, 2015/in Divorce Financial Planning, General, High Net Worth Divorce /by Justin Reckers

Financial discovery is the fact finding/document gathering part of the divorce process. Financial discovery can be time consuming and may be the most expensive part of a divorce process for a wealthy family. Financial discovery will most likely happen over time. The amount of time depends on whether or not the parties are being cooperative. It is a process, not an event, and requires ongoing document requests until all necessary information is gathered.

For the most part, discovery takes place outside the courtroom, with parties exchanging written information and sitting through face-to-face questioning sessions (called “depositions”). However, if the parties can’t agree on what should be handed over in discovery, a judge may have to resolve the dispute.

The kind of information that a party can force someone else to reveal — is generally very broad, though there are some limits. A party may ask for facts about the case, for the identity of others who may know something about the case, for documents relating to the case, and for inspection of physical objects or property connected to the dispute. Discovery can be used to seek information not only from the other party, but also from people and businesses that aren’t involved in the legal proceedings.

There are four types of formal tools that are frequently used in financial discovery during divorce. They are:

In a deposition, one party or that party’s lawyer conducts face-to-face questioning of the other party or a witness to the dispute. The person being questioned (the “deponent”) must answer under oath, and the answers are recorded for later use at trial. If the deponent cannot testify at trial, the questions and answers might be read to the jury as evidence. If the deponent does testify and gives different answers at trial from those he gave during the deposition, the questions and answers can be used to show the jury that the witness changed his story.
Requests for production of evidence.In a request for production of evidence, one party asks the other for physical evidence related to the dispute. Requests for production are usually used to gather pertinent documents, such as contracts, employment files, billing records, or documents related to real estate. However, these requests can also be used to inspect physical objects or property — for example, in a dispute about whether a contractor properly repaired a homeowner’s roof, the contractor’s lawyer might ask to have a roofing expert inspect the work.
Interrogatories are written questions one party sends to the other to be answered under oath. The answers can be used at trial in the same way as deposition answers — to challenge a party who changes her story later.
Requests for admission.In a request for admission, one party asks the other party to admit, under oath, that certain facts are true or certain documents are genuine. These requests are generally used to save time and to narrow the issues that have to be proved at trial.

We work with our clients to identify and collect the financial data pertinent to the divorce. From the original data gathering we evaluate any key financial concerns related to divorce – such as income and deductions, living expenses, assets, and liabilities. This process will likely tip us to other information we will need to request.

Wellspring Advisors work with the attorney to compile complete and comprehensive document requests, interrogatories and depositions to insure no stone goes unturned and the right questions are asked to help level the playing field. Good financial discovery will give you the peace of mind that no assets were hidden. Knowledge is power in the financial negotiations of divorce and formal discovery may be the only way to gain the knowledge you need.

10 Questions to Ask a Potential Financial Advisor After Divorce

September 2, 2015/in Divorce Financial Planning, High Net Worth Divorce, Post Divorce Financial Planning /by Justin Reckers

What do you do now? Your divorce is finalized and the financial settlement is clear(ish). How do you take control of your new found financial independence? The first item on our Post Divorce Financial Checklist is “Interview and retain the services of a financial planner.” You may have never done so in your married life so here are the most important questions to ask when looking for a new financial advisor after divorce.

What CREDENTIALS do you have? CFP (CERTIFIED FINANCIAL PLANNER), CPA (Certified Public Accountant), CFA (Chartered Financial Analyst) are the most rigorous to obtain but there are hundreds of alphabet soup credentials available in the financial advice world. Some represent specific specialties like the CDFA (Certified Divorce Financial Analyst) designation while some, such as the AIF (Accredited Investment Fiduciary) merely represent the advisors commitment to acting as a fiduciary in client relationships. Keep two things in mind,
- simply having professional designations does not necessarily make a good advisor
- licenses are not credentials, most all advisors will have Series 7, 24, 51, 63, 65, 66 and insurance licenses
Are you a FIDUCIARY? Your advisor should act as a Fiduciary for clients meaning, in simple terms, they would never do something with your money they would not do with their own and they will always put your interests ahead of their own. Here is the Wikipedia definition of Fiduciary.
- Do you have any disciplinary records? Check out the Securities Exchange Commission website to check up on them just in case.
- How are my assets safeguarded?
How often will we meet and what will we talk about? Your advisor should be proactive in communicating with you and scheduling meetings to review financial planning goals and investment performance. They should also have a structured process for providing their services. A typical financial planning relationship has the following steps at minimum. You will notice WellSpring Divorce Advisors follows this same process.
- Establishing and defining the client planner relationship
- Gathering client data
- Analyzing and evaluating the client’s financial status
- Developing and presenting the financial planning recommendations
- Implementing the financial planning recommendations
- Monitoring
How long have you worked at the current firm? Where were you previously? Why did you leave? Advisors move from firm to firm on a pretty regular basis for a number of reasons. Some for altruistic reasons seeking to provide better client service, others move for a pay-day. An advisor who leaves Wells Fargo and moves to Merrill Lynch as an example could be paid millions of dollars for doing so. If you check the background of an advisor and they move every 5 to 10 years they are likely chasing the pay day each time. Be wary of them as they will probably do it again.
HOW DO YOU GET PAID for investments you recommend and other services you provide? The financial advisory world is full of complicated compensation structures. An advisor could be paid commissions by their employer as well as outside entities such as insurance companies and mutual funds for selling you a product. In general you should avoid any advisor who accepts commissions for investment decisions. Look for an advisor who charges a percentage of the assets they manage for you. Industry standard these days is around 1%.
What SERVICES do you offer outside of investment management? Do you provide financial planning services? If so, what does this include? Paying 1% a year from your portfolio for just investment advice is an old and antiquated service platform. Your advisor should offer Comprehensive Wealth Management services which include financial planning assistance with cash flow management, retirement planning, estate planning, tax planning and dependent care planning. if you need an investment advisor you also need financial planning. Most of our clients at Wellspring Divorce Advisors need a financial planner more than an investment advisor.
Can I speak to a client of yours about their experience working with you? Speaking to a current client about the prospective advisor is absolutely mandatory. Feel free to ask them some of these questions as well.
What happens to my account if something happens to you? Do you have a SUCCESSION PLAN? Advisors are notoriously bad at succession planning for their own businesses. A good succession plan takes proactive steps to protect clients and their money if an important decision maker and advisor becomes ill, dies or simply retires. Your advisor should be able to tell you what happens in the case of each event. It may be a current business partner would step in, a younger advisor is being mentored to step in, an entire new firm would take over or the worst case, they have no plan at all. Do not work with an advisor who has no succession plans as you leave your financial security up to chance if something should happen to them.
Who is your IDEAL CLIENT? Most advisors will struggle to explain their ideal client outside of telling you the minimum assets they require to work with you. It is important to understadn this ideal client make up because it can inform you how likely the advisor is to be able to handle your individual needs. If you are a newly divorced woman who has never managed her own money; the advisor specializing in executives at tech companies is not your best bet. Wellspring Divorce Advisors recommends you find an advisor who specializes in working with individuals after divorce. You have very specific needs from a financial planning perspective and need an advisor who will educate you along the way.
What is your INVESTMENT PHILOSOPHY, in simple terms? How frequently will my portfolio change and who makes decisions as to when and how to change it? You will be surprised how many advisors don’t actually manage the investment themselves. They outsource the responsibility to others. There is nothing wrong with this. Your advisors job is to work with you to meet your financial goals, manage your lifestyle and help you make financial decisions. Outsourcing investment management allows the advisor to concentrate on you the client. BUT, if they cant explain how the portfolio is managed, why it is managed that way and who is ultimately responsible for decision making they are doing more than outsourcing, they are abrogating their fiduciary responsibility to you. They still need to oversee the outside investment managers and make strategic decisions about risk profile.

Let us know if you need a referral to a competent and credentialed Advisor who specializes in working with individuals after divorce. We know all the best nationwide.

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.

Divorce Financial Planning: Concentrated Stock Holdings During Divorce

January 2, 2013/in Divorce Financial Planning, High Net Worth Divorce /by Justin Reckers

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.