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Divorce- Stay or Go, What You Must Know.  Thumbnail

Divorce- Stay or Go, What You Must Know.

It is often said that “half of marriages end in divorce.”  The truth is that divorce rates have declined over the last ten years (1).  Whether you choose to stay married or divorce, the amount of couples getting divorced is still staggering and it can happen to any of us.  Divorce is far reaching, often affecting more than just the two people involved and their possessions.  Family, friendships, children, businesses, real estate, income, assets, and retirement are a few things on that very long list. 

So how do you navigate the choppy waters of divorce?  How do you make good, educated and unemotional decisions in an incredibly emotional environment?  Here are 4 areas to consider when going through a divorce:

Division of Assets – Any assets you owned during the marriage will be split “equitably” between the spouses.  “Equitably” is a discretionary term to be decided by the court based on the specific variables of the two involved. However, typically the courts look to make 50/50 splits of any marital assets.  

When it comes to pre-tax investments, 401Ks and IRAs, you will need a separate document called a Qualified Domestic Relations Order or “QDRO” (pronounced “quad-row”).  The purpose of a QDRO is to split these retirement assets and avoid a taxable event properly.  One spouse will be awarded an amount which is specifically outlined in the document.  The QDRO itself does not execute the transfer, but outlines how much and to whom money is being transferred.  If you don’t process the transfer outlined in the QDRO in a timely manner, any growth experienced in the account also does not transfer over, you are limited to what is expressed in the court document.  So significant delays could cost you. 

Division of Debts – Like “Division of Assets”, debts created during the marriage will be split “equitably” among the two individuals involved.

Children – If children are involved, there are several areas the courts will decide on, including custody and child support.  With regards to custody, this is broken down into two categories: physical and legal.  Physical is the decision on where and when the children will reside with each parent. Legal refers to who is making decisions for the children and when.  Child support refers to the exchange of monies to cover the costs of the children.  There is a software program that inputs data like custody time, income and other support obligations that will rate each person on a scale of 1-10, which will then provide a “recommendation” for the amount of support to be paid.

Spousal Support (Alimony) – Like child support, alimony is calculated on a software program that includes things like income, ability to earn income, education, age and duration of the marriage to name a few.  This will produce a rating on a scale of 1-10 which will produce a “recommendation” for the amount of alimony, if any, to be paid.

It is crucial that you surround yourself with professionals that can educate and guide you through this process.  When it comes to your assets, it is important to understand your options, even before you step foot in the courts.  With the amount of discretion the courts have in making these decisions for you and your family, being empowered with the knowledge of what to expect and the options you have is paramount to the results.

Most people who have experienced divorce rarely receive advice outside of an attorney who is going to only advise on the things under the law and what the divorce decree stipulates.  When it comes to finances, it is important to understand how these things will affect you prior to the decisions being made.  The proper process of dividing those assets and its effect on your short-term and long-term plans are rarely ever discussed during the legal process of divorce.

The terms we come up with to describe divorce do not change the fact that it is messy and it will dramatically alter the trajectory of the lives of the people who are directly involved.  If you decide to “consciously uncouple” make sure you are extremely conscious of your options, decisions and the people you have in your corner advising you.  It will mean the difference between your expectations and reality.   

Written by: Justin Meyer

(1) https://www.census.gov/library/visualizations/interactive/marriage-divorce-rates-by-state-2011-2021.html

This commentary on this website reflects the personal opinions, viewpoints and analyses of the Financial Strategies Group, Inc employees providing such comments, and should not be regarded as a description of advisory services provided by Financial Strategies Group, Inc or performance returns of any Financial Strategies Group, Inc Investments client. The views reflected in the commentary are subject to change at any time without notice. Nothing on this website constitutes investment advice, performance data or any recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. Financial Strategies Group, Inc manages its clients’ accounts using a variety of investment techniques and strategies, which are not necessarily discussed in the commentary. Investments in securities involve the risk of loss. Past performance is no guarantee of future results.

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