4 Things to Do BEFORE You Divorce

before you divorce

If you’re reading this, then obviously you’re thinking about ending your marriage. Before you initiate your divorce, I’m going to ask you to take a few steps to ensure the best outcome for you should you decide to move forward. This is not a decision to be taken lightly and a little preparation can go a long way.

The reality for lots of couples that have invested in each other for many years is that if you’re going to end the relationship, you now have to stop thinking emotionally and start thinking financially.

#1 Evaluate What You Really Know About Your Finances

If your answer is anything but “Oh, I handle all our finances, I know exactly where we are,” then you have work to do. If you have been out of touch with your family finances for more than five years, don’t even try to get caught up. Get yourself to a CDFA® (Certified Divorce Financial Analyst) ASAP! You can find one in your area by going to the Institute for Divorce Financial Analysts. Do this BEFORE you tell your spouse you want a divorce. Your CDFA® will help you do a little digging to get some information before the information mysteriously disappears. They’ll also help you see what your financial life after divorce might look like.

#2 Gather Documents Before your Divorce Starts

This is the one thing you can do to save yourself a ton of money in the divorce process. Anything you can gather before you meet with either an attorney, a mediator, or a CDFA® will reduce the amount you ultimately have to spend out-of-pocket. Here a quick list of must-have documents.

  • 3 years of tax returns
  • 6 months of bank statements on all accounts
  • 6 months of statements on each of your marital and separate investment accounts including 401k, deferred
  • compensation, ESPP, ESOP, 403b, 529, IRA, etc. If you are baffled by those different account types or you’re not
  • even sure if your spouse has a retirement plan, get to a CDFA® now!
  • Most recent 4 paystubs
  • Most recent mortgage statement on any properties owned
  • Copies of all insurance policies and annuities (the policies themselves as well as statements)
  • VIN numbers and mileage on vehicles owned
  • Most recent statements on debts, credit cards, car loans, etc.
  • Details of any business interests, e.g. S Corps, LLC’s, and partnerships

#3 Get Organized

Once you’ve gathered all the data, find a way to keep it all organized. Some people create a 3-ring binder with tables for each section, others put all their documents in a protected electronic environment like Dropbox, iCloud, or Google Drive. This is best when you need quick and easy access in a mobile format. Again, this will save you a lot of money down the road.

#4 Research Alternative Divorce Processes

There are several ways to get a divorce, each with its own pros and cons. Which method you choose will be largely dictated by the relationship between you and your spouse. If you are afraid for your or your children’s safety for any reason at all of it your spouse is denying you access to enough cash to survive, get a lawyer.

If you believe you and your spouse will be able to rationally discuss and negotiate the details of your divorce and be fair and honest, you might consider a do-it-yourself divorce or use an internet service to guide you. Beware: just because you and your spouse are getting along today doesn’t mean it will always be this way.

Your county’s divorce website will most likely give you an overview of the process and forms you’ll need if you going the DIY approach. There are lots of cheap internet services, too, that can produce divorce forms for your jurisdiction, but not all counties accept their forms as-is. These cheaper alternatives may seem attractive upfront but the money it may take to correct any mistakes you make along the way could cost you thousands of dollars.

If your financial situation is a bit more complex, e.g., there’s a pension involved or one party is self-employed, or the idea
of DIY frightens you, then you should consider using a CDFA® as a financial neutral as part of a collaborative team
or as a mediator to help you craft a fair settlement. Your CDFA® may also be able to get your legal documents
prepared for you, too. When couples go this route, they are more likely to remain friends—it’s a respectful, honest way
to go through the process and saves both parties significant money by not having to pay expensive lawyers.

As a last resort, if one or both parties can’t manage to cooperate at any level and seem determined to go to war, then hiring attorneys may be your only option. Unfortunately, you’ll need to say goodbye to about $15,000 per spouse, at a minimum. A little preparation before you move forward with a divorce can go a long way towards reducing the cost of your divorce and creating a fair settlement. Wishing you a gentle divorce and a bright future!

The divorce process can be scary and overwhelming. Starting with a plan and professionals that you trust to guide you through the process can be key in making sure you’re ready for your future. If you’re thinking about divorce schedule your complimentary divorce strategy session where we’ll explore your options and connect you with any resources you might need.

Divorce: How to Keep Your Money

As soon as you begin to contemplate divorce, the nauseating, panic-attack-inducing realization of losing half of your net worth kicks in. You find yourself wondering if it’s even worth it to consider leaving if you’re just going to end up broke and starving.

There are ways to ensure that your financial future is not destined for disaster. First and foremost, be sure you involve a Certified Divorce Financial Analyst (CDFA®) or CDFA®-Mediator so that you will be fully informed of all the creative settlement possibilities that may be open to you. They are your best bet when you want to keep your money safe.

A couple married 24 years were referred together to a colleague for assistance with their divorce. They had gone to an attorney together and were completely amicable. The attorney made it clear that he could only do their document preparation since he was ethically bound to represent only one party. That was ok, but they asked how they would determine their property division. He responded,

“This is a community property state so we’ll just divide each asset and each debt exactly 50/50.”

The couple just didn’t feel like that was the smart thing to do. They were referred to the CDFA® to explore options.

After gathering all of their financial documents and completing the analysis, the CDFA® put together two reports for the clients. The first reflected an exact 50/50 split as the attorney had suggested. The second was a creative settlement solution that also resulted in a net 50/50 split but took into consideration tax planning and consequences as well as the needs of each party as they planned for the next phase of their lives.

This couple had less than $800k in total net worth and the creative settlement solution resulted in an additional $20,000 EACH to their bottom line just because some financial intelligence was used to determine their settlement. That’s real money! That’s how you keep your money! Needless to say, the couple was thrilled knowing that they saved $40,000!

Don’t go into this blind. There are so many ways to ensure that both of you get to keep more of your own money. Get the right experts on your team. We’d love to help you! Call us today.

Do You Really Need a QDRO?

You’re in the last steps of your divorce, you can see the light at the end of the tunnel and you’ve reached a settlement agreement with your spouse. Then your mediator or attorney turns to you and says, “Now we just need your QDRO, and that’s going to be an additional fee.” “Wait, why? What is a QDRO, and do I absolutely need it?”

The QDRO is the final step in your divorce, one you can’t skip because most divorces will ultimately involve a QDRO. QDRO is an acronym for a legal document called a Qualified Domestic Relations Order and is required whenever a divorcing couple needs to divide a Qualified Retirement Account.

A Qualified Plan is usually one being held by an employer and includes 401(k) plans, 403(b) plans, pensions, 457 plans, deferred compensation plans, and some RSU, restricted stock unit accounts.

IRAs or, Individual Retirement Accounts do not require a QDRO. However you can use a QDRO to avoid withdrawal penalties, even with an IRA, during a divorce. Legally, the divorce decree is all you need for an IRA division. For a Qualified Retirement Account however, to assign all or a portion of the accounts to a non-employee spouse, it has to be stated in the divorce decree and the QDRO, must be completed and submitted to the plan for the division to take place.

If you are granted retirement assets from a former spouse via QDRO, this is the only opportunity to take money out of that plan with zero penalties. It will be taxable income and there will be no 10% penalty for the withdrawal before age 59 ½. If you want to be able to do this from an IRA, then you must use a QDRO.
In my practice, I facilitate the preparation of QDROs for my clients by acting as their representative to a QDRO attorney that I have vetted and found to be the most affordable and ethical. Through this practice I have become aware of the multitudes of pitfalls that QDROs present and often, the failure of attorneys and mediators to address the issues in the settlement negotiations. Here is just a short list of some of the subtleties often overlooked.

    • Is the non-employee spouse eligible to receive a lump sum settlement upon retirement?
    • If the employee spouse dies, will the non-employee spouse still receive benefits?
    • Were any outstanding loan balances taken into consideration?
    • If splitting a 401(k), what is the actual date of division? Will the earnings after that date be included?
    • For Pensions, does the plan set up a separate account for the non-employee spouse so they can choose their own payout options and beneficiaries? If not, have you protected the non-employee spouse from early-retirement penalties?

As you can see, the waters of a QDRO are fraught with peril and not for the inexperienced! If that wasn’t bad enough, prices for QDROs can range from $500 to $3,000, all for the exact same document. Each plan is unique and has very specific requirements for the language of their QDROs and it is essential that the preparer have the plan documents in advance to ensure it will meet the requirements. You want to ensure that the QDRO will be PRE-APPROVED by the plan if allowed to prevent rejection and more cost to re-do it correctly.

Once your decree is final, signed by the Judge, then you submit the finished QDRO to the Judge as well. Once it is signed, then and only then is it ready to submit to the plan. At that point, they will contact the non-employee spouse to get instructions for the disbursement or to identify the new account set up on their behalf.
QDROs are complicated. Be sure you have an expert that can guide you through it and make sure you don’t get taken advantage of. It just isn’t necessary to go through more pain and frustration.

If you need an affordable, accurate QDRO, contact us today. We’re here to help.


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Three Ways to Keep Divorce from Wrecking Your Retirement

While retirement might not be in the forefront of your mind during a divorce, it’s something that needs to be considered, especially if your facing a “gray divorce.” Divorce can have a profound impact on your retirement savings and financial future. Depending on the circumstances of your split, you may see your retirement prospects change dramatically.

So, how do you keep a divorce from wrecking your retirement? TruNorth Divorce has put together a list of three things to best protect your retirement.

1. Work with the right divorce professional

Work with a Certified Divorce Financial Analyst (CDFA®) or a CDFA®-Mediator. CDFA®’s are experts at divorce finance and know how to preserve your retirement. They understand how taxes work with various kinds of assets and how to value a pension. They can predict the tax consequences of transfers between spouses, and help to ensure your retirement moneys will be properly transferred between spouses.

Lawyers do not have this expertise! At TruNorth Divorce our mediators and advocates are not just expert mediators, they are also CDFA’s and trained divorce coaches. The law is typically a non-issue in most divorces—most divorces don’t need to be processed through the legal system. Your settlement agreement, custody agreement, and divorce filings will always be legally compliant and the quality of your divorce far better when you work with TruNorth Divorce than if you work with an attorney alone.

2. Consider the tax implications of your settlement agreement

Not all assets are treated the same by the IRS. Equity in a house isn’t taxed up to $250,000 per spouse (assuming there are no other prior real estate rollovers pre-1997). Withdrawals from an IRA are taxed at your marginal tax rate. Big difference. Likewise, joint funds in brokerage accounts can be subject to capital gains taxes.

Also, the division of retirement account assets during a divorce, specifically, can have unique tax implications and governing regulations. It’s important to look at the particulars of each account and determine its actual after-tax value. A Roth IRA with $50,000 sitting in it is worth more than a 401(k) with the same amount of money. A pension distribution of $50,000, too, will be treated differently tax-wise.

3. Make sure you have a properly executed Qualified Domestic Relations Order (QDRO)

The Employee Retirement Income Security Act of 1974 protects retirement assets in 401(k), 403(b), and Thrift Savings Plans for federal employees and military personnel. For these plans, you will need to draft a qualified domestic relations order (QDRO) so that the asset split becomes legal and for retirement plan administrators to accept and execute it.

A QDRO endorsed by a judge and executed properly provides a means to roll over a portion of a qualified retirement plan without penalty, tax-free. Depending on the circumstances, you may choose to continue contributing to the retirement plan. You could also roll it over into a Roth IRA through a trustee transfer. You can even take penalty-free withdrawals from transferred qualified retirement plans when they are handled within a QDRO—very helpful if you need some extra cash for a house down payment or to retire debt. Without a well-drafted QDRO you could wait years for your retirement account transfer.

Taking the proper steps to accurately assess your retirement assets during a divorce will put the right financial foot forward as you wipe the slate clean and retake sole ownership of your assets. For more post-divorce budgeting tips and all topics divorce, visit our blogsite.

Reach out to a divorce mediator in Maryland if you want a kinder, smarter, and more affordable divorce. If you’re on the fence and you have a list of concerns related to your divorce, don’t hesitate to Schedule a Free Strategy Session to go over your options. 



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Three Critical Financial Steps in Getting Through Your Divorce

Divorce can make it really hard to think straight about what to do next when it comes to most things and especially financial planning. Believe me, I know. The intelligent, together person you are can turn into an emotional, brain-fogged, unorganized mess. You try really, really hard to keep it together but you know this will not go down as “the best of times.” You want to sit down and get it together and plan your future but feel paralyzed and surrounded by a pea-soup cloud of indecision. What’s a person to do to ensure they’re doing the right things to financially plan for your divorce?

Well first, let’s get real.


When it comes to the finances, what’s your role? Do you handle the family’s finances and investments? Are you on top of your investment accounts, retirement plans, bank accounts, etc.? If you’re in the dark, you need someone to help you turn the lights on and fast!  Gather all your financial statements on your asset accounts and your most recent tax returns, then find a specialized divorce financial advisor to help you out and bring you up to speed.  A CDFA is specially trained in the financial aspects of divorce and will be your best friend in this process. If you and your spouse are able to cooperate, you can use a CDFA-Mediator who will educate you and your spouse on the realities of your financial health and what your future might look like under various settlement options.


Maybe you’ve already been fantasizing about your future life or perhaps this has all taken you by surprise. Regardless, it’s time to start really thinking about what the next phase of your life looks like. Unfortunately, this has to happen at the same time that you are grieving what you thought the next phase might look like. But if you allow yourself some space, it can actually be very productive. You now have the chance to start from scratch. What did you used to dream of doing that got lost while you were married? Is it time to go back to school? Maybe live on a sailboat for awhile or move closer to family? Whatever you dream of, you have to have your budget and financial picture top of mind. So the step above has to come first so your dreams don’t outsize your wallet! A financial advisor specializing in divorce would know how to set you up for future success.


Often through marriage many of the credit cards, mortgages, loans, etc. are in the names of both spouses. All of those accounts will have to be closed or converted. After the marriage is over, your credit picture may not be nearly as strong, so you want to be sure to put some things in place while you’re still married. Immediately open a checking and savings account in your own name to begin the process of establishing your own financial identity. Get a credit report and start monitoring it. Track your expenses and create a budget for now and post-divorce. Find a good rewards credit card to apply for in your name alone so that you will be assured of having access to credit through the divorce and beyond.  

These steps seem small but are valuable first steps to get you thinking financially and looking out for your future. You can get through this with a little help from an experienced divorce financial advisor. Having the right professionals on your side will be of great benefit to you.



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