Handling child support and alimony doesn’t always require a lawyer. In fact, working with a Certified Divorce Financial Analyst® (CDFA®) can be a game-changer.⠀ ⠀ A CDFA® specializes in the financial aspects of divorce, helping you navigate the complexities of child support and alimony calculations. They consider all income sources—wages, disability payments, interest, dividends, bonuses, and even potential earning capacity if you’re working part-time or retired early. This comprehensive approach ensures accurate and fair child support and alimony arrangements.⠀ ⠀ One of the key benefits of working with a CDFA® is maintaining control over the process and outcome. They can serve as mediators or consultants, offering solutions that are often faster, less stressful, and more cost-effective than involving lawyers and the court system.⠀ ⠀ CDFA® professionals also help you plan for future financial changes. Whether it’s understanding how a financial windfall or a change in income impacts child support, they provide the clarity and guidance you need.⠀ ⠀ Why deal with the stress and expense of the court system if you don’t have to? Let a CDFA® help you resolve child support and alimony issues efficiently and effectively.⠀ ⠀ For more information and to schedule a private complimentary consultation, visit our website trunorthdivorce.com.⠀
When you consider divorce, or if you know someone who is contemplating divorce, one of the biggest realities for those in the divorce process is the financial settlement and financial analysis post-divorce. Get the assistance of Berni Stevens, a Mediator, Certified Divorce Financial Analyst® (CDFA®), and divorce coach.
Berni provides step-by-step guidance on matters related to divorce. With a wide range of experience and expertise related to divorce issues, Berni will simplify the process and provide much-needed clarity in areas such as long-term tax consequences, asset, and debt analysis, dividing pension plans, continued health care coverage, stock option elections, protecting support with life insurance, and much more. She can also guide you through building an effective parenting plan, and getting your divorce processed through the court.
In our previous article, “How Executive Compensation Impacts Divorce,” we presented the types of executive compensation that should be considered for purposes of marital property division, as well as future income that should be included for support calculations. This article will examine the basics of dividing executive compensation. We begin by identifying several key aspects of executive compensation in divorce.
Identifying the Marital Portion
In most cases involving divorce, we must first determine to what extent the compensation is marital and subject to division. In all cases, if the compensation was awarded and vested during the marriage, they are 100% marital. If awarded but not vested, we must first determine the extent the award is based on past service vs. future performance. To the degree based on future performance, that portion would be considered separate property. To the extent that there are no plan-specific rules regarding the division of benefits, coverture fractions are used to determine the percent marital.
Applying Coverture Fractions
Coverture fractions based on past performance are based on the Hug formula. The numerator (marital service credit) represents the total number of years or months during which the retirement benefits were earned or accrued while the spouses were married. This includes the period from the date of marriage to the date of separation or divorce filing, whichever is applicable. The denominator (total service credit) represents the total number of years or months that the spouse worked or accumulated service credit that counts towards the retirement benefit. Up to the present date or retirement date. Calculate the marital coverture fraction by dividing the numerator (years of marital service credit) by the denominator (total years of service credit).
Coverture fractions based on future performance are based on the Nelson formula. The numerator (period of marital service) represents the period during which the spouse earned or accrued retirement benefits while the marriage was intact. This typically starts from the date of marriage to the date of separation or divorce filing, depending on state laws. The denominator (total period of service) represents the total period during which the spouse worked or accumulated service credit that counts towards the retirement benefit up to the present date or anticipated retirement date. Calculate the marital coverture fraction by dividing the numerator (period of marital service) by the denominator (total period of service).
Divide or Offset?
Most executive compensation cannot transfer directly to the non-employee spouse. Even if it can be, it may not be advantageous to transfer it at the time of vesting or payment. In these cases, we need to be able to provide a value for the portion earned during the marriage so that the employee-spouse can keep the compensation while the non-employee spouse receives other assets to compensate. Valuation, however, is not always a straightforward exercise.
Tax Considerations
When transferring to a non-employee spouse, we need to adjust for the taxes paid at the time of vesting or exercise. Depending on the plan, the recipient’s marginal tax rate applies to some transfers when exercised. Only the employee spouse can exercise others, using the employee spouse’s marginal tax rate at vesting or exercise.
Attorneys may subpoena the employee spouse’s company or the employee spouse can provide documents that are necessary to determine if the executive compensation is based on past or future performance, granting conditions and vesting schedules. Request the following documents:
Compensation plans and all amendments
Grant agreements and all amendments
All correspondence (letters, memorandum, emails) relating to grants
Summary plan descriptions
Annual statements of employee benefits
Employee manuals the describe employee’s right to benefits
Employment contract or offer letter
Beneficiary designation forms
Employee’s employment file
Valuations conducted for IRC Section 409(A) purposes or other purposes
Employee’s W2’s
In our next article, we will look at some of the nuances of handling executive compensation across the more common types of executive compensation.
Take Control of Your Future
When you consider divorce, one of the biggest realities for those in the divorce process is the financial settlement and financial analysis post-divorce. Get the assistance of Berni Stevens, a Mediator and Certified Divorce Financial Analyst® (CDFA®.)
Berni provides step-by-step guidance on matters related to divorce. With a wide range of experience and expertise related to divorce issues. Berni will simplify the process and provide much-needed clarity in areas such as long-term tax consequences, asset, and debt analysis, dividing pension plans, continued health care coverage, stock option elections, protecting support with life insurance, and much more.
In our previous article, “How Executive Compensation Impacts Divorce,” we presented the types of executive compensation that should be considered for purposes of marital property division, as well as future income that should be included for support calculations. This article will examine the basics of dividing executive compensation. We begin by identifying several key aspects of executive compensation in divorce.
Identifying the Marital Portion
In most cases involving divorce, we must first determine to what extent the compensation is marital and subject to division. In all cases, if the compensation was awarded and vested during the marriage, they are 100% marital. If awarded but not vested, we must first determine the extent the award is based on past service vs. future performance. To the degree based on future performance, that portion would be considered separate property. To the extent that there are no plan-specific rules regarding the division of benefits, coverture fractions are used to determine the percent marital.
Applying Coverture Fractions
Coverture fractions based on past performance are based on the Hug formula. The numerator (marital service credit) represents the total number of years or months during which the retirement benefits were earned or accrued while the spouses were married. This includes the period from the date of marriage to the date of separation or divorce filing, whichever is applicable. The denominator (total service credit) represents the total number of years or months that the spouse worked or accumulated service credit that counts towards the retirement benefit. Up to the present date or retirement date. Calculate the marital coverture fraction by dividing the numerator (years of marital service credit) by the denominator (total years of service credit).
Coverture fractions based on future performance are based on the Nelson formula. The numerator (period of marital service) represents the period during which the spouse earned or accrued retirement benefits while the marriage was intact. This typically starts from the date of marriage to the date of separation or divorce filing, depending on state laws. The denominator (total period of service) represents the total period during which the spouse worked or accumulated service credit that counts towards the retirement benefit up to the present date or anticipated retirement date. Calculate the marital coverture fraction by dividing the numerator (period of marital service) by the denominator (total period of service).
Divide or Offset?
Most executive compensation cannot transfer directly to the non-employee spouse. Even if it can be, it may not be advantageous to transfer it at the time of vesting or payment. In these cases, we need to be able to provide a value for the portion earned during the marriage so that the employee-spouse can keep the compensation while the non-employee spouse receives other assets to compensate. Valuation, however, is not always a straightforward exercise.
Tax Considerations
When transferring to a non-employee spouse, we need to adjust for the taxes paid at the time of vesting or exercise. Depending on the plan, the recipient’s marginal tax rate applies to some transfers when exercised. Only the employee spouse can exercise others, using the employee spouse’s marginal tax rate at vesting or exercise.
Attorneys may subpoena the employee spouse’s company or the employee spouse can provide documents that are necessary to determine if the executive compensation is based on past or future performance, granting conditions and vesting schedules. Request the following documents:
Compensation plans and all amendments
Grant agreements and all amendments
All correspondence (letters, memorandum, emails) relating to grants
Summary plan descriptions
Annual statements of employee benefits
Employee manuals the describe employee’s right to benefits
Employment contract or offer letter
Beneficiary designation forms
Employee’s employment file
Valuations conducted for IRC Section 409(A) purposes or other purposes
Employee’s W2’s
In our next article, we will look at some of the nuances of handling executive compensation across the more common types of executive compensation.
Take Control of Your Future
When you consider divorce, one of the biggest realities for those in the divorce process is the financial settlement and financial analysis post-divorce. Get the assistance of Berni Stevens, a Mediator and Certified Divorce Financial Analyst® (CDFA®.)
Berni provides step-by-step guidance on matters related to divorce. With a wide range of experience and expertise related to divorce issues. Berni will simplify the process and provide much-needed clarity in areas such as long-term tax consequences, asset, and debt analysis, dividing pension plans, continued health care coverage, stock option elections, protecting support with life insurance, and much more.
Thinking about withdrawing funds from your retirement accounts to settle a divorce agreement? Think again!⠀ ⠀ Consulting with a Certified Divorce Financial Analyst (CDFA) before touching your retirement accounts can save you a significant amount of money. A CDFA helps you understand the legal and financial implications of dividing retirement assets. They can guide you through the Qualified Domestic Relations Order (QDRO) process, which allows you to divide retirement plans without facing the 10% early withdrawal penalty and additional taxes. By following the correct legal steps, you can ensure a fair division of assets while protecting your financial future.⠀ ⠀ Don’t risk losing your hard-earned money. DM us ‘Appointment’ to meet with Berni Stevens, PhD, CDFA, for a preliminary conversation and learn how to protect your assets during divorce.⠀
When you consider divorce, or if you know someone who is contemplating divorce, one of the biggest realities for those in the divorce process is the financial settlement and financial analysis post-divorce. Get the assistance of Berni Stevens, a Mediator, Certified Divorce Financial Analyst® (CDFA®), and divorce coach.
Berni provides step-by-step guidance on matters related to divorce. With a wide range of experience and expertise related to divorce issues, Berni will simplify the process and provide much-needed clarity in areas such as long-term tax consequences, asset, and debt analysis, dividing pension plans, continued health care coverage, stock option elections, protecting support with life insurance, and much more. She can also guide you through building an effective parenting plan, and getting your divorce processed through the court.
Did you know that there are basically three kinds of divorce mediators? There are lawyer mediators, therapist mediators, and financial mediators.
Most people new to divorce think first of lawyer mediators. Lawyers are experts at navigating divorce through the courts: filing petitions, presenting at hearings, filing motions, and arguing cases before hearing officers and judges. If you’re meditating your divorce, though, there isn’t much that a lawyer can bring to the table other than knowledge of the filing procedure and state guidelines and these are readily available to all. Lawyers aren’t allowed to provide the couple with legal advice, either. Regardless of your choice in mediators, it’s a good idea to hire an attorney as a consultant to get legal advice and review your settlement agreement before signing.
Second, therapist mediators are specially trained in various mental health areas and are useful as divorce mediators when there are special circumstances, e.g., complex custody issues or personality disorders. They do not possess financial expertise, nor can they help with legal documents or divorce processing. On the other hand, you may want to utilize a divorce coach to help you stay on track throughout the divorce process and be more effective in your negotiations.
Financial mediators, specifically Certified Divorce Financial Analysts® or CDFA-mediators, bring divorce financial expertise to the table, helping couples determine an optimal divorce settlement. They can provide the couple with financial advice that neither lawyers nor therapists are equipped to do. Working with a financial mediator facilitates:
Properly identifying and valuing marital vs. separate property
Understanding the tax implications of various settlement options
Evaluating settlement options, including support and division of assets, on both short-term and long term criteria, specifically whether there will be sufficient cash to pay the bills in the next few years and whether there will be enough wealth to fund longer term goals like retirement.
So be aware that there is more than one type of mediator option and that your first leaning may not be the best choice for your situation. Book a complimentary, private consultation to learn more.
