How a CDFA™ helped one couple
John and Jane are 40 years old and have two children. They own a home worth $165,000 with net equity of $77,500. Their IRAs and 401(k) retirement plan total $165,500 in value. John earns $90,000 a year and has take-home pay of $68,760 a year. Jane has never worked outside the home and has no job skills, but she hopes to get a part time job for $8 an hour with take-home pay of $8,900 a year. The following settlement has been suggested. After the divorce, Jane and the children will live in the house, which will be deeded to her. She will also receive $44,000 of the retirement moneys and John $121,500, thus dividing the assets equally. John will pay Jane alimony of $600 per month for 5 years and child support of $225 per month per child. He will also pay college costs which start in 4 years. John's expenses include his normal living expenses, child support, alimony and college costs. Jane's expenses include support of the children and are reduced when each child leaves home. This appears to be a reasonably fair settlement. However, an analysis shows Jane's assets will be completely depleted within seven years while John's investments will grow dramatically.
To improve Jane's financial future, the settlement could provide her with increased alimony of $1,500 per month for 10 years. This would actually cost John $1,005 per month in after-tax dollars. The correct child support according to the Child Support Guidelines is $1,125 per month for two children for a couple with their income. Jane also could be awarded an additional $24,300 from the retirement plans. She also may need to cut her expenses by 10%. These changes in the original settlement will still allow John to have a surplus which he can add to his investments. If John stays within his budget and invests all of his extra income, his investments have the capacity to grow to $2.5 million by the time he is age 60.
This sample case illustrates the value of financial planning as a means of reaching more equitable divorce settlements. If the court's intent is to treat both parties in a divorce as equitably as possible, it is essential to analyze the marriage as if it were a financial contract, with tangible investment into it by both parties.
We welcome you to a free half-hour initial consultation to determine what you need and how we can best help you. Call 952-746-0770 or e-mail @ jenco@q.com to set up an appointment. Evenings and weekend hours are available. Everything is always confidential.
We see what you may not.
Money issues are the number one cause for divorce, and also the main argument during the divorce. You need to be protected against the financial impact after the divorce is final. We help you determine where you are as a couple and where you need to be as a divorcee. Clients who are in the midst of the process often wish they contacted a financial divorce specialist as one of their first steps in their divorce. Don't make that same mistake.
At Jenco we inventory, catalog, define and value all assets of the couple. It is extremely important this is done right. Whether it is a high net-worth divorce or a couple with debt, it is important to look at all assets and liabilities with a fine-tooth comb. We work closely with your attorney to calculate proposed settlement/alimony/spousal support options. We also are an integral part of the Do-It-Yourself divorces. We define premarital property, 401k valuations and division of retirement assets. Attorneys understand the law, we understand your finances and how they will impact your future.
In a complicated and emotional divorce sometimes a team effort is necessary. The following community of professionals I work with may need to be involved: Attorneys, Psychologists, Business Valuation Specialists, or Mediators. One or all can be part of the shared goal; representing you through your divorce so you can make the most of the rest of your life.
At Jenco Financial Services you will be provided with a 20-year cash flow analysis. With graphs that are easy for your attorney, judge (and most importantly) you to understand the financial impact of your divorce.
Divorce Finances are a specialty niche at Jenco Financial Services. Jennifer Ray was the 10th person in the state of Minnesota to have the dual certification as Certified Financial Planner® and Certified Divorce Financial Analyst®.
Top Five Reasons for Hiring a Certified Divorce Financial Analyst ™ During the Divorce Process.
1) Financial analysis conducted early in the divorce process can save time.
The average length of the U.S. divorce process is one year. In the beginning stages of the process, both parties spend a great deal of time trying to get a clear understanding of the financial aspects and terminology of the separation. A Certified Divorce Financial Analyst ™ (CDFA ™) can explain all financial aspects of the pending decisions and help to empower their client to make educated decisions throughout the proceedings.
2) A CDFA ™ can help their client save money during the divorce process.
By using a CDFA ™, you can have a clearer view of your financial future. Only then can you approach a legal settlement that fully addresses your financial needs and capabilities. A legal settlement that floats back and forth between attorneys, without the client having a clear understanding of all the financial ramifications, can be detrimental, time consuming and expensive. CDFA0084s can educate their clients by providing a thorough knowledge and understanding of the often-complicated financial decisions.
3) A CDFA™can help his/her clients to avoid long-term financial pitfalls related to divorce agreements.
Working with a client and their attorney, a CDFA™ can forecast the long-term effects of the divorce settlement. This includes details of all tax liabilities and benefits. Developing a long-term forecast for their financial situation is far better than a short-term snapshot. Financial decisions must be made that not only take care of immediate family needs, but retirement needs as well.
4) CDFA™s can assist their clients with developing detailed household budgets to help avoid post-divorce financial struggles.
A CDFA™ can help clients think through what the divorce will really cost in the long run and develop a realistic monthly budget during the financial analysis process. Expenses such as life insurance, health insurance and the cost of living increases must be taken into consideration when agreeing on a final financial settlement.
5. Using a CDFA0084 can reduce the amount of apprehension and misunderstanding about the divorce process. Misinformation and misconceptions about the divorce process can be detrimental. Many have false expectations that they will be able to secure a divorce settlement allowing them to continue with their accustomed style of living. Financial divorce analysis helps to ensure a good, stable economic future and prevent long-term regret with financial decisions made during the divorce process.
You are worried about whether you get your kids on the next holiday, that's why you need someone to safeguard your long-term interests while you focus on what is most important to you today.