Which (bad) calculations from the husband could hurt (or help) your client?

Julie Kern, CPA, CFP®, CDFA®

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• What are the hidden pitfalls (and windfalls) of separate property tracing?
• Settlement Assurance Review
• AFI service

In my last article, I relayed the story of a divorcing husband who’d made back-of-the-envelope separate-property-tracing calculations about the value of his pension. His soon-to-be ex-wife was my client.

The husband got the math wrong. And not in the way he’d intended. He effectively shot himself in the foot, and I discreetly let my client, and her attorney, know that he’d erred.

As a CPA, a CERTIFIED FINANCIAL PLANNER^® professional, and a Certified Divorce Financial Analyst^® professional, I see these kinds of poor assumptions and bad math, well, pretty much all the time. If they benefit my client and her attorney, we all keep mum. If they threaten to make her settlement less than equitable, I speak up.

Here, let me tip you off to some common examples:

• Income. Specifically, the husband’s income is often miscalculated. That could be an innocent error; lots of people struggle to annualize income off of, say, bi-weekly pay stubs. But it can also be more insidious. Divorcing husbands will sometimes miscalculate their income to make it look lower, especially when there’s a business involved. In these cases, I don’t settle for just “the most recent data,” because that’s where things can get hidden and/or fudged. I insist on several years’ worth of data, because it’s more difficult to hide it that far back in time.

• Separate property tracing. That was the case in that other story I’d mentioned. A husband will often estimate how much of, say, a commingled account that he’d brought into the marriage, without providing proof. Most divorcing women don’t realize that the burden of proof lies with the party making the claim of the separate property. I don’t let them (or their attorneys) take those husbands’ claims at face value.

• Business valuations. As you know, these typically involve a Business Valuation Expert. They cost a lot of money. They can take months to perform. But those are for big/multimillion-dollar businesses. What about smaller ones? Let’s say the husband is an insurance agent, and he claims that when he stops working, his business effectively will have no value. But he already has a book of business that’s saleable to someone else. Bingo—that’s value.

• Pension valuation. The husband’s pension (at least, his name is on the account) will give its present value with each statement. But that’s what it’s worth if you walked away from it today and simply took a lump-sum payout. It’s shocking—to me, at least—how few people actually calculate the present value of the future stream of monthly payments and compare it against that lump sum, because the former would be much more than the latter. “It’s worth $80k” doesn’t hold a candle to, say, “It would pay $3k a month for 15 years.”

The above applies to child support, spousal maintenance, you name it.

Let me help your client—and you. Your job is to settle the case, of course; my job is to give you that much more financial horsepower to really come through, heroically, for your client.

Call me today and let’s talk.

Settlement Assurance Review

For every time you’ve been faced with a complex case—such as one with a lump-sum spousal-maintenance payout, or a complicated asset mix with hidden tax implications—and told your client, “You should talk to your tax or financial advisor,” I have a new service for them… and you.

It’s simple. When you and your client are considering a settlement, I can review it from a financial-expert perspective, for a nominal fee, and “bless it” (or not) before you go to court or mediation. The Settlement Assurance Review scrutinizes your client’s divorce settlement terms before finalization, providing:

• Equitability analysis: A detailed evaluation to ensure the proposed settlement terms are fair and well-balanced.

• Tax impact assessment: Identification and explanation of any potential negative tax implications.

• Risk mitigation review: Detection of any hidden financial risks or liabilities that could impact your client’s financial well-being, post-divorce.

During these reviews, I often discover hidden negative tax implications and other undesirable outcomes and risks that would be detrimental to your client. This can significantly reduce your liability exposure, while giving your client added confidence, and making you look even better in the process!

By partnering with us, you can confidently assure your clients that their financial interests are fully protected and their settlements optimized for both fairness and financial clarity.

Contact me and I can help you easily get your clients started with this.

AFI service

Seeing how often improperly-completed AFIs can frustrate attorneys like you, I’ve created an all-new service: I’ll help your divorcing-women clients complete their AFI, within one week of getting the supporting documents (bank and credit-card statements, etc.). And I’ll do it for them for a flat fee of just $495.

So they—and you—will have a good, solid AFI that opposing counsel can’t poke holes in, for a flat fee, in fast time.

Contact me today to get started!