Business Columns & Blogs

Financial strategies to negotiate a divorce settlement

Jim Zientara
Jim Zientara

Divorce is an emotional and financial time of stress.

When going through a divorce, the parties should be thinking of PEACE – an acronym that outlines some areas that should be addressed by agreement or litigation.

The following is a brief discussion of a complex topic.

Parenting plan

The parenting plan tries to lay out a plan of action for a child and their support for future years.

Equitable distribution

Equitable does not necessarily mean equal. You will get what you and your spouse agree on. If you can’t agree, attorneys may be called on to represent each party and arrive at a plan. The plan is given to a judge in court for dissolution of the marriage.

Alimony

Alimony is the payment by one spouse to the other after a divorce. Factors include standard of living, age, physical condition, earning abilities for today and tomorrow, the contribution of each part to the marriage, inflation, etc. There are many factors to consider.

Contesting

Divorce can range from a relatively simple splitting of the marital assets to great disagreement. This may require each spouse to be represented by an attorney to arrive at a plan that may or may not be acceptable by each spouse. However, a plan is needed to give it to a judge.

Everything else

Each party has different priorities and concerns in a divorce. There are many factors to consider. Knowledgeable people on your side can be comforting during this emotional and challenging time.

The following is a simplified summary about the divorce process. It tries to indicate the flow from simple to complex.

1. Collaborative: The spouses decide how they want to divide their property, assets, etc. The spouses write the plan and give it to a judge, who dissolves the marriage. One of the spouses can work with an attorney who will write the plan for review by the other spouse. If acceptable to both spouses, the attorney can deliver the plan to a judge.

2. Mediation with attorney: The spouses discuss with a mediator who helps them arrive at a plan to divide their property. The attorney usually presents the plan to the judge.

3. Two attorneys: Each spouse hires their own attorney. The attorneys representing their clients arrive at a plan to divide their property. Both attorneys usually present the plan to the judge.

Help wanted

Generally speaking, you should have a team on your side and consult with them even if you are thinking about divorce. These could be some of the members of your team.

1. Attorney: It is wise to hire an attorney. Divorce is a complicated legal process and you want someone to legally represent your interests.

2. Accountant: There are many items for review. They include stocks, bonds, 401(k), pension plans, homes, insurance, etc. These items frequently involve taxation, gains and losses, determining the new cost basis and other tax matters. It is best to hire an accountant, CPA or enrolled agent to handle these tax matters. Failure to do so could result in an IRS audit.

3. Financial planner: The paperwork of splitting stocks and other financial matters is handled by a financial planner. The planner follows the instructions for division as detailed in the court-ordered plan. The plan often requires setting up accounts. There may be accounts for a 529 college savings plan for the kids. Life insurance or other similar investments may be used in case one of the spouses dies prematurely. An annuity could help ensure that the promised alimony, child support and other payments are made.

Divorce is rarely a fun time. With helpful friends and your team in place, it is easier to get through.

Jim Zientara is a financial planner with Raymond James Financial Services, Inc. Member FINRA/SIPC. His website is thefinancialplanningguy.info and he can be reached at 941-750-6818. His office is at 11009 Gatewood Drive, Suite 101, in Lakewood Ranch.

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