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Tracy Stewart, CPA

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Peace of mind through financial clarity.

Pre-Divorce Checklist: 3 Steps to Avoiding Costly Mistakes

January 9, 2017 by Tracy Leave a Comment

Worried woman with fistful of credit cards.Divorce is a time filled with stress and uncertainty, and money is a big part of it. The toughest part is that the divorce learning curve is quite steep. After all, there is no divorce preparedness class you can attend to steer you around potential pitfalls and explain what to expect! Over the years, I have seen many clients stumble and get blindsided by mistakes that could have easily been avoided. While there is no complete “smooth divorce checklist”, I can offer you three things you can do before your divorce to have a measure of control over your financial security.

Step 1: Check your wallet

First, go through your wallet and pull out all of your credit cards. Now, set aside any credit cards that are joint, as well as those where you are an authorized signer on your spouse’s account. You will lose the ability to use these credit cards once the divorce is finalized. The sorting step may be trickier that it sounds, because most cards won’t have an obvious note to alert you that the account is a joint one. I get into more detail below.

Next, be sure that you have at least two credit cards in your name only. It is best to have general-use cards for this purpose. Visa, MasterCard and Discover are all good options – just be sure that they are not limited to any one store. If you do not have two general-use credit cards in your name, now is the time to get them.

Once you have a clear understanding of what credit cards you have in the event you need emergency access to money, keep them in good standing. This may sound obvious, but make sure you pay the bills and have available credit at all times. If you find yourself on the side of the road with a smoking engine and little kiddos in the back seat, you will be glad to know that you can pay for the tow – even if your first card of choice had been compromised three hours earlier.

Step 2: Get organized

This step sounds like a lot of administrative paperwork. Busy people might be tempted to overlook it, but doing so can create negative consequences that will take years to correct. Start with creating a list of every account and credit card that your household has. The list does not have to be complex (a simple Excel spreadsheet will do) but be sure to include the card number, expiration date and the names on the account.

Be clear on who the joint, individual or authorized users are on each account. Don’t trust your memory on this – I know that calling credit card companies and checking statements can be painful, but your list must be 100% factually accurate. No guessing!

To be absolutely certain that your list is complete, request a credit report. Review it carefully, as it will include indication of account ownership. My favorite credit reports come from Experian via http://www.AnnualCreditReport.com. The ones I ask my clients to get show the “owner” on the accounts. Look for “individual” (in only your name), “authorized user” (you are being allowed to use someone else’s card) and joint (you know what that is). Or you could call the card issuer to ask.

Now that you have a complete list of every account and every card, come up with a plan for what happens to those accounts after the divorce. Some accounts may need to be closed permanently, or closed to be re-opened later as two separate accounts under different names. Accounts with a carried balance may require additional planning.

Tip: If you can do this nicely with your spouse, the two of you can compare lists and credit reports and maybe even start agreeing on when to take the authorized users off some of those accounts.

Step 3: Check your health insurance

Many families share healthcare coverage through one spouse’s employer. After all, it is convenient to work within the same network of premium payments, co-pays and doctors. If that is your situation, now is the time to look for alternative coverage. Researching networks and comparing premium costs is not a fun way to spend your day, but I encourage you to do it anyway. Consider your options and apply for coverage as soon as you can. Your goal should be to have a seamless transition for health insurance – not a single day without coverage.

In closing, don’t leave this financial prep to chance and don’t trust your memory. I recall a situation where a female client had opened a credit card account in her name when she was 19. A decade later, the original issuing credit card company was acquired, and my client’s file had been mistakenly processed to include her spouse as a joint account owner. During the divorce, my client was confident that the account was in her name alone – just to have the credit card company surprise her with the news and refuse to fix the mistake. After weeks of negotiating with the credit card company to un-merge the files, my client had to close that account to make sure her soon-to-be-ex would not have access to it – even though she had her heart set on keeping it open as her oldest line of credit. Lesson learned: when it comes to credit cards and divorce, it is better to be 100% sure. [Read more…]

Filed Under: Assembling Your Data, Financial Literacy

Preparing to Negotiate a Divorce Property Settlement

October 2, 2014 by Tracy Leave a Comment

canstockphoto3833279 Thought bubble

 

Individuals going into a divorce property division negotiation rarely understand how just a few details can have a substantial financial affect on their future. You can avoid bad luck by having a strong grasp on the nuances of property division. The quickest and most efficient way to get this knowledge is to work with a divorce financial adviser.

  • Be sure you hire one who is also a CPA. The income tax issues can be complex.
  • Look for a CPA who also holds a CDFA – Certified Divorce Financial Analyst because they specialize in divorce financial issues.
  • Tell your adviser everything about your property. If you are not a divorce expert yourself, you are not going to know which details are critical and which are not.
  • Ask your divorce financial adviser to work up a couple of property division scenarios. You need to see how various options affect your financial outcome.
  • Know that during negotiations you will need to compromise on something. Talk with your adviser about the effects of giving up on this or that option. Take notes.
  • Familiarize yourself with the mediation process.

Filed Under: Assembling Your Data, Dividing Money and Property, Financial Considerations, Working with CPAs

Accountants Provide Financial Peace of Mind

September 23, 2014 by Tracy Leave a Comment

canstockphoto0260533house of money       Divorcing couples struggle with the complex financial issues that come with their divorce. I find that most people who are going through a divorce are unaware of key bits of information that relate to their own financial situation. Failure to fully understand these details leads to major challenges in the divorce process and makes it difficult to arrive at a mutually agreed upon settlement.

You can solve this problem by working with a financial professional who specializes in divorce financial and tax issues. Look for a CPA with the added credential of a Certified Financial Divorce Adviser (CDFA). This article explains the advantages of having one of these professionals on your team.

Filed Under: Assembling Your Data, Dividing Money and Property, Financial Considerations, Working with CPAs, Working with experts

3 Steps to Being Financially Smart in Divorce

April 19, 2014 by Tracy Leave a Comment

 

canstockphoto3833279 Thought bubble

Being smart about you money before and during a divorce can make the difference between living a lower lifestyle and living your current lifestyle. There are tons of financial details to be aware of during your divorce. But if you nail down the basics, those details will fall into place more easily.

Basic Step #1:  Be completely organized. Create logical files for all your financial information. Create a balance sheet – a list of everything you own and everything you owe and include copies of proof, such as mortgage statements, property tax statements and retirement account statements. Assemble the last twelve months of all credit card and bank statements. Being complete will save you time and professional fees down the road.

Basic Step #2:  Hire a divorce financial advisor. Having a financial advisor on your team means that you will have an objective expert to see the things that your emotions block. To survive financially, you need to recognize the good news and the bad news. To recognize them, you need an expert to explain them to you. Much of the financial issues in divorce include little known gotchas. Don’t let those bite you.

Basic Step #3:  Don’t listen to your friends. They have the best intentions, but they also are not experts in your divorce. If their claim to expertise is their own divorce, you are getting slanted advice. Your divorce is different. They are all different in quiet but crucially detailed ways. Be careful to avoid the wrong advice.

Filed Under: Assembling Your Data, Dividing Money and Property, Financial Considerations, Working with CPAs Tagged With: financial issues, retirement plans

Four Ways to Keep Costs Down in Your Collaborative Law Divorce

July 1, 2013 by Tracy Leave a Comment

canstockphoto2906598 SaveMoney Keyboard

Even divorcing couples with wealth don’t want to waste it on an inefficient divorce. This is why the smarter Bryan/College Station couples that are talking about divorce are choosing collaborative law divorce. The collaborative law process offers couples privacy, control and methods to keep the total cost down.

The first step in saving money during a collaborative law divorce is to hire professionals trained by the Collaborative Law Institute of Texas. The Institute teaches how to be efficient from start to finish. I have been on cases with attorneys who had not been trained by the Institute. The result was a slow, mishandled and expensive experience for the couple. Be very careful to hire a collaboratively trained attorney. Ask about the training when you interview lawyers.

The second step is to pay attention in meetings and do what you have committed to doing. You will not be asked to do anything you cannot do. The collaborative case will go at the pace to which you agree. If you have a work deadline or family event, the case will slow down while you take care of these. But once you have committed to providing information for the case and a meeting has been scheduled to review that information, if you procrastinate and don’t finish your homework on time, the cost goes up a bit. When meetings have to be rescheduled, it costs money to check calendars, discuss alternative dates and process emails that communicate the rescheduling options and agreements.

The third step is to make your divorce a priority. If you can do this, the process will go faster and more efficiently.  Ask to see the meeting agenda a few days ahead. Show up for all the meetings on time and prepared. Provide information when you say you will – try not to be late. Follow up to be sure your information was received.

In my experience, collaborative law divorce is usually significantly quicker and less expensive than traditional litigated divorce. You can reap even more savings when you follow these three steps during your collaborative law divorce.

I have worked on about 100 collaborative law divorces. If you would like my advice on which attorneys to interview, feel free to contact me at stewart@texasdivorcecpa.com.

Filed Under: Assembling Your Data, Financial Considerations, Working with attorneys, Working with CPAs Tagged With: Bryan, Collaborative Divorce, College Station, divorce costs

Get a Jump on Your Divorce

June 10, 2013 by Tracy Leave a Comment

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Looking at a divorce? Get a jump on your case. Save legal fees. Get to settlement sooner. Stop the pain faster.

Make your first step learning about your property settlement options.

Litigation divorce cases in Brazos County move at glacial speed. If you want to end your pain sooner, get a handle on your settlement options before you file and before you seek an attorney. The first thing to do is to meet with a CPA experienced in divorce settlements.

Why shouldn’t you consult with your tax CPA or your investment advisor? Sure, these experts are talented in their own niches. But they don’t have specialized knowledge and experience of working with divorce attorneys through to a wide variety of divorce property settlements. You need a specialist to identify the long-term financial implications from your decisions that will affect your happiness for the long haul. You need a specialist to get you up to speed quickly.

The divorce CPA will walk you through the minefield, showing you where to step and when to jump aside.  He or she will explain the pros and cons of your various settlement options. For example, are you thinking of owning the house together with your ex after the divorce? There are dozens of details that can go wrong. There are income tax implications to avoid or take advantage of. If you don’t address all those issues, they can pop up later to sideline your long-term and short-term financial goals.

How will this save you money?  When you understand your financial options before your attorney does, you are way ahead in the process. You are closer to ending your pain. You will save time and money when you can interview attorneys with the summary and details of your various settlement options in your hand.

When you are ready to look for a divorce attorney in the Brazos County, contact me. I can help you find the divorce attorney who best fits your situation.

Filed Under: Assembling Your Data, Dividing Money and Property, Financial Considerations, Uncategorized, Working with attorneys, Working with CPAs Tagged With: divorce, divorce attorney, divorce costs, financial issues, income taxes

Be Brief: Reduce Divorce Costs

May 28, 2013 by Tracy Leave a Comment

Whether in Houston or College Station, clients everywhere want to keep their divorce costs down. I encourage my clients to spend wisely but not too generously on their divorce. I want them to have a divorce that sticks but also have money left over to fund their own retirement. There are some easy ways to keep your costs down. All you have to do is keep your focus.

Focus on what you want to accomplish every time you contact your lawyer. Attorneys charge for their time. That includes time to read and reply to emails. Include only the essential information in your emails. I recommend that you ask no more than two questions in an email. Isolate each question with some white space around it. Consider numbering them: “Question 1 …. Question 2.” Make it easy for your attorney to see your questions because that will make it easier and faster to answer them. This saves you money.

Do not vent or ramble. This is true in emails, phone calls and face-to-face meetings. Of course you are in emotional turmoil, but your attorney is not your therapist. So focus on business. Save your emotional outbursts for your sympathetic friends or your therapist’s couch.

For phone calls and meetings, have a list of your questions with the most important questions at the top. If your meeting or call ends before you get through all your questions, at least you will have addressed the most important ones.

If you are looking for a divorce attorney in the Brazos Valley, contact me. I can help you find the divorce attorney that best fits your situation.

Filed Under: Assembling Your Data, Working with attorneys Tagged With: Brazos County, divorce, divorce attorney, divorce costs

Divorce Mediation: Learn from the Boy Scouts

May 6, 2013 by Tracy Leave a Comment

To increase your odds of getting what you want in mediation, take a tip from the Boys Scouts: Be Prepared. Most of my Brazos County divorces include mediation. When you are prepared, you have a better chance of a successful outcome.

Develop a realistic settlement range. At the low end, know what your worst-case settlement looks like. At the high end, what is your dream settlement? Calculate your break-even point. These steps will prepare you to respond to various proposals that will come from your spouse during the mediation.

Identify what is essential to discuss at mediation. Make a list. Review it with your lawyer a few weeks before the mediation. The issues don’t have to be financial. One of my clients had a strong emotional issue regarding the old videotapes of her daughter’s early childhood. The mediation did not end until she and her husband resolved the issues surrounding those tapes.

Bring your starting offer. If you initiated the divorce, come to mediation with a written offer. Get the settlement discussions started right away. Your starting offer should not be your bottom line settlement scenario. Consult with your lawyer to pull this initial offer from somewhere within your realistic settlement range.

If you are getting a divorce in Brazos County or nearby counties, I can refer you to excellent divorce lawyers and mediators.

Filed Under: Assembling Your Data, Dividing Money and Property, Financial Considerations, Non Financial Divorce Issues, Working with attorneys, Working with mediators Tagged With: Brazos County, Bryan, College Station, decision making, divorce attorney, Mediation

The Number: How Much Spousal Support to Seek?

April 19, 2013 by Tracy Leave a Comment

After a long marriage, women facing divorce struggle with knowing how much spousal support to seek. You can help yourself by understanding your future cash flow situation.

Make a detailed list of the living expenses you will have after your divorce. Identify your expenses. Create a separate list of expenses you wish to cover for your children. Look over your bank statements and credit card statements for the past year. Identify those expenses that will not change after your divorce. Then make a list of spending amounts that will change after your divorce. Will you have a new cell phone contract? How about your vehicle insurance premiums? Are you expecting to have a different home?

Estimate how much of your living expenses can be covered by non-wage income. If you have investments, the income on those may change after you start making investment decisions on your own or are working with an investment advisor. Consider whether you might have Social Security income or pension income. Estimate how much child support you think you will receive.

Will you have income from a job? How much you can earn in a career? If you already have a career, this step is relatively easy. If you are just now entering or re-entering the workforce, this step is more challenging. Consider seeking advice about your employment possibilities from a career advisor.

To find out how much spousal support you might want to ask for, add your estimated sources of income together and subtract your anticipated expenses. If the result is a negative number, that is your starting number for how much spousal support to seek. Weigh this against the Texas spousal support guidelines and the amount your soon-to-be-ex husband can manage. Work with your divorce attorney to fine-tune your approach.

I can refer you to Brazos County divorce attorneys as well as career advisors and investment advisors. Contact me today for a referral.

Filed Under: After the Divorce, Assembling Your Data, Financial Considerations, Living Expenses, Working with attorneys, Working with career advisors, Working with experts, Working with investment advisors

Collaborative Divorce: Most Common Mistake Men Make

April 15, 2011 by Tracy Leave a Comment

It’s the “I don’t need to do that” guy thing. If you have been making more money than your wife, you are particularly prone to this mistake.

In collaborative divorces in College Station and Houston, we look at post divorce cash needs to help us see options for splitting investments, property, etc. Wives are fine with listing their expenses. They want to show their husbands that their needs are authentic and accurate. These husbands are glad to see that I am going to show their wives – in black and white – that they can’t keep up the spending level.

You guys don’t feel you need to do a budget. You know how much you make. Your personal spending needs are modest. She’s the one who has been spending all the money. She needs the budgeting, not you.

Bingo. There’s the mistake. You need to let her see your living expenses. They may be modest, but they are not as modest as you think. In my experience, people consistently and reliably underestimate their expenses by at least 50%, many times 100%.

I worked with a couple a few years ago. The husband wanted me to work with his wife on her expenses. He told his attorney we didn’t need to look at his expenses. He said he made enough money that he was going to be just fine. He said he had modest expenses. We got well into the collaborative divorce process when he started to put his own numbers on a spreadsheet. He stayed awake that night thinking that he was offering a settlement he couldn’t afford.

The next morning, I showed him that he wasn’t worried enough. He was underestimating his living expenses. The divorce went on pause while I nailed down his true expenses. He backed off his settlement offer. You can imagine how well that went over with his wife and her attorney.  After all, he had been saying for months that his expenses were modest. His mistake and the aftermath of it slowed down that divorce by about three months.

Guys, you need to show your living expenses early in the collaborative divorce process. You need to show, in black and white, that you are not an endlessly deep pocket. Listing accurate living expense is time consuming and boring. If you don’t want to do it yourself, let your financial neutral do it. Be accurate. Be honest. Don’t guess.

 

Filed Under: Assembling Your Data, Dividing Money and Property, Financial Considerations, Fundamentals of Collaborative Law, Living Expenses Tagged With: budget, Collaborative Divorce, College Station, divorce, expenses, financial issues, Houston

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Thanks for all the help, advice and encouragement. It's a real pleasure learning from an informed, honest and caring person. I sleep so much better at night. Thank you for everything!
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