Financial Aspects of Divorce An eXtension Webinar for Military PFMP Professionals
Financial Aspects of DivorceAn eXtension Webinar for
Military PFMP Professionals
Financial Security for All CoP• eXtension.org• eXtension Financial Security for All
Community of Practice• Significant content
– Frequently Asked Questions– Programs and Resources
• Online Learning– Web conferences– Began as chats
Military Family Learning Network• Multiple CoPs
– Such as: Child care, Family Development, Network literacy
• And our Team Personal Finance Training the Personal Finance Managers (PFMs)
Military Family Learning Network• Personal Finance Project goals:
– Provide on-going professional development to enhance the DoD baseline program
– Programs be accessible to Military PFMs at installations around the world
– Opportunity to earn Continuing Education Units (CEUs) to maintain AFC credential
– Create or enhance community among PFMs
Topics• Housing and Fore closure• February 2, 2012 11:00 AM Eastern • http://learn.extension.org/events/427
• Talking With Kids about Money• February 23, 2012 Time 2:30 PM Eastern• http://learn.extension.org/events/441
• Implications of Relatives Raising Children While Parents Are Deployed
• April 5, 2012, 2 PM Eastern• http://learn.extension.org/events/458
• Financial Aspects of Divorce• April 12, 2012, 11:00 AM Eastern• http://learn.extension.org/events/456
• Home Ownership: When Is The Right Time?• May 8, 2012, 2:30 p.m. Eastern• http://learn.extension.org/events/509
• 9 Skills of Couples Communication About Money• June 26, 2012, 2 p.m. Eastern• http://learn.extension.org/events/529
• Retire Ready: Financial Planning for Later Life• July 10, 2012, 2 p.m. Eastern• http://learn.extension.org/events/530
• Thrift Savings Plans: Retirement Planning for Military Families
• July 25, 2012, 1-2:30 p.m. Eastern• http://learn.extension.org/events/563
• Income Tax Return Filing Issues for Members of the Armed Forces
• August 28, 2012, 12:30-2 p.m. EASTERN• http://learn.extension.org/events/588
• Basic Money Management• September 25, 2012, 11 a.m. Eastern• http://learn.extension.org/events/61
Why Web Conferences?
• Engaging venue to reach larger audiences for – Educational outreach– Professional development
• Presentations are archived for additional viewing
• Post test supports CEU process integrity
Marketing • FSA Membership• State lists of agents• Department of Defense and the MFLN• Partners assisted too!
– NIFA (Thank you Susan)– Thank you Ken McDonnell, Director, American Savings
Education Council (ASEC), Employee Benefit Research Institute
• Twitter – @mikegutter– @moneytalk1– @dollardecisions
Making it Interactive• Use Adobe Connect• Audience can hear presenters, see a
picture, follow presentation or view other materials
• Can ask questions via chat box• Can respond to questions via chat box• Respond to poll questions to give real-time
feedback that can be seen by all.
Who Attended?
Live: 166 Recorded: 107
Disclaimer• The intent of this Webinar is to provide accurate,
research-based information
• The Webinar in no way purports to render legal, financial, or other professional services
• Viewers should consult an attorney that specializes in military divorces if legal advice or other expert assistance is required
Webinar Agenda
• 10-Question Pre-Test
• Divorce and Military Families
• General Divorce Financial Planning
• Military Divorce Financial Planning
• Key Documents Needed in a Divorce
• Resources for PFMPs
Divorce Process• Very fact based (case-by-case basis)
• Range of factors considered by courts
• NO “magic formula” for the appropriate division of assets (“equitable” does not mean “equal”)
• Decisions made within state guidelines (e.g., child support and community property)
• Federal and state laws must be followed
Divorce and Military Families• Divorce rates higher for military families than
for general U.S. population• 3.7% in 2011, up from 2.6% in 2001
– WSJ Article: http://kienkerlaw.com/global_pictures/Divorce%20Splitting%20Up%20a%20Rich%20Military%20Pension.pdf
• Divorce rate for women in the military is double that of men– Highest among military women with civilian husbands
– One reason: more support services for wives?
Common Divorce Financial Issues• Division of real property (e.g., house, land)• Division of personal property• Division of savings/investments• Division of debts• Will anyone pay alimony (spousal support)• Arrangement of child support payments• Income tax exemption for dependents• Post-divorce insurance coverage (e.g., life,
health, disability)
Common Divorce Non-Financial Issues
• Where the children are going to live
• Who will make decisions about the children and their well-being
– Physical custody: where children live (overnights)
– Legal custody: decision-making authority
• Where and when the other parent can visit the children
Military-Specific Divorce Issues• Federal laws (SCRA, USFSPA)
• Military paychecks (e.g., BAH allowances)
• Jurisdiction for filing divorce
• Child support process and compliance
• Child custody and visitation decisions
• Pension rights
• Military benefits
Smart Negotiation Strategies • Know what YOU want
• Know what your spouse wants
• Listen to the other side
– Learn things to further your interests
• Have a fall-back plan
• Never agree to anything that is unacceptable
• Get it in writing
Negotiation Planning GridMy goals in terms of property division are:
My spouse’s goals in terms of property division are:
My goals in terms of support are: My spouse’s goals in terms of support are:
My goals in terms of my children are:
My spouse’s goals in terms of children are:
Common “Hot Buttons”Men (and Employed Women): Pension and voluntary savings accounts (e.g., Thrift Savings Plan)•Emotionally tied to previous work history•“I [busted my butt, went to war, defended my country, risked my life, etc.] and she/he wants half of my pension. I don’t think so”
Women: Keeping a house and child custody•Tied to desire for stability for self and children•BUT…”home attachment” may not be as much an issue for military spouses used to frequent moves
Property DesignationsSeparate Property
– Acquired before marriage and NOT co-mingled
– Gift from someone other than spouse
– Personal injury awards, NOT co-mingled
– Inheritances, NOT co-mingled
– Designated in a prenuptial agreement as separate property
Property Designations
Marital Property– All property acquired by EITHER or BOTH
spouses during the marriage (and before the signing of a separation agreement or the commencement of a divorce REGARDLESS of the name in which property is held
– Community property is another term for marital property in nine states
Community Property States• Most property acquired during a marriage
is owned jointly and divided at divorce (except gifts and inheritances)
• Joint ownership is automatically assumed• AZ, CA, ID, LA, NV, NM, TX, WA, WI
Value of Property
• Fair Market Value (FMV)- price at which an item could be sold (e.g., garage sale, eBay)
• Depreciated Value- FMV as calculated from depreciation schedules for specific property
• Replacement Value- Cost to replace or purchase a new item
Debt Repayment• No matter WHO charged WHAT, a joint account
means BOTH spouses are legally responsible to creditors for debt repayment
• Creditors don’t care about divorce decree terms…they just want to be repaid!
• Ask creditors to close joint accounts– Try to convert to or reopen as individual account
• Got doubts? Request duplicate statements or online access to monitor ex-spouse’s compliance
Tax Considerations• Child support is neither deductible by the payor
nor included in the income of the recipient
• Alimony (spousal support) is taxable to the recipient and deductible as an adjustment to the payor’s gross income (to calculate AGI)
• Avoid attempts to “disguise” child support as alimony
Proceeds From Sale of a Home$_____ Estimated sales price
Selling expenses:
$_____ Realtor commission
$_____ Fix-up costs
$_____ Amount required to pay off loans(s)
$_____ Real estate transfer taxes
$_____ Other sales costs
$ ______ Estimated selling costs
$_______Estimated proceeds from sale
Staying vs. MovingCost of Staying in Home
– Monthly PITI
– Gas and electric
– Water and sewer
– Garbage pick-up
– Yard work
– Homeowner fees– Maintenance and repairs (1%
of market value)
– Other
Total Monthly Cost: $_____
Costs of RentingMonthly Costs
– Rent– Utilities– Other
Total Monthly Cost: $_____One-Time Costs
– Moving– Deposits– Utility hook-ups
Total One-Time Cost: $_____
Military Divorce Process• Combination of state laws and guidelines (e.g.,
child support) and federal laws • Servicemembers Civil Relief Act (SCRA)-
Active duty service member can request a 90-day stay of divorce action; can be extended (but not forever) if military duties interfere with participation
• Uniformed Services Former Spouse Protection Act (USFSPA)- Allows (but does not require) local courts to treat military retired pay as marital property and divide it in a divorce action
Military Divorces• Couples with marriages of all durations
– 20+ year careerists with substantial benefits• WSJ (3/10/12): Divorce: Splitting Up a Rich Military Pension
• Air Force Lt Colonel with 30 years of service gets a pension of $72,288
• http://online.wsj.com/article/SB10001424052970203961204577269460305366188.html
– Young service members in first/second enlistments• Older couples: pension is very valuable asset
• Enlist at 18, retire at 38, receive pension with COLAs for next 30? 40? 50? years
• No minimum retirement age
Military Pensions• USFSPA permits states to treat “disposable retired
pay” as marital property and divide it in a divorce settlement– Monthly retirement pay minus qualified deductions
• Does NOT automatically entitle a former spouse to any of service member’s benefit
• If > one divorce, direct payments to ex-spouses should not be > 50% of retired pay
• “First come, first served” basis
More About Military Pensions• 10-10 test for DFAS to trigger garnishment of
a military pension (like a civilian QDRO)– Married for at least 10 years
– 10 years of creditable service by member
– Must request DFAS to garnish retired pay
• Consider delaying divorce if close to 10 years
• If can’t meet 10-10 test, court can still award part of pension but military spouse is responsible for making payments
Other Military Benefits at Divorce• Non-military spouse loses ID card/installation privileges
(e.g., medical, commissary, PX) once divorce is final– Exception: unmarried 20-20-20 former spouse
– 20-20-15 spouse qualifies for medical benefits for one year from date of divorce or annulment but has no commissary and PX privileges
– Children maintain commissary/PX privileges; ex-spouse may request privileges to buy items for children
• Military housing must usually be vacated within 30 days after SM stops residing there– Installation commander may make interim decisions
Key Divorce Documents • Deeds to real estate• Mortgage papers• Tax returns (last 5 yrs)• Paycheck stubs (last 8)• Bank statements • Bills for living expenses• Proof of other income (e.g.,
unemployment, disability)
• Documents showing debt• Insurance policies
• Pension/retirement savings plan documents
• Business tax records• Inheritance documents• Insurance settlement
documents• Net worth statement• Household budget• Evidence of adultery
Divorce Finance Resources• Association of Divorce Financial Planners:
http://www.divorceandfinance.org/
• Institute for Divorce Financial Analysts: https://www.institutedfa.com/
• FPA (Financial Planning Association): Getting a Divorce: http://www.fpanet.org/LifeCrisis/GettingaDivorce/
• Military Money: When Love is a Battlefield: http://www.militarymoney.com/MilitaryLife/rights/tabid/115/itemId/2229/Default.aspx
Evaluation • 100% of respondents indicated the subject matter was what they
expected• 100% of respondents indicated the presenters were
knowledgeable and helpful• 89% of respondents indicated amount of material presented was
about right for the allotted time.• 97% of respondents indicated they will apply this knowledge in
their jobs• 97% of respondents indicated the difficulty level was appropriate• 100% of respondents indicated the webinar stimulated their
interest in the subject• The number of respondents indicating that they knew quite a lot
about the topic increased 58% after the webinar
Topic Suggestions Are Welcome
Please send ideas for topics or speakers to [email protected]
Questions?