Divorce Math Made Clear: How Smart Planning Saves Thousands in Divorce

Hey everyone, this is Scott Levin, Chief Peacekeeper, and appreciate you being here today. I'm here with Ryan Finley. Ryan is with Freedom Financial Services Group, a couple offices in Nashville and in Florida, Sarasota.

Sarasota? Yes, that's correct. Yes. Okay.

And, uh, but you work nationwide, Ryan, or do you state-specific?

I do. I work nationwide. I've got customers all over the country, or clients.

Yeah. And so you're a CPA and a CDI. But you're pretty much all in the family law divorce world?

Yes, that's what I— yeah, primarily I'm a CPA, CDFA, mediator, CVA, a little bit of everything.

So, okay, do you do, um, is your, is your, is your niche on the financial side?

Exactly, yes. So that's what we do. There's most of our clients, uh, or I would say 80% of our clients are, are women. We handle men as well, but it's Primarily women that we handle.

And so, like, is it, is it a situation where, like, someone is, like, one of your clients is going to— it was kind of not like the primary financial person in the marriage, and they're going to be coming out of the marriage with some significant assets, or you're evaluating, you know, how to divide an estate so that they're, you know, best off at the end, not just like year 1, but projecting down the road tax-wise and things like that?

That's exactly right. Most of our clients— and just to give you a brief scenario, you know, you have 2 people that meet, they get married, they have kids, they both have careers. One of them drops off and takes care of the family, the other has their career. And then 10 years down the road, they get a divorce. You've got one spouse that their job is to take care of the kids and the family, and it's just as important as the other job. And, you know, they're not involved with the financial aspects of the, of the family. And so a lot of them are our clients. They come to us and they don't understand what's going on. They don't understand their financial picture. They don't know what the bills are. They don't know what investments they have. And so a lot of that is just reassuring them and educating them on what they actually have, getting my arms around their financial picture and being able to explain that in a way that they understand it. And come up with a plan that, okay, here's what your living expenses are. Here's what your expected income is.

You know, yeah, that income expectation. Like, I have a client right now where she— I'm doing the mediation, but she's talking about she's going to end up with around like $2 million or so in a Roth IRA, but she's pushing for more cash because she wants to buy a home for cash. And she's got a kind of an adult dependent, but so she needs some space. But, you know, I'm sitting there thinking like, I should have someone run the numbers for her so she understands, like, if you have a Roth IRA and let's say you take $400,000 of it and you put it as a down payment, and then you have a mortgage, and then you put that, the Roth, to work for you, and it spits off income and dividends and interest, and you have that scenario versus taking $2 million and just Putting it into a house and eliminating that entire, that entire pile. I just like, that's the sort of work that I would, I, that I think that I really depend on CDFAs to do, or to, and to help evaluate like those decisions because they're like so impactful. So you're not only doing the divorce, but then you're thinking, what am I going to do with the money? And you're doing it all at once, and you're doing it without like the guidance. It's a scary situation for people, I think.

It is. And there's some people— I've got clients like you described as well, where they have— they suddenly come into this, all this money, and they don't know what to do with it, how to invest it. And, you know, whether they— and the scenario you proposed is exactly what you see a lot, you know. Do I cash this in to buy the house? You know, and it's an individual decision. If it's just making, you know, 12% or 10% or whatever it's making, and you can get a mortgage for 6%, Why would you take that money? You've got a spread of 5 or 6% on there that this money's earning money for you. Why would you cash that in and, you know, spend it? I know it's peace of mind, and it could be a cash flow issue. There could be cash flow reasons why you wouldn't do that. But for the most part, you know, a lot of people don't understand that, and a lot of people make emotional decisions. And I'm sure in your situation, you're aware of this too. It's They look at what, 6 months or a year down the road. My kid's in this school. I want to keep them in that school. They don't see the financial impact of what that is 10 years down the road when their kid's out and on their own. And what do they have as far as income?

Yeah, I mean, and they're also making decisions like, you know, a lot of my clients trying to keep the home. That's always a traditional thing, especially with kids. And we get very creative in my practice with the home and how to, you know, co-ownership or buying out. structuring those buyouts, but, you know, keeping the home for the kid. But in looking at this interest rate and they're like, I have a 3.25%, like, that's an asset. And I'm like, yes, of course it is. But you're looking at it in the purview of like a 4-year period, you know, but we hadn't seen 6% or 7% interest rates on a primary mortgage in a long time before 2020 or whatever it was. So, like, you know, in the spectrum, We could go back that route, and we might not. I know a lot of people say we're not, but who knows? So like you're kind of making like these narrow decisions, like in the moment. And you know one of the things, Ryan, that I deal with a lot—I'm doing a lot of prenuptial agreements, and I represent a lot of a lot of primarily females that are marrying into like significant wealth. But these prenups are awful, and they're so impactful. I've done so many divorces with prenups where the people don't even—they're like, yeah, I met my. Lawyer once, and, uh, I signed it. And, uh, you know, now 28 years later, I'm being held by this piece of paper. I'm 56 years old. Um, when people are waiving spousal support, I, I'm a huge proponent of not doing that in a prenup. But I wonder, like, um, like, are you able to project— like, is there a mathematical, like, process or calculation where you can show somebody, like, here, look, this is what Like a waiver of spousal support could mean to your lifestyle in the future.

Yeah, and that's what I try to do. Like, like you said, every situation is different, but you try to analyze what that person's situation is and the future impact of it. You know, I've had some cases where, you know, they get married, they've got a trust, and their spouse is trying to convince them that we're, you know, we're going to be married forever. Just, you know, put my name on it or put some of that in here. And it's like, you know, it's like a primarily that's separate property for now, but the minute you commingle that, it's not gone. And so a lot of my advice to them is just, you know, let's, let's think about this first, you know, that you can pull money in, but you can't move money back and forth, you know. So it's just—

It's in your practice in CPA. Do you have clients that most of your clients hire you together? As, or if you have like traditional CPA work, and do you, and is there a scenario where you've had one saying, hey, like, let's just, you know, put that, put that in, you know, why don't you take $600,000 of that inheritance and put it in our joint account? We'll buy a house with it. And do you, is there a scenario where you're like cautioning that person or explaining the repercussions of that work? Is that something that you have to deal with?

It is. I'm seeing more of it with my divorce work, though. Just, you know, people kind of explaining to them the difference between separate property and marital property. You know, people think that this is what I had going into the marriage, even though, you know, I bought my house and I put, I put her name on it, but I made the down payment. You know, they're thinking that that down payment's separate property, and it's not. It's, it's marital property because it's commingled, and that spouse is on the, on the Title.

One other question I have for you is what's really popular for my clients the last year or so, for whatever reason. I think I'm just, I'm working with a little bit of an older population, maybe as I get older. You know, I have a lot of clients that are basically to try to accomplish a buyout of or an equalization of their assets. They're taking a 401 and they're transferring it to their spouse via a Quadro, but then they're overfunding that transfer. Let's say they're trying to get $200,000 to the— to their spouse. Their spouse is going to cash out that transfer. So instead of it going into their own IRA, they're going to cash it out in their bank account, and they're— and they're overfunding that transfer so that the person ends up after their income tax payment, they're— they're— they're arriving at that net figure. Do you have any advice or caution?

Like, is that a Is that—

if you— I know it's hard. Again, it's specific to each individual case, of course, but like, is in general, are you a fan or does it concern you when someone is doing that cash-out process during the QDRO?

It concerns me because, like you said, during mediations and allocation of assets, you're trying to get it equitable. And $100,000 in an IRA account doesn't equal $100,000 cash for what you mentioned there, because there is a tax effect. And a penalty if they're not, if they're not 59 and a half. So, uh, yeah, we do see that quite a bit, and we do advise on that. But I'm, I'm more of a fan of making things equal. This cash equals this cash. This investment equals this investment. And the other trick that, that's in there too, if you're dividing investments, is, you know, this is kind of financial technical, but people may not understand this. But if you have an investment, let's say you have 100 shares of Microsoft stock, you bought 20 of it 20 years ago, and you bought 20 of it 10 years ago, and then 25 years. And so that stock's not the same. You've got a different basis in this stock versus this stock. So if I give you the stuff that I bought a long time ago, you're going to have a huge capital gain that you're going to have to recognize when you sell that stock. So I'm a big proponent of 1 for you, 1 for me. If there's 10, 20 that were bought, then I get 10, you get 10. So that's more about—

Divide all the lots equally. Yeah, that's really important. All the lots have to be, and you have to have the settlement agreement written by somebody that knows what they're doing because you're directing Vanguard or Fidelity through the settlement agreement how to, how to do that division. And if one spouse is, you know, if the new— if the spouse that's getting, you know, those half the transfer of those assets is setting up at Schwab, but it's— the assets are at Vanguard. Well, Vanguard is naturally like, you know, they're essentially— their client is the one staying at Vanguard, not the one that's sending them back to Schwab.

Yeah.

And not to say that they would intentionally do anything, but if they're not being directed specifically to divide every equity, every lot equally, then you end up with a potential, you know, problem. And, uh, everyone, the reason that we started this conversation kind of just jumping in is because my goal was to illustrate several different examples of how, um, you know, Ryan helps people, how he can help people. There's so much complexity, but at the same time, divorce— and I don't know if you share this opinion, Ryan— I say it all the time. It doesn't have to be as complicated as the internet makes it seem to be. You just have to form a team, and that team has to be— consist of people that can actually help and make your decisions simpler and easier. And I certainly think Ryan is able to do that. Do you want to let people know where they can kind of connect with you?

Yes, the best way to reach me, and I completely agree with what you said, Scott. That's my philosophy as well. It doesn't have to be complicated. You know, it's— but it is, it's a math problem that you have to solve, and you need a financial person to help you solve this math. Divorce is about dividing assets and children and different things, but it's a big math problem. It is. But people can reach me via my website. It's www.freedomfsg.com. And if there's a schedule a consultation tab on there, and if they'll click on that and fill out the form, then I'll reach back out to them. Be glad to.

Awesome. Well, thanks so much for joining us, and we'll see you guys soon.

All right. Thanks, Scott.