Talk Wealth to Me

#005: The Cost of Divorce with Financial Expert Laurie Itkin

May 24, 2019 Felipe Arevalo, Chase Peckham, Katie Utterback, Laurie Itkin Season 1 Episode 5
Talk Wealth to Me
#005: The Cost of Divorce with Financial Expert Laurie Itkin
Show Notes Transcript

Fifty percent of marriages end in divorce. While we don't always plan for our own marriage to fail, life happens.

In our latest podcast, we're joined by Laurie Itkin, a financial advisor, wealth manager, and certified divorce financial analyst. She's the author of the best-seller "Every Woman Should Know Her Options: Invest Your Way to Financial Empowerment," and a frequent and beloved volunteer with the San Diego Financial Literacy Center.

Comments, questions or suggestions for the show? Email us at [email protected]

Want to learn more about Laurie Itkin? Visit her website, check out her book, "Every Woman Should Know Her Options," or follow her on Twitter.

To learn more about DebtWave Credit Counseling, visit our website or connect with us on Facebook, Twitter, Instagram, and LinkedIn.

To learn more about the San Diego Financial Literacy Center, visit our website or connect with us on Facebook and Twitter.

Support the show (https://www.sdflc.org/help-sdflc/donate/)
Intro:

Intro Music Welcome to Talk Wealth to Me, a safe space podcast where we chat about anything and everything related to personal finance.

Felipe:

The information contained in this podcast is for educational and entertainment purposes only. It does not constitute as accounting, legal, tax or other professional advice.

Chase:

Laurie Itkin is a financial advisor, wealth manager, and certified divorce financial analyst. She's also the author of the Amazon Bestseller. "Every woman should know her options: Invest your way to financial empowerment," and a frequent and beloved volunteer of the SDFLC.

Katie:

All right, well thank you so much for joining us on the show today, Laurie. We very much so appreciate it. And today we're talking about divorce and financial planning for a divorce and it's not maybe the happiest of all topics, but it's something that maybe we should all maybe know about given that a lot of stats I'm finding is that around 50% of marriages will end in divorce. Is that something that seems familiar to you? High divorce rates? Yeah.

Laurie Itkin:

Yes. Katie um, I'm happy to be here and discuss this topic today. Uh, you know, I've, I'm a huge fan of the San Diego Financial Literacy center and I volunteer and I've been involved for several years now. And yeah divorce hits everybody, you may not personally go through a divorce. It's certainly a family members and friends we'll go through and at some point in their lives and we're finding uh, a big trend these days is what's called gray divorce. A lot of the clients who I work with are in their 50s and even 60s. And so the needs of older folks going through divorce are different than millennials. But the divorce,

Katie:

you know, I have to tell you, I was looking at your Twitter account to prep for the podcast today and you had, I think you had retweeted a study that you had actually participated in. It was study, um, with Worthy at which is an online auction marketplace for pre-owned diamond jewelry and then the Association of divorce financial planners. And I thought it was very interesting that you're trying to bring up the point that divorce is not a one size fits all experience that just kind of like planning a wedding. There are a lot of different ways to actually go through the divorce process.

Laurie:

That's correct. And one thing we found in this study that I co authored with Worthy and the Association of divorce financial or ADFP is that women going through divorce, um, always encountered some sort of financial surprise and that tells you that you really need to be planning, you know, just as you plan a wedding while you're married, you need to be planning and evolving how you share financial responsibilities with your spouse. Because if you are both not on the same page, if you are both not aware if everything is not transparent, that if you do get separated or divorced, you will face nasty financial surprises.

Katie:

Can you maybe shed some light for some of us, um, who haven't gone through a divorce process or maybe don't know anyone yet? What kind of surprises can pop up during that divorce process?

Laurie:

Well, in California in particular, it's, it's can very difficult to deal with a divorce in terms of dividing property and then determining income that might be available for child or spousal support. So often one of the surprises people will encounter is not being aware of the level of debt in the marital estate. Uh, a house for instance, you may own a house, there may be a primary mortgage. There may also be a home equity line of credit so that you find that if you were to sell the house and the divorce, each of you maybe walking away with a very little amount of money. That's one big surprise. The second big surprise, I find clients, uh, tell me they're surprised when they're going through divorce and let's say I'm, the wife wants to keep the home because she her children are still in school. She just assumes that she can just stay in the house, but she may have to buy out her husband or wife share the equity, you know, depending on if it's a heterosexual couple or same sex couple. So I'll just, I'll just use spouse in this example, but not only buying out her spouse, but also can she qualify to refinance the existing mortgage in her own name and can she afford to stay in the house? It's very expensive. You have mortgage, you have property tax, which is very high in California, getting much higher as real estate prices go up. Do they have a Hoa, a maintenance. So I find that issues revolving around the marital home can change some of the biggest surprises during divorce.

Katie:

Sure. And I, you know, in our last episode of our podcast we were talking about financial infidelity. So I think, you know, it may not come as a surprise for some of our listeners that there are financial secrets in a relationship. But I think what may be shocking is that I keep finding research that one in four women just once they get married, they just hand over all financial control to their partner, usually a male partner, but there's maybe a quarter of the female population that doesn't necessarily know anything about their finances. So I'm just kinda curious, especially since you work so closely with a lot of people going through this kind of transition, is there any kind of advice or what can we, what kind of message can we share with people that you know, any sort of financial responsibility you had when you were single, that doesn't necessarily end when you get married?

Laurie:

Absolutely. Katie. I mean, no matter what your gender, I you should never really defer all responsibility for finances to your partner. When you're single, you're 100% responsible for your financial life and there should be no reason why when you are married that you advocate that financial responsibility. Uh, as simple tip that I give to people is never sign a joint tax return without reading it, number one. And number two, understanding it so many spouses, uh, you know, and sometimes it's the, it's the, sometimes it's the wife who is in charge of the finances and her spouse may not know about this and the taxes as you can see a lot of hints about your financial health and the tax return. I mean if somebody's taking early distributions out of a retirement plan because they need money that'll show up on the tax return. If somebody is self employed and not doing very well in their business, that will show up in the tax return. There are many keys in that tax return and if this moves you to to understand what you are signing,

Chase:

well, I think that that's just good practice as in general being open and honest and in your partnership talking about money and your future. I don't think you want necessarily to go into it like I got to make sure that I'm on top of this in case my relationship doesn't work out, but just for commonality and knowing that if something happens to your partner and you have to take over, God forbid something happens with an illness accident, something like that, that you're prepared for this.

Laurie:

Absolutely. Absolutely. And again, as you say, it's not just having to deal with divorce. What about job loss? If one spouse loses his or her job and you can counting on that income? Well, both of you need to be prepared to understand how your budget may be effective if that happened. And, and so he'll, aside from the tax return, really understanding how much money comes into the household each month and how much money goes out of the House vote each month. And I really encourage couples to be open and transparent. Whether or not they keep separate bank accounts or separate credit cards, that doesn't matter. Um, there needs to be a way that you are meeting with your spouse at least to two times a year, if not monthly, to just go over what you are spending because fights happened over money and these fights, I really think the vast majority of fights over money could be eliminated if people just understood what was coming in and what was going out, and you'll have different priorities from yourself, that's okay. But you cannot even have an argument an informed argument or debate or discussion if you don't even know what the baseline is.

Chase:

And that goes along the lines of just communication, right? I mean, and something that you would think and you would hope that you would have discussions even before you get married, about what are your likes, your dislikes, what are your goals with life? What, what is it that you want to accomplish? What is it you want to accomplish together? Because every decision we make, both personally and as a couple have a financial component to it. Wouldn't you say?

Laurie:

Absolutely. And life life happens. People have children. You may have, uh, uh, a high school student going to college. How would that be financed? Your car made me, your car may break down. You need to buy a new car. Um, it, couples who can anticipate these emergencies and these surprises are going to be prepared. And once again, have less conflict. And you know, when we're talking about divorce, you know, again, a lot of it is about, um, arguments over money that creates so much anxiety in a marriage. Um, and sometimes it's, it's difficult to overcome.

Chase:

So what do you do? I mean, I know that you work, um, a lot with all types of personalities and situations, but you really do kind of focus, uh, on the divorce side of things. And I know that, you know, when you say the options lady, you work with a lot of females and so kind of give us an idea, how did you go in that direction? What was it that made you want to focus on that area?

Laurie:

I've been a wealth manager or financial advisor. I manage investments for people through coast-wide wise capital group. I'm a financial advisor there and you know, I had been doing that for for some years and I started getting referrals. A lot of folks are referring women to me who were um, you know in the process of finishing a divorce or right after the divorce and they needed their settlement money to be managed. And I started realizing, boy, wouldn't it be helpful if I could work with you when then at the front end, when, when the separation occurs, when divorce is being contemplated, because so many mistakes happen through the divorce process that I really wanted to become educated about. And I wanted to be able to help in a proactive manner and that's why I got what's called a certified divorce financial analyst designation for CDSA. And I'm a member of the association of divorce financial planners and the institute for divorce financial analysts. What that means is, um, I have special qualifications and now lots of experience. I've worked on over a hundred divorce cases now that I can help either a couple acting as a financial neutral or more often than not, I help an individual acting as their financial advocate and advisor and coach through the divorce process so they can make the best decisions and they can also spend the least amount of money possible on what legal fees.

Chase:

Yeah, I would because I would think that that's, I mean that's such a painful process anyway. I mean the thought that you know that that person that you thought you were going to be with for the rest of your life and for whatever reason it doesn't work out. In your mind, can you make it easier on the couple by getting involved earlier and avoiding maybe those huge conflicts?

Laurie:

Absolutely. I mean you obviously when you're, um, you know, usually there are a couple is able to come to consensus on some issues. Okay. But I find that couples that go through the mediation process where they have a neutral mediator and maybe they have lawyers advising them on the side, but those whose go through the mediation process are going to save a lot of money on the divorce itself and also be able to be empowered to make decisions together, which enables them to be co parents to their children in the future. So I just know that the couples that have gone through mediation usually have more functional relationships as ex spouses and parents after divorce versus those that go to the litigation process where they each are dueling attorneys and it's adversarial from day one. So, you know, again, I always encourage couples to see if they can't work things out through mediation as a first step.

Chase:

Well, yeah, because I mean, we all know, I mean, not that all attorneys are like that, but I mean, they, they, they're, they're following the law. They're trying to get the best situation for their client, which means I can get really nasty.

Laurie:

They also, the paperwork, the documents, the discovery process is the court processes are in themselves, very expensive and some are more substantive than others. So if you are in California and you decide if you know that you're going to get a divorce, do you know either your off initiated or you initiated or you both initiated it. If you go to mediation, um, if the great thing is that you're, you're mediators neutral, that's great, but there's also a disadvantage. You do not have anyone giving you legal advice or financial advice. And that's where I come in. So if I'm hired by one spouse is their advocate, their financial advocates throughout the process, I can help them structure proposals on how to divide property. I can help them determine what income is available for child and spousal support and I can help them craft proposals and respond to proposals presented by their stuff. And people find that incredibly empowering and it also helps us reduce the financial anxiety they have about their future.

Chase:

So will you work directly if, if they obviously have attorneys and representation, do you work with them directly as well?

Laurie:

So oftentimes if they have an attorney, I can work as part of the team, the attorney and the client. Now sometimes I'm hired as a neutral if he gets a couple of in mediation. And one of the things I do a lot is um, if you or your spouse received equity compensation through work, maybe you received issues which are, are um, short for restricted stock units or you may receive stock options. There comes in issue where, um, options or, or our shoes that were granted during their marriage but haven't yet invested. A portion of that can actually be considered marital property subject to division. So a lot of people don't know that. They think, well, you know, I can't sell the stock. Yeah, you know, it hasn't vested . I don't own it yet. So my spouse gets none of it. That's not true. And so often I'm hired by the couple as a neutral. Could you the analysis to figure out, well, he shared this triage. You've asked two years from now this tranche, vests three years from now, your spouse can child 18% and fifth and 23% of that. And, and so that's an example where a financial neutral and can work with a couple to help save money in their divorce process.

Katie:

And Laurie, given that the divorce rate is so high in this country, are you seeing more and more people with prenups that are maybe, is that helping in the divorce process when it comes to dividing assets?

Laurie:

Oh, I don't see a lot of prenups. Um, occasionally, you know, they come my way, but I totally think we should have more free. Now. I personally have a prenup because I got married later in life and my husband had gone through a rotten divorce, so I insisted on a prenup. Um, any time if you had been married before and you have children or blended families and you might have assets on your own, you definitely want a prenup because it shows she for going into a second or third marriage, it protects you, number one. And number two, it really helps eliminate any confusion as to what happens if the next marriage doesn't work out. The statistics show that if you have been, um, uh, married twice or three times the rate of divorce or more common in people who have been married more than once.

Katie:

Oh Wow. So for our listeners who are maybe having a little bit, um, increase in heart palpitations because they don't have a prenup and it's maybe their second or third marriage, is there a possibility to get a postnup or something like that?

Laurie:

Yeah, yeah. I see the issue. The person up come up a lot and it's, it's, um, it's challenging because if you go to your spouse after 10 years of marriage and say, hey honey, I want to post up, the marriage is going great. Yeah. Geez after they introduce a little bit of, of, um, paranoia in there. So, you know, you can do postnup, but frankly, just do it before you get married, do the prenup.

Felipe:

And, and that came up in a recent presentation I had Laurie, where a student asked me is they had read the article on a Amazon's founder, Jeff Bezos and how much he ended up having, how much his divorced ended up costing. And, and they asked the same question, is it, is there something you could do after? I was like, well, at that point, if that's what you're, the option you're looking at, it's a little too late down the road. That's a conversation half beforehand, right?

Laurie:

Yeah, I think so. But the postnups do happen. They're out there. They are out there and I do know attorneys who do work on those issues.

Chase:

I can't imagine as if I'm, my wife came to me all of a sudden and said that I think a red flag would be flying in and think we might need to have a longer conversation.

Katie:

I only brought it up because it was actually recommended to me that I get a postnup. I didn't, I don't,

Chase:

you're recently married.

Katie:

I'm recently married. Completely happy. Um, but I, I am a writer and so I've had people approach me about writing a book. I didn't, I don't have enough assets to protect. Now, to be quite honest, I don't think I had the money to pay the legal bills to pay for the prenup. But if I ever found myself in that situation, I don't know, Laurie. I mean, is that something that I, those situations that happen where you maybe don't have assets when you're starting a marriage, but, or even if my husband were to go on and create a video game or something, is that an asset that he would want to protect?

Laurie:

Well, one issue that you may want to take about, um, or anybody listening, is the issue about debt accumulated during accumulating during marriage? You know, where a postnup may make sense is this, let's say you're married several years and one of you wants to start your own business and have to borrow money and you want to make sure that your spouse isn't saddled with that debt. Uh, you know, if the business doesn't do well and you get a divorce. So the post nups and Prenup don't just protect assets. They also can protect a other spouse from one spouse to set. Because in California, typically this is just a, you know, the, the, the baseline any assets or debt I accumulated during marriage are considered community property unless you have a agreement stating that such as separate property. And so I do see, um, divorces where there's a lot of debt, a lot of credit card debt. Um, there might be loans for the business, there may be a four one k one, and in that case boy a postnup, it helps protect the other Strauss to guest having to be responsible for half of that debt.

Chase:

So Laurie, you just sparked something in me because I was, and it hadn't have been always under the assumption that if, especially with credit card debt for sure, if your spouse is not on that account, that if something happens to you that you're not going to be responsible for that. Isn't that correct?

Laurie:

Well, at what say, so you're saying, so let's repeat that one more time.

Chase:

For instance, my wife and I have four separate credit card accounts. I have my own, she has her own. If something happens to me, uh, and she's not on my credit card account, she's not going to be liable for that.

Laurie:

Think you, you may want you want to check that out and get clarity on that situation because you're married. So, um, you know, there may be ways at this, you know, there may be ways to work with, um, a specialist on structuring credit card debt, but typically if you're, if you're married, it's community debt.

Chase:

That's interesting.

Laurie:

Like, yeah, I mean just like, um,

Chase:

okay. Still, but that's in the divorce process. That's not necessarily the creditors calling you individually trying to get that debt correct. So that might be community property as far as the as the total amount of debt when it comes to the separation of assets and debt in, uh, in, in the divorce process. But as far as legally collecting debt,

Laurie:

I don't know. I'm not a debt collector, so I don't know that distinction. But I do know that we have plenty of couples, um, coming into mediation where, you know John is on the credit card. Sarah is not on the credit card, but it is community debt.

Chase:

All right. And I was to clarify about that and I know my brain is

Laurie:

the next podcast, the better you have a credit expert come on the next spot down.

Chase:

No, and it's funny you say that cause I know from a legal standpoint, I know that that is the situation, but from, I'm not an attorney so I don't, you know, better than, than I would on the community property. You're right that, that's an interesting one. But by my brother, my wife, his wife, ex wife had a credit card. He didn't even know about

Katie:

financial infidelity

Chase:

and yet

Laurie:

because they were, and that was in their divorce settlement. Yes. Unfortunate.

Chase:

Yeah. So Lori, one more question for you before we let you go. If you could give any advice to someone who not only may be contemplating divorce but just maybe is realizing by listening to this podcast that they don't understand and may not know everything that's going on in their financial lives, what would you tell them to do?

Laurie:

So you need to start gathering as much information as possible. So when, when women make appointments to see me, that's what we do. I asked them to gather as much information as possible. Um, can you get access to the last three years of tax returns? Can you get access to your mortgage statement? Um, what about 401K, any statements? Have you, even if you know, even if you don't know what your spouse has specifically, you can make some assumptions. Where is he or she employed? What is their position? Might that position get a bonus? My deposition get equity compensation? Um, what about student loans? Suggest start varying information. I always give people a copy of a net worth template. That's great. You with everything you own and everything you owe otherwise known as assets and debt. And that's a good starting point. And then by looking at the tax returns, if you, if you can't get your spouse's pay stubs, well looking at your tax returns, we can sort of make some assumptions about ranges of child and for spousal support just by gathering this information. Because when women come to see me, when, when they're contemplating divorce or maybe their spouse is said, you know, I want a divorce, they want to know what they're going to end up with after the divorce. They want to know what assets they'll have, what debt they'll have, still have what get the house. If they can be able to stay in their house, um, they're gonna want to know what they're going to receive or have to pay in child support and spousal support. So it's rice, it's sad or as much information as you can.

Chase:

Oh, I don't know why this made this topic makes me feel so uncomfortable.

Katie:

Really.

Chase:

It really does. Yeah, it really, really does. And maybe that's just because I feel like I'm so happily married, you know, I love happily married and I'm with chase on this. The idea of somebody coming to me and saying, I don't want to be with you anymore for the rest. I mean that just, that whole thing just kind of freaks me out.

Katie:

Well, yeah. Um, yeah, I'm not looking forward to that either. I don't want that. If AJ's listening, please don't ever do that, but, okay.

Laurie:

Well, I mean, yeah, that's the whole point. You get married many people who are married starting families. It's very, obviously there's, there's emotional and legal issues and then the financial unraveling, it's just a sort of a byproduct that isn't fun at all. So it's, it's very hard and you know, it's there when I meet with people, I'm not a therapist, but I have to be very empathic. Um, and, and really it really a cheerleader and, and trying to help people know that they will be eventually in a better place. It's a long road, even be patient and you thought to do some hard work, but if you do that work, you will be okay and be able to rebuild your, your life.

Chase:

Laurie, Where can people find you? Uh, if, if just in general at for advice, uh, but to hire you, maybe they're going through that process, where can they best find you?

Laurie:

The best way to reach me as my website, the options lady.com, that's theoptionslady.com. And you can also Google me as I'm the only Laurie Itkin in the world for better or for worse. I'm the only one in the world that's L-A-U-R-I-E I-T-K-I-N

Katie:

and Laurie. I'll put a link to your website and your social media profiles in our show notes page too.

Chase:

Wonderful. Thank you. And you know from the SDFLC, Laurie, we can't thank you. What you do for our organization and the, the pro bono time that you give us, uh, is invaluable in our clinics. So thank you so much. Thank you. I'd love doing them. I love, uh, my colleague who also volunteer. Wow. I'd like to thank Laurie. It can, she was phenomenal. And even though that, like I mentioned before in the interview that it made me a little uncomfortable. It did open up a lot of eyes for me. And I did go home and talk. Yeah. My wife that night and said, I love you and I'm never ever, ever going to divorce you ever. And she said, okay, me too.

Felipe:

She was probably confused.

Katie:

That's really sweet. I kind of went home and told her the same thing. To be completely honest, no, but I, I do have to say that I appreciated learning as much as I did about divorce planning just because I like having that in my wheelhouse.

Chase:

I think I took away more than the divorce. I think you can take away the divorce part of it and what I really did, I think everybody can be in the, if you, even if you were happily married and you could have listened to this and taken a lot from it, I think the one thing that we really learned was both partners need to be involved. Whether they physically are making the payments or not. Doesn't, that's not the, that's not the issue, but both need to know where accounts are. They need to know how much money's coming in. They need to know how much money's going out. If something happens, you're prepared and not taken by surprise.

Felipe:

Absolutely. Cause we hear about it. You know, sometimes it's elderly who maybe haven't handled their finances for 50 years because their significant other was, and you know, they pass through there, they're no longer able to, uh, handle the finances and they're scrambling. They can't get logins, they don't know where to send payments to. And you know, it's just a matter of not being part of the process at all.

Chase:

Yeah. And it's really interesting that she mentioned that there's a whole name for seniors that are getting divorced now to, uh, that, that surprises me. Usually you would think that if you've made it that long,

Katie:

never say never,

Chase:

but you'd never know. You just never know. Again, I'd like to thank Laurie again, uh, for her time. And there was one thing that I did want to bring up, uh, and we talked about credit and we whether, uh, that if you're going to be liable for your spouse's credit and the answer specifically like credit card debt, credit card debt in this case, right. Because the issue is if you're not on that person's account, it's just your name on that account. You're solely responsible according to the debtor or to the debtee, your responsible, the creditor and they're there. They can only come after you legally. However, in community property states, whatever debts are accumulated or whatever earnings are accumulated during the period of that marriage, those communities states are going to say 50 50 whether whether you have $50,000 on just your credit cards. And if you and I were married and I had nothing, we would say, well I have nothing. So I'm going to, well maybe she did all the shopping. So in community property states I would be, I would be, you'd be responsible for it. I'd be responsible for 25,000 yeah. So in that case we were, we were both right. However, the one thing, how would it have nothing to do with your credit score, even though you owe that debt, that would not, if you didn't go paid, the only people you'd be in trouble with is the courts. But you would not, that wouldn't come around on your credit report.

Felipe:

So the creditors can't come after you, but the legal system, the legal system pay.

Chase:

Correct. And typically when there's a death, it's the estate. So even though if if you and I were married and I passed away, you would be responsible, you wouldn't technically be responsible for those debts, but your husband's estate, my estate would be, which you're a part of. Right. So in other, in other terms, those would have to be rectified. Okay. Well that makes sense. Yeah. So thank you to my good friend who is an attorney and explained all that from that side. So, uh, I knew about the credit score is, I knew about the credit reports. I'm involved in that, but, but when Laurie brought that up, I gotta let that, that was the first phone call I made when I got off the phone. What do we got next week?

Katie:

We are talking about the American dream next week. First Time Home Ownership.

Chase:

First Time hold ownership. How to buy a house.

Felipe:

Could be more fun topic, but just as nerve wracking.

Chase:

Just as nerve wracking. Yeah. Financing a house, going through that process. If you're not prepared like anything else, it can be overwhelming. But if you're prepared and you have a good lender and a good realtor to be, I don't want to say easy, it would be a lot easier. So come back next week.

Speaker 1:

See you then.