IAFP 2003 Considerations in Divorce Akeela Davis, CFP, RFP, FDS, EPC.
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Transcript of IAFP 2003 Considerations in Divorce Akeela Davis, CFP, RFP, FDS, EPC.
![Page 1: IAFP 2003 Considerations in Divorce Akeela Davis, CFP, RFP, FDS, EPC.](https://reader030.fdocuments.us/reader030/viewer/2022012922/56649ec45503460f94bce114/html5/thumbnails/1.jpg)
IAFP 2003Considerations in Divorce
Akeela Davis, CFP, RFP, FDS, EPC
![Page 2: IAFP 2003 Considerations in Divorce Akeela Davis, CFP, RFP, FDS, EPC.](https://reader030.fdocuments.us/reader030/viewer/2022012922/56649ec45503460f94bce114/html5/thumbnails/2.jpg)
Questions about Divorce
Can I manage by myself?
How much will I pay in Child Support?
Will I be a bag lady? Will it scar my kids?
![Page 3: IAFP 2003 Considerations in Divorce Akeela Davis, CFP, RFP, FDS, EPC.](https://reader030.fdocuments.us/reader030/viewer/2022012922/56649ec45503460f94bce114/html5/thumbnails/3.jpg)
Know Your Boundaries
Let the client know your boundaries!
![Page 4: IAFP 2003 Considerations in Divorce Akeela Davis, CFP, RFP, FDS, EPC.](https://reader030.fdocuments.us/reader030/viewer/2022012922/56649ec45503460f94bce114/html5/thumbnails/4.jpg)
What can an advisor do?
Be an information source Have a list of books you can recommend Have a list of referable counselors Have a list of referable lawyers Have a list of referable mediators
![Page 5: IAFP 2003 Considerations in Divorce Akeela Davis, CFP, RFP, FDS, EPC.](https://reader030.fdocuments.us/reader030/viewer/2022012922/56649ec45503460f94bce114/html5/thumbnails/5.jpg)
A Financial Divorce Specialist
Raise questions, give information Emergency funds Insurance Tax consequences
![Page 6: IAFP 2003 Considerations in Divorce Akeela Davis, CFP, RFP, FDS, EPC.](https://reader030.fdocuments.us/reader030/viewer/2022012922/56649ec45503460f94bce114/html5/thumbnails/6.jpg)
A Financial Divorce Specialist
Raise questions, give information Revoking existing POA Preparing for separation Credit rating
![Page 7: IAFP 2003 Considerations in Divorce Akeela Davis, CFP, RFP, FDS, EPC.](https://reader030.fdocuments.us/reader030/viewer/2022012922/56649ec45503460f94bce114/html5/thumbnails/7.jpg)
A Financial Divorce Specialist
Raise questions, give information Financial statements Demystify pensions Establish tax discounting rates
![Page 8: IAFP 2003 Considerations in Divorce Akeela Davis, CFP, RFP, FDS, EPC.](https://reader030.fdocuments.us/reader030/viewer/2022012922/56649ec45503460f94bce114/html5/thumbnails/8.jpg)
Modeling
Abstract information
Visual model
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The Family
Michelle Brady – 46 years Frank Brady – 47 years Married 20 years Four children ages 14, 10, 5 and 4
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Family Finances (Income)
Frank – Salary $67,000/yr Frank – Dividends IRS $30,000/yr Michelle – Salary $170,000/yr Michelle – Dividends IRS $30,000/yr Michelle – Dividends ABC $70,000/yr
Total Family Income $367,000/yr
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Family Finances (Expenses)
Estimated Income Tax $114,000 Michelle’s RRSP $14,500 Accelerated Mortgage $74,500 RESP $8,000 General Living Expenses $146,500
Total Family Expenses $357,000/yr
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Family Assets (Joint)
Value Liability Net Asset
Residence$650,000 $300,000 $350,000 MM Fund $52,000 $0 $52,000 IRS* $525,000 $121,900 $403,100
$805,100
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Family Assets (Frank)
Value Liability Net Asset
RRSP $63,000 $0 $63,000 Pension $141,000 $0 $141,000 Vehicle $15,000 $0 $15,000 Boat $25,000 $0 $25,000
$244,000
![Page 14: IAFP 2003 Considerations in Divorce Akeela Davis, CFP, RFP, FDS, EPC.](https://reader030.fdocuments.us/reader030/viewer/2022012922/56649ec45503460f94bce114/html5/thumbnails/14.jpg)
Family Assets (Michelle)
Value Liability Net Asset
RRSP $181,000 $0$181,000
MM Fund $21,000 $0 $21,000 IRS* $20,000 $0 $20,000
$222,000
![Page 15: IAFP 2003 Considerations in Divorce Akeela Davis, CFP, RFP, FDS, EPC.](https://reader030.fdocuments.us/reader030/viewer/2022012922/56649ec45503460f94bce114/html5/thumbnails/15.jpg)
Exempt Assets? (Michelle)
Value Liability Net Asset
Mutual Fund $175,000 $0$175,000
ABC* $1,600,000 $127,700 $1,600,000
$1,775,000
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Proposition #1
Frank Shares in ABC growth since marriage Gets cash buyout from both businesses Keeps 100% pension Gets open mutual funds for home equity Child support payments = income only Frank gets some of Michelle’s RRSP MM split 50/50
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Proposition #1 – Summary
Frank Gets $939,847 in cash and RRSP No debts 100% of his pensions Pays $16,776 tapering to $6,636 in child support Lifestyle expenses = $62,000/year Gross income = $67,000
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Proposition #1
Michelle Keeps the children Gets ABC ½ ABC growth since marriage Keeps IRS Takes out loans to buyout Frank ABC/IRS Keeps home with mortgage Gets child support payments Keeps most of her RRSP MM split 50/50
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Proposition #1 – Summary
Michelle $214,000 in cash and RRSP Assets $2,775,000 - $941,000 debts, plus tax
liability on businesses Receives child support $16,776 - $6,636 Debt repayments $104,868 annually Lifestyle expenditures = $98,200 Gross income +$300,000
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Client Concerns and Fears
Michelle & Frank - Net Worth
$-
$500,000
$1,000,000
$1,500,000
$2,000,000
$2,500,000
$3,000,000
$3,500,000
$4,000,000
$4,500,000
$5,000,000
$5,500,000
$6,000,000
$6,500,000
$7,000,000
46 51 56 61 66 71
Michelle's Age (Years)
Ne
t Wo
rth
($
)
Frank
Michelle
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Client Concerns and Fears
Michelle & Frank - Liquidation
$-
$250,000
$500,000
$750,000
$1,000,000
$1,250,000
$1,500,000
46 51 56 61 66 71
Michelle's Age (Years)
Liqu
id A
sset
s ($
)
Michelle
Frank
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Underlying Numbers
Michelle's Financial Sheet
Age Net SalaryOther Income CPP
Child Support
Living Expenses Mortgage
Expense Adjustment Cash Flow
Liquid Assets RRSP
Real Estate Equity Net Worth
46 2.00% 2.00% 14 Years 3.00% 20 Years 5.00% 7.50% 3.00%46 106,782$ 89,258$ -$ 16,776$ 98,806$ 104,868$ 52,500$ 9,142$ 26,000$ 188,900$ 1,814,000$ 2,028,900$ 47 108,918$ 89,258$ -$ 16,776$ 101,770$ 104,868$ -$ 8,313$ 36,442$ 217,568$ 1,916,518$ 2,170,527$ 48 111,096$ 89,258$ -$ 16,776$ 104,824$ 104,868$ -$ 7,439$ 46,578$ 248,385$ 2,023,189$ 2,318,152$ 49 113,318$ 89,258$ -$ 16,776$ 107,968$ 104,868$ -$ 6,516$ 56,345$ 281,514$ 2,134,238$ 2,472,097$ 50 115,584$ 89,258$ -$ 14,076$ 111,207$ 104,868$ -$ 2,843$ 65,678$ 317,127$ 2,249,902$ 2,632,708$ 51 117,896$ 89,258$ -$ 14,076$ 114,544$ 104,868$ -$ 1,819$ 71,805$ 355,412$ 2,370,438$ 2,797,655$ 52 120,254$ 89,258$ -$ 14,076$ 117,980$ 104,868$ -$ 740$ 77,214$ 396,568$ 2,496,120$ 2,969,903$ 53 122,659$ 89,258$ -$ 14,076$ 121,519$ 104,868$ -$ (394)$ 81,815$ 440,811$ 2,627,245$ 3,149,871$ 54 125,112$ 89,258$ -$ 10,764$ 125,165$ 104,868$ -$ (4,898)$ 85,512$ 488,371$ 2,764,130$ 3,338,013$ 55 127,614$ 89,258$ -$ 10,764$ 128,920$ 104,868$ -$ (6,151)$ 84,889$ 539,499$ 2,907,115$ 3,531,503$ 56 130,167$ 89,258$ -$ 10,764$ 132,787$ 104,868$ -$ (7,466)$ 82,983$ 594,462$ 3,056,569$ 3,734,014$ 57 132,770$ 89,258$ -$ 10,764$ 136,771$ 104,868$ -$ (8,847)$ 79,665$ 653,546$ 3,212,889$ 3,946,100$ 58 135,425$ 89,258$ -$ 10,764$ 140,874$ 104,868$ -$ (10,294)$ 74,802$ 717,062$ 3,376,501$ 4,168,365$ 59 138,134$ 89,258$ -$ 6,636$ 145,100$ 104,868$ -$ (15,940)$ 68,248$ 785,342$ 3,547,867$ 4,401,456$ 60 140,897$ 89,258$ -$ -$ 111,453$ 104,868$ (38,000)$ 13,834$ 55,720$ 858,743$ 3,727,485$ 4,641,947$ 61 143,715$ 89,258$ -$ -$ 114,797$ 104,868$ -$ 13,308$ 72,339$ 937,648$ 3,915,894$ 4,925,881$ 62 146,589$ 89,258$ -$ -$ 118,241$ 104,868$ -$ 12,738$ 89,264$ 1,022,472$ 4,113,676$ 5,225,411$ 63 149,521$ 89,258$ -$ -$ 121,788$ 104,868$ -$ 12,123$ 106,465$ 1,113,657$ 4,321,461$ 5,541,584$ 64 152,511$ 89,258$ -$ -$ 125,442$ 104,868$ -$ 11,460$ 123,911$ 1,211,682$ 4,539,934$ 5,875,527$ 65 155,561$ 89,258$ -$ -$ 129,205$ 104,868$ -$ 10,747$ 141,567$ 1,317,058$ 4,769,832$ 6,228,456$ 66 -$ 70,000$ 8,928$ -$ 118,581$ 96,148$ (14,500)$ (135,801)$ 159,391$ 1,415,837$ 5,011,959$ 6,587,187$ 67 -$ 70,000$ 9,107$ -$ 122,139$ -$ -$ (43,032)$ 913,394$ 1,522,025$ 4,185,663$ 6,621,081$ 68 -$ 70,000$ 9,289$ -$ 125,803$ -$ -$ (46,514)$ 916,032$ 1,636,177$ 4,311,233$ 6,863,441$ 69 -$ 70,000$ 9,474$ -$ 129,577$ -$ -$ (50,102)$ 915,319$ 1,758,890$ 4,440,570$ 7,114,779$ 70 -$ 70,000$ 9,664$ -$ 133,464$ -$ -$ 34,144$ 910,983$ 1,767,684$ 4,573,787$ 7,252,454$
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Underlying Information
Assumptions about Interest rates Tax rates Inflation rates
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Another Scenario
Michelle & Frank - Net Worth
$-
$500,000
$1,000,000
$1,500,000
$2,000,000
$2,500,000
$3,000,000
$3,500,000
$4,000,000
$4,500,000
$5,000,000
$5,500,000
$6,000,000
$6,500,000
$7,000,000
46 51 56 61 66 71
Michelle's Age (Years)
Ne
t Wo
rth
($
)
Frank
Michelle
![Page 25: IAFP 2003 Considerations in Divorce Akeela Davis, CFP, RFP, FDS, EPC.](https://reader030.fdocuments.us/reader030/viewer/2022012922/56649ec45503460f94bce114/html5/thumbnails/25.jpg)
Another Scenario
Michelle & Frank - Liquidation
$-
$250,000
$500,000
$750,000
$1,000,000
$1,250,000
$1,500,000
$1,750,000
$2,000,000
46 48 50 52 54 56 58 60 62 64 66 68 70
Michelle's Age (Years)
Liq
uid
Ass
ets
($
)
Frank
Michelle
![Page 26: IAFP 2003 Considerations in Divorce Akeela Davis, CFP, RFP, FDS, EPC.](https://reader030.fdocuments.us/reader030/viewer/2022012922/56649ec45503460f94bce114/html5/thumbnails/26.jpg)
Summary – Michelle’s Concerns
Impact on children?
![Page 27: IAFP 2003 Considerations in Divorce Akeela Davis, CFP, RFP, FDS, EPC.](https://reader030.fdocuments.us/reader030/viewer/2022012922/56649ec45503460f94bce114/html5/thumbnails/27.jpg)
Summary – Michelle’s Concerns
Can she make it on her own? What would her retirement look like?