Investing assets for future growth is an important part of the financial picture. I teach my clients to be realistic about investment returns. I teach them to account for market risk. They cannot assume that the same return will occur every year. They cannot forget about inflation and taxes. Those will affect their investments and, they need to figure in longevity. Women are living to be mid 90’s and men just a few years less. I make sure their plan takes into account that it may need to sustain them for 40 or 50 years! Finally, we revisit the plan regularly to see if anything has changed. We do not just set it and forget it. Many things can happen to change your plans the world has unexpected events.
When it comes time to discussing and figuring out your finances during a divorce, the most frustrating answer you can give your attorney or financial planner that will make your blood boil is, “I don’t know!” You feel helpless, angry and at a huge disadvantage because you have no clue where your money is or how to find it. When you are going through a divorce, it is crucial if not vital to know this information, especially because it will all funnel into your financial settlement. Luckily, Aviva Pinto, a Managing Director of Bronfman Rothschild who is also a Certified Divorce Financial Analyst (CDFA) and Certified Divorce Specialist with over 25-years of experience is here to help. She works with clients to determine the most appropriate course of action for their situation and it all starts at the very beginning.
Ilyssa Panitz: Thank you so much for doing this! Before we dig in, tell me all about you?
Aviva Pinto: I was born in New York and grew up in South Africa, New York and Evanston, Illinois. My parents came to the US from South Africa when my father was doing his residency. I was raised by two hard working parents in the medical field, who stressed education as the way to get ahead in the world. They had a stable marriage and imparted their values to their three kids. I graduated from the University of Michigan and then received my MBA from University of Chicago. I worked at several asset management firms doing both institutional and personal wealth management before finding my passion in helping those going through divorce get their finances back on track.
Ilyssa Panitz: Can you tell me what brought you on this specific career path given how your parents have a fantastic marriage and you were surrounded by a mother/father in the world of medicine?
Aviva Pinto: I was called by a matrimonial attorney I had worked with, who told me there was a new designation called, CDFA, better known as a Certified Divorce Financial Analyst. I had worked with her on a few of her client’s divorces and she said it was a way to learn more about the divorce process, be certified and thus be a better resource for clients and to matrimonial attorneys. I immediately signed up for the course as I wanted to learn more about how I could be helpful to the non-monied spouses going through divorce. I then joined the National Association of Divorce Professionals and became the Director of the Long Island Chapter and, I took their course to become a Certified Divorce Specialist.
Ilyssa Panitz: So you help first-timers learn the ropes when it comes time to money, numbers and everything financial?
Aviva Pinto: I love being able to give the non-monied spouse the tools and knowledge they need to better navigate their finances before, during and after their divorce.
Ilyssa Panitz: Why is it important to know everything about your finances/money before you file for divorce?
Aviva Pinto: For those who are ending a marriage, having a sound financial plan can help keep you organized during the divorce process and help you plan for your financial future after the divorce. You will need to gather important documents to start the divorce process. Both parties will have to complete a sworn statement of their income, expenses, assets, and liabilities. This document, which is filed with the court, shows the divorcing couple’s financial situation and is what the judge will use to determine alimony and child support payments.
Ilyssa Panitz: This sounds intense. Can you walk us through it?
Aviva Pinto: You will need to gather estate planning documents such as Wills, Powers of Attorney, trusts and pre-nuptial agreements. Pull together financial information such as bank account statements, investment account statements, credit card statements, tax returns for the past five years and business partnership agreements. Organize income information such as payroll statements, investment property income, insurance coverage information and deeds and titles for vehicles and real estate. The divorce process can be costly. Make sure you have set aside cash to pay bills, living arrangement and cover legal fees. Divorce entails making the money that supported one household, support two households in the future. Knowing exactly what you spend and what you anticipate spending in the future is important to determine what you will need to sustain your lifestyle after divorce. Your budget should include all mortgage and debt payments, anticipated taxes, home maintenance, personal and household spending such as groceries, clothing, laundry, health care, insurance, attorney fees, education, and entertainment spending. Your budget will show you whether you can sustain your current lifestyle or will need to increase your income or decrease spending in the future. Another reason to gather everything ahead of filing is so that the information does not “disappear.” While married you can have access to joint statements and documents. Once the divorce commences, some find that they cannot access the information as easily. Just as important as gathering all the documents is understanding what you own jointly and what is your individually. If you live in a community property state such as: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin, all marital property will be divided 50–50 according to the court unless agreed to otherwise by the divorcing spouses. If you live in an equitable distribution state (all other states except Alaska), marital property will be divided between spouses in a way that is equitable, or fair. The court decides what’s fair based on a set of factors that take into account the length of the marriage, each spouse’s financial situation, what each of you contributed to the marriage and what each spouse will need to move forward after divorce. So, it is important in both community property and equitable distribution divorces to have a correct assessment of what is owned jointly and what is owned separately. For example, homes, inheritances, pensions, retirement accounts, jewelry, art, and collectibles.
Ilyssa Panitz: What about the marital residence?
Aviva Pinto: For most couples, their home will be their largest asset. You will need to agree who will retain the marital home, or whether it needs to be sold and the proceeds used as part of the divorce settlement. Keeping the house may be your desire, but, factoring in whether you will be able to afford the mortgage, taxes and maintenance going forward in addition to your day to day living expenses, needs to be considered. Equally important to determining which assets are yours and which assets you desire, is understanding your debts (credit card debt, vehicle loans, mortgage, student loan, etc.) Document the outstanding balances, monthly payments, and interest rates for any debts you have. In community property states any debts incurred during marriage are presumed to be owed by both spouses and must also be divided in a divorce. In an equitable distribution state, marital debt will be divided between spouses in a way that is equitable, or fair. Generally, one is only liable for their spouse’s debts if the obligation is in both names.
Ilyssa Panitz: How do you help guide a woman in filling out her statement of net worth?
Aviva Pinto: For those who have not handled the finances, filling out the statement of net worth can be overwhelming. It helps to work with a financial advisor to navigate this process, preferably a Certified Divorce Financial Analyst (CDFA) who specializes in the financial issues surrounding divorce. A CDFA can help you manage your immediate financial needs and help set goals and objectives for investing and retirement planning. You will need to gather estate planning documents such as Wills, Powers of Attorney, trusts and pre-nuptial agreements. Pull together financial information such as bank account statements, investment account statements, credit card statements, tax returns for the past five years and business partnership agreements. Organize income information such as payroll statements, investment property income, insurance coverage information and deeds and titles for vehicles and real estate. List your insurance coverage — life, disability, health care, long-term care, home(s), and vehicle(s).
Ilyssa Panitz: What do people need to know when diving everything they had during the course of the marriage?
Aviva Pinto: When you are dividing assets, you will need to understand the tax consequences of liquidating anything you have. For example, if you are going to be receiving half of a taxable investment account, you will need to make sure that the assets are split equitably. Taking on highly appreciated assets that will need to be sold for liquidity will incur capital gains and you will have a large tax bill to pay. The tax implications of selling a house, selling a stock, distributing an IRA, or withdrawing from a Roth IRA can be very different from a net after-tax perspective. It is therefore important to work with CDFA prior to accepting the agreement. You will also need to speak with your accountant or tax advisor to determine if you are filing your taxes single or jointly and the tax consequences of your divorce stipulations. Make sure that taxes are up to date and that you have copies of prior tax returns. Your tax professional will be able to determine whether you will be in a higher or lower tax bracket than when you were married and how this will affect your overall financial plan. If you anticipate being in a lower bracket in retirement, it may be better to fund pre-tax accounts like traditional IRAs and 401(k)s. If you expect your tax bracket to be higher in retirement, it is likely best to fund after-tax accounts like Roth IRAs or Roth 401(k)s. If you have dependents, you will also need to determine who will claim the deduction. Do not forget about inflation. Inflation can have dramatic long-term effects on a settlement. Agreeing to a specific settlement without considering inflation can leave you short in the future. Be sure to work inflation into your settlement negotiations. These tasks can seem daunting, but also having someone help you organize the information and know what to look for will help you be in control of the process.
Ilyssa Panitz: Is it common for a woman to not be as schooled as her soon-to-be ex-husband when it comes time to knowing about their assets, where the money is, where it is invested and with whom?
Aviva Pinto: It is not just women who are not as schooled as their soon to be ex. Whichever spouse was handling the money will be in a better position. The one paying the bills, reading the investment statements, speaking with financial managers, bankers, their trust attorney, and accountant will always have the upper hand. It could be the woman. In “grey divorces” (50+) it tends to be the men who are the ones who have been handling the finances. Younger couples tend to delegate the responsibility to one person and the other is less involved. During the information gathering process we discussed above, it will be easy to piece together where the money is, where it is invested and with whom. If the statements are coming in paper form — it is easiest. If they are electronic, you will have to have access to passwords to see the information. Joint accounts should not be a problem — calling or walking into the bank or into the custodian with identification will allow you access.
Ilyssa Panitz: Why should women not beat themselves up if they were not entrenched in the finances before but instead use this as an opportunity to learn?
Aviva Pinto: Many women feel as if they are “stupid” for not knowing the financial information. I have clients who are very smart professionals — doctors, lawyers, own their own business, but they have delegated the responsibility of the finances to their soon to be ex. That does not mean they are stupid. I would have no idea how to write a law brief, my specialty is finances. It only means that they need to start doing something they have not done before. Financial literacy is teachable, and it will empower them going forward.
Ilyssa Panitz: You just answered my next question. This financial stuff is not difficult to get the hang of.
Aviva Pinto: For some people they shut down at the mere mention of numbers! The trick is to communicate with them in the way they will be able to understand it. Some people learn with pictures or charts. Others like to see rows and columns that neatly add up. They do not have to become experts at the finances — but they do need to know how much is going to be coming in, what is going to be spend, how to budget so that they are not overspending and that they need to save and invest for their future. They do not have to do it by themselves. Wealth managers can help them with the budgeting and help them allocate their assets and manage their money for the future. Even those with little or no financial experience can become financially savvy by asking the right questions and seeking help. Wealth managers can help them with the budgeting and help them allocate their assets and manage their money for the future. With practice and time, anyone can learn to understand their finances.
Ilyssa Panitz: Why will women gain confidence once they take control of their money?
Aviva Pinto: Every new skill gives one a sense of empowerment especially if it is something they never did before, thought they could not do or were belittled about it in the past. Mastering your own finances and being in control of your financial destiny is a very powerful feeling. Investing assets for future growth is an important part of the financial picture. You need to be realistic about investment returns. You need to account for market risk. You cannot assume that the same return will occur every year. You cannot forget about inflation and taxes. Those will affect your investments and, figure in longevity. Women are living to be mid 90’s and men just a few years less. Make sure your plan takes into account that it may need to sustain you for 40 or 50 years! You must revisit your plan regularly to see if anything has changed. Do not just set it and forget it. Many things can happen to change your plans — the world has unexpected events
Ilyssa Panitz Does a woman who is going through a divorce have to be rich to hire a financial planner and invest her money?
Aviva Pinto: No matter how much you make, it is important to have someone who can help you before, during and after your divorce. They can save you money in the long run. Financial mistakes related to divorce settlements are common and often rooted in not realizing the consequences of a decision that seemed to make sense at the time. These mistakes can happen when decisions are made not considering the ramifications from a financial standpoint. Creating the right investment strategy for you pre- and post-divorce is a dynamic process that requires planning and a lot of patience. Your financial advisor can help you optimize that process so that your efforts keep you on the road toward reaching your goals and enjoying the journey along the way. There are various types of financial planners, those who charge a fee for the plan and those who include the plan in their services when they manage the money. The IDFA website has a list of CDFA’s nationally that can lead you to one that best meets your budget and needs.
Ilyssa Panitz: How do you structure a portfolio for a first-time investor going through a divorce?
Aviva Pinto: Structuring a portfolio for any investor — not just a first-time investor going through divorce — takes into account:
1. Their time horizon — how old they are and how long the money will have to last. Is the money just for them or are they planning to gift it to charity or for future generations?
2. Their liquidity needs — will they need to be drawing from the portfolio to pay bills and need income to be kicked off from the portfolio.
3. Their risk tolerance — will they be freaking out each time the market takes a little dip, or will they only look at the statements periodically and understand they are investing for the long term.
4. Their tax situation. Some investors are given half of a portfolio with highly appreciated stock. Selling those positions will incur capital gains. Carefully managing those positions is very important so as not to cause them huge tax liabilities.
5. Their expectations. Some clients do not care if the portfolio does not grow a lot — they want to know that their principal is safe. Others expect huge returns. Managing their expectations about the expected returns from their investments is also important in structuring a portfolio.
6. Their familiarity with investing. Those who are new to investing will need a lot of hand holding and lots of meetings and calls to get them comfortable with the jargon and the process. They will need to be educated and given a lot of time and patience.
Ilyssa Panitz: It’s like Cuba Gooding Jr. said in the 1996 movie “Jerry Maguire,” show me ‘da money?
Aviva Pinto: Investing assets for future growth is an important part of the financial picture. I teach my clients to be realistic about investment returns. I teach them to account for market risk. They cannot assume that the same return will occur every year. They cannot forget about inflation and taxes. Those will affect their investments and, they need to figure in longevity. Women are living to be mid 90’s and men just a few years less. I make sure their plan takes into account that it may need to sustain them for 40 or 50 years! Finally, we revisit the plan regularly to see if anything has changed. We do not just set it and forget it. Many things can happen to change your plans the world has unexpected events.
Ilyssa Panitz: Are there any books, courses, podcasts you recommend she watches to learn the tricks of the trade?
Aviva Pinto: Best Book: Violet P. Woodhouse, “Divorce & Money”
Best blog: https://www.divorcemag.com/blog?fwp_category_facet=financial
Podcast: Word of Mom Radio
Ilyssa Panitz: What are the most common mistakes people make during/after they go through a divorce when it comes time to money/finances?
Aviva Pinto: The most common mistakes come from not being organized. Let me list a couple of examples.
One: Re-title your assets. Once your assets are divided, make sure your home, cars, investment accounts, trusts, and other assets are re-titled as needed. Close all joint checking, savings and credit card accounts and open new individual accounts. Also check your credit report and verify that joint liabilities have been removed.
Two: Update your Estate Plan. Meet with your trust & amp; estate attorney to update your will, powers of attorney, trusts, and health care proxies. Make changes to terms, parties involved, and beneficiaries as needed. Also be sure to update beneficiaries on all insurance policies and investment accounts, including employer-sponsored retirement plans so you do not unintentionally leave anything to your former spouse after your divorce.
Three: Get the retirement funds due to you and to it in a tax efficient manner. 401K plans and other employer sponsored plans are more complicated to divide than savings and investment assets. If you will be receiving a portion of your spouse’s retirement plan, a Qualified Domestic Relations Order (QDRO) will be issued and approved by a judge. The QDRO will detail how you and your spouse will split qualified retirement accounts such as 401(k) or pension accounts. It is important to ensure that if you decide not to defer the distribution until your spouse retires, you roll the proceeds into your own pre-tax retirement account (Rollover IRA). Money not rolled into a pre-tax retirement account will incur taxes when the money is distributed.
Four: Check your strategy for claiming Social Security. One other item to consider is whether the financial impact of your divorce will change your strategy for claiming Social Security and pensions. If a couple was married for 10 years or longer prior to divorce, a non-working or lower-earning spouse is entitled to a portion of his or her spouse’s social security benefits. These benefits do not impact the worker spouse’s social security payments.
Five: Redo your Financial Plan. After you have separated your financial lives, work carefully with your financial advisor to focus on planning your future. With your budget determined, your tax situation accounted for, you should put together a comprehensive financial plan with your financial advisor. Establish an overall plan to determine how much you will need to sustain your lifestyle and retire comfortably. Review your investment allocations to make sure they are appropriate to achieve your goals and take in to account your risk tolerance and your time horizon.
Ilyssa Panitz: People generally label the word divorce as being negative and yes, while there are downsides, there can also be a lot of positive that comes out of it as well. What would you say that they are?
Aviva Pinto: I have seen many clients become more independent. Those that were living a good life and received an equitable settlement, can now take charge of their finances and be totally independent. Those who did not have a lot to split and have had to go back to work, have found that they have talents that were not being used and are now employed and earning their own money. Others have had to downsize and have learned to live with less and have told me they are still enjoying life.
Ilyssa Panitz: What is the one thing people going through a divorce should be open to changing when it comes time to the economics of divorce?
Aviva Pinto: From a financial perspective, many need to be open to re-evaluating their spending habits. Those who were not budgeting in the past may have to do so in the future. Those who were not the breadwinners in the family may have to become the breadwinners. Those who were not saving, and investing may have to set aside money from marital support. Those needing to sell the house and downsize, will need to be open to moving to be able to maintain a good lifestyle.
Ilyssa Panitz: What “5 things does one need to know to survive and thrive during/after a divorce” — from a financial perspective?
Aviva Pinto: One: Prepare for Your Financial Future. After you have decided to move on, work carefully with your financial advisor to focus on planning your future. Get organized. Gather all the paperwork of your assets, your debts, your expenses. Work with a CDFA to organize the information your matrimonial attorney will need to file on your behalf.
Two: Determine your Savings Goals and evaluate your investment strategy: Determine how your post-divorce financial situation affects your ability to save for goals such as college or retirement and whether you will need to revise your expectations. We recommend creating a plan to maximize your savings. You and your advisor can evaluate your investment allocations to make sure they are appropriate for your risk tolerance and your time horizon. An advisor can help you focus on rebuilding your assets while remaining cognizant of tax implications.
Three: Re-evaluate your Retirement Planning: Establish an overall plan to determine how much you will need to retire, then stick to it to maximize your nest egg. A mix of both pre-tax and post-tax accounts can provide the needed balance for most investors. Determine if your divorce will change your strategy for claiming Social Security and pensions. If a couple was married for 10 years or longer prior to divorce, a non-working or lower-earning spouse is entitled to a portion of his or her spouse’s social security benefits. These benefits do not impact the worker spouse’s social security payments.
Four: Many receive a Qualified Domestic Relations Order (QDRO)details how a former spouse is entitled to receive a predefined portion of an individual’s retirement plan, usually 50% of the value of the assets gained from the beginning of the marriage to the time of the divorce. If you receive a QDRO, you will need to make sure pre-tax dollars are placed in pre-tax retirement accounts and will need to decide how to manage it. If you do not keep the money in a pre-tax retirement account, you will be responsible for taxes when the money is distributed. Once your assets are divided, make sure your home, cars, investment accounts, trusts, and other assets are re-titled as needed. Close all joint checking, savings and credit card accounts and open new individual accounts. Also check your credit report and verify that joint liabilities have been removed. Meet with your trust & estate attorney to update your will, powers of attorney, trusts, and health care proxies. Make changes to terms, parties involved, and beneficiaries as needed. Also be sure to update beneficiaries on all insurance policies and investment accounts, including employer-sponsored retirement plans so you do not unintentionally leave anything to your former spouse after your divorce.
Five: Put in place a comprehensive Financial Plan: After you have separated your financial lives, work carefully with your financial advisor to focus on planning your future. With your budget determined, your tax situation accounted for, you should put together a comprehensive financial plan with your financial advisor. Establish an overall plan to determine how much you will need to sustain your lifestyle and retire comfortably. Review your investment allocations to make sure they are appropriate to achieve your goals and taking into account your risk tolerance and your time horizon. It is important to understand how each of the areas above work together in your overall plan. Your cash flow determines what you can save for various goals each month, your tax situation determines which kind of retirement savings account is best for you, and your long-term goals impact the type of investment strategy you should use. Consider working with a trusted advisor, who operates in your best interest, to make decisions in these various areas.