Divorce and Social Security

It isn’t surprising to hear about friends, acquaintances, family members and loved ones divorcing these days.  It certainly seems that everyone knows someone who has recently divorced or is in the process of divorce.   Divorces for those age 50 and older are also on the rise.  The term “gray divorce” has even been coined for those divorcing during their senior years.   Divorce for folks later in life presents many different challenges than for those in their 20s, 30s and 40s.  Financial mistakes during the divorce process for these folks can be more devastating because they do not have as much time to recover from financial blunders.

One critical area to pay attention to during and after a divorce later in life is social security.   If your marriage lasted at least 10 years and you are not currently married, you can receive benefits based on your ex-spouse’s record, even if he or she is remarried.   You can also choose to receive benefits among multiple ex-spouses as long as each marriage lasted at least 10 years.   Filing for benefits on an ex-spouse’s record does not affect his/her social security retirement benefits, and he or she also is not notified that an ex-spouse has filed on his/her record.

To claim on your ex-spouse’s record, you must be at least age 62, not married, and your ex-spouse needs to be eligible to receive his/her own benefit.   If your ex-spouse is eligible for social security retirement benefits, but has not applied, you can receive benefits based on his or her record if you have been divorced for at least two years.

Take a moment to consider your own retirement planning strategies.   If you are divorced, were married for at least 10 years and have reached full retirement age, you could likely apply for divorced spousal social security benefits on your ex-spouse’s record now, and delay your own social security benefits, which will increase your future payments.  If you were born in 1943 or later, the annual rate of increase for delayed social security benefits is 8%!

Divorce is no fun for anyone and in most cases a financial setback.  For additional information on financial planning for divorce, contact me at Budros, Ruhlin & Roe, Inc. at amy.weldele@b-r-r.com.  You may follow me on twitter @BRR_AmyWeldele.

Amy Weldele, CFP®, CDFA®Senior Wealth Manager

OHIO-BASED BUDROS, RUHLIN & ROE CIO NAMED A BARRON’S TOP 100 ADVISOR

For the second year in a row, Daniel Roe, chief investment officer of Columbus-based, Budros, Ruhlin & Roe, was named to Barron’s 2016 list of Top 100 Independent Wealth Advisors in the United States. The list is determined by the volume of assets overseen by the advisors and their teams, revenues generated for the firms and the quality of the advisors’ practices. 

Roe joined Budros, Ruhlin & Roe in 1996 and is a Certified Financial Planner®. He has been in the financial services industry for more than 25 years.  

“It is an honor to be named to Barron’s Top 100 list for the second year,” said Roe. “This recognition is a direct reflection of Budros, Ruhlin & Roe’s steadfast commitment to helping our clients continually achieve their investment management and financial planning goals.”
  
Roe said his firm sets itself apart through disciplined strategies designed to help clients navigate the various emotions of the stock market.

“Meeting with clients is the part of our business that I truly enjoy most,” Roe said. “I am directly involved in the strategy of each portfolio, which plays an important part in helping clients meet their goals.”
 
Roe has also been named one of “The 150 Best Financial Advisers for Doctors” on Medical Economics’ exclusive list.  He has been profiled and widely quoted in The Wall Street Journal and featured in Morningstar Advisor Magazine.  

Disclosure: Participants were chosen as America’s top independent financial advisors, as identified by Barron’s, through a ranking that reflects the volume of assets overseen by the advisors and their teams, revenues generated for the firms and the quality of the advisors’ practices. The scoring system assigns a top score of 100 and rates the rest by comparing them with the winner. A ranking of “N” denotes an advisor who is new to the list.  Neither the RIA firms nor their employees pay a fee to Barron’s in exchange for inclusion in the Top 100. For more information, please visit: https://www.barrons.com/report/top-financial-advisors/independent/2016

QDROs and Beneficiary Designations

Qualified Domestic Relations Orders (QDROs) and Beneficiary Designations

Without exception, our clients want to move on with their lives as quickly as possible after their divorce. Moving on includes taking control of their own finances. There is a long list of things to do in order to take control of post-divorce finances that are beyond the scope of this article (we would be happy to send you a guide upon request). Our recommendation is to enlist the services of an experienced Certified Divorce Financial Analyst® (CDFA™) professional before the divorce is final to ensure that the final agreement does not have negative long-term consequences.

We regularly engage with clients to complete these items and there is one simple (to us) but infuriating (to clients) road-block that almost all face: retirement plan beneficiary designations.

If the divorce is not yet final and the Qualified Domestic Relations Order (QDRO) is in process, our clients will need to obtain a signed consent from their current spouse to name someone else as beneficiary. Most financial institutions require spousal consent for a non-spouse beneficiary designation. Experts believe this is simply a policy protection from beneficiary-related litigation for custodians.

For example, an agreement awards 50% of Jim’s 401K account to Sally via a Qualified Domestic Relations Order (QDRO). In order to receive the funds, we are opening a Rollover IRA account in advance of the QDRO in Sally’s name. This way, we can tell the 401K plan administrator exactly where the funds should go and avoid any potential hiccups in the transfer process. However, custodian policy requires that an individual name their spouse as beneficiary of retirement funds, and our client is not yet officially divorced. As CDFA professionals experienced in the intricacies of account transition, we will inform Sally that she has three options to remedy the situation:

  1. Obtain her former spouse’s signature as a spousal consent on the new account paperwork. Jim must effectively agree to allow Sally to name her children as the beneficiaries of the funds she was just awarded in the divorce.

Client Quote: “You mean I just spent 18 months and X dollars fighting over this money and I still need his permission to do what I want with my money?!” Practical Consideration: What if the relationship has deteriorated to the point where Jim refuses to agree to the change in beneficiary? It may cost X dollars in attorney fees to force him to do so. Practical Consideration : What if Sally doesn’t want Jim to know who her financial advisor will be post-divorce? Name the former spouse as beneficiary temporarily. Although, If Jim and Sally no longer communicate, she could simply name Jim as beneficiary with the intent of updating the beneficiary designation as soon as the divorce is final. Client Quote : “You mean we have come all this way and I have to keep him as my beneficiary and he will inherit my money if I die?!” Practical Consideration : What if we decide to postpone but somehow forget to change the beneficiary designation once the divorce is final? Does the judgment awarding the 50% to Sally protect her? Practical Consideration : What if something happens while the judgment is pending? Who inherits Sally’s money? Delay the transfer of funds. QDROs take time: the QDRO cannot be carried out until the final judgment is signed by a judge. Client Quote : “But you said ‘Taking Control Now’ was the most important part of my financial transition after the divorce! Now you are telling me to wait?! Wait for what?!” Practical Consideration : So what is the harm in waiting? One major concern is the management of investments inside of the account. When transfers are delayed, the funds are often managed by the former spouse or his/her investment advisor. The advisor used by a couple during marriage is rarely appropriate for both parties to work with after a divorce. Either they will be aligned with one party, unfamiliar with the specific needs of one spouse, or unable to provide the necessary services. In addition, there is often a lack of trust. Practical Consideration : The account could lose value during the dissolution proceeding. Guess who gets blamed for the losses? Usually the former spouse – which means the client may not trust anything they have to say and turn into X dollars of additional unnecessary discovery efforts. Practical Consideration : We may want to obtain authorization and consent from the former spouse for our client to take over managing his/her portion of the funds.
The financial transition following divorce offers the opportunity for clients to remake their financial lives in a way that supports their ongoing comfort, security, and dreams. Most importantly, it offers the opportunity to take control of their finances as a single individual. The complications of such simple things as paperwork, as evidenced above, can have prolonged and lasting effects on our clients’ lives when the power struggle continues after the financial agreements are reached. Enlisting the services of an experienced CDFA™ professional during the process will help clients obtain the most financially advantageous settlement possible and support their financial independence far beyond divorce negotiations.

At BRR Divorce Advisors we are experts and leaders in the field of Divorce Financial Planning. Contact us today for an experienced and professional guide through your post-divorce transition and help consider your beneficiary designations. Also follow us on twitter at https://twitter.com/BRR_AmyWeldele or @BRR_AmyWeldele.

Amy Weldele, CFP®, CDFA™ SeniorWealth Manager