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NATIONAL ASSOCIATION OF CERTIFIED VALUATION ANALYSTS  INSTITUTE OF BUSINESS APPRAISERS          Thursday, June 9, 2011  ...
• Please set pagers, cell phones, etc. on  vibrate mode or turn them off.• Please complete and hand in the  Presenter Eval...
NATIONAL ASSOCIATION OF CERTIFIED VALUATION ANALYSTS  INSTITUTE OF BUSINESS APPRAISERS          Thursday, June 9, 2011  ...
Breakin’ Up is Hard to Do:  Dividing the Marital Estate and Figuring AlimonyD◦I◦V◦O◦R◦C◦EWhat Can You Do?• Identify  – Tax...
Breakin’ Up is Hard to Do: Dividing the Marital Estate and Figuring AlimonyD◦I◦V◦O◦R◦C◦EWhat Can You Do?• Propose a Divisi...
Breakin’ Up is Hard to Do:  Dividing the Marital Estate and Figuring AlimonyDividing the Marital EstateSupporting Document...
Breakin’ Up is Hard to Do:  Dividing the Marital Estate and Figuring AlimonyDividing the Marital EstateSupporting Document...
Breakin’ Up is Hard to Do: Dividing the Marital Estate and Figuring AlimonyThe “Marital Balance Sheet”Factors to Consider•...
Smith v. SmithMarital Balance Sheet3/31/11                                                                      Child or  ...
Breakin’ Up is Hard to Do: Dividing the Marital Estate and Figuring AlimonyConstruction1.Excel2.Numbered lines3.Numbered p...
Breakin’ Up is Hard to Do: Dividing the Marital Estate and Figuring AlimonyConstruction8.Display the proposed division of ...
Breakin’ Up is Hard to Do: Dividing the Marital Estate and Figuring AlimonyRelated Issues & Analyses for the MBS•Present V...
Smith v. Smith        Defined Benefit Pension Valuation        3/31/11        Case Information        Date of Valuation   ...
Breakin’ Up is Hard to Do: Dividing the Marital Estate and Figuring AlimonyDissipationDissipation: “The use of an asset fo...
Breakin’ Up is Hard to Do:  Dividing the Marital Estate and Figuring AlimonyTennessee: “Ward Factors”The Trial Court must ...
Smith v. SmithDissipation of Marital Assets by Husband                                                                  Gi...
Breakin’ Up is Hard to Do:  Dividing the Marital Estate and Figuring AlimonyCase Study – The SmithsPersonalHusband - (“mon...
Smith v. SmithMarital Balance Sheet - Round 13/31/11                                                                      ...
RETIREMENT18   ABC Co. Pension Plan #AB-123              H    514,417                     514,417    (68,589)    445,828  ...
Smith v. SmithMarital Balance Sheet - Round 23/31/11                                                                      ...
RETIREMENT18   ABC Co. Pension Plan #AB-123              H    514,417                     514,417    (68,589)    445,828  ...
Breakin’ Up is Hard to Do: Dividing the Marital Estate and Figuring AlimonyFiguring Reasonable Need and the Ability to Pay...
Smith v. SmithWifes Need for Support3/31/11Monthly Basis - 1st Year OnlyGross Monthly Income                          3,33...
Breakin’ Up is Hard to Do:  Dividing the Marital Estate and Figuring AlimonySingle-month flawed for these reasons:1.Repres...
Breakin’ Up is Hard to Do: Dividing the Marital Estate and Figuring AlimonyThe Need and the Ability to Pay Analysis•A simp...
Breakin’ Up is Hard to Do: Dividing the Marital Estate and Figuring AlimonySteps1.Calculate the remaining life expectancy ...
Smith v. SmithWifes Need for Support3/31/11 (A)     (B)      (C)       (D)        (E)         (F)      (G)       (H)      ...
Smith v. Smith                                                                Checking Account #5689                      ...
Smith v. SmithWifes Retirement Savings3/31/2011                                                                           ...
Smith v. SmithHusbands Ability to Pay Support3/31/11 (A)     (B)    (C)         (D)          (E)         (F)        (G)   ...
Smith v. SmithNet Worth Accumulation of Marital Assets3/31/11                                                             ...
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Divorce Property Division and Alimony Needs Analysis - "Breakin' Up is Hard to Do" - Presentation at the 2011 NACVA Annual Conference

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Forensic accounting divorce analysis of proposing property division and alimony need and ability to pay. Learn about a marital balance sheet and a lifestyle analysis.

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Divorce Property Division and Alimony Needs Analysis - "Breakin' Up is Hard to Do" - Presentation at the 2011 NACVA Annual Conference

  1. 1. NATIONAL ASSOCIATION OF CERTIFIED VALUATION ANALYSTS  INSTITUTE OF BUSINESS APPRAISERS Thursday, June 9, 2011  Matrimonial Litigation Breakin’ Up is Hard to Do: Dividing the Marital Estate and Figuring Alimony Robert Vance, CPA, CVA, ABV, CFF, CFP 2 0 1 1 A N N U A L C O N S U L T A N T S’ C O N F E R E N C E ~ Adversity Brings Opportunity ~ Tomorrow’s Information Today ~ ~ J U N E 8 – 1 1, 2 0 1 1  S A N D I E G O B A Y F R O N T H I L T O N
  2. 2. • Please set pagers, cell phones, etc. on vibrate mode or turn them off.• Please complete and hand in the Presenter Evaluation forms.• Don’t forget to complete your CPA Attestation Form. Add your Membership Number (located on your name badge) and sign it. Keep the white copy for your records. Turn in the yellow copy at the Registration Desk.
  3. 3. NATIONAL ASSOCIATION OF CERTIFIED VALUATION ANALYSTS  INSTITUTE OF BUSINESS APPRAISERS Thursday, June 9, 2011  Matrimonial Litigation Breakin’ Up is Hard to Do Robert Vance, CPA, CVA, ABV, CFF, CFP 2 0 1 1 A N N U A L C O N S U L T A N T S’ C O N F E R E N C E ~ Adversity Brings Opportunity ~ Tomorrow’s Information Today ~ ~ J U N E 8 – 1 1, 2 0 1 1  S A N D I E G O B A Y F R O N T H I L T O N
  4. 4. Breakin’ Up is Hard to Do: Dividing the Marital Estate and Figuring AlimonyD◦I◦V◦O◦R◦C◦EWhat Can You Do?• Identify – Tax Returns – Account Statements – Creative (NOL C/F, Dissipation)• Classify – Marital v. Separate – Transmutation, Commingling• Quantify – Value a Business – Value a Pension 2011 ANNUAL CONSULTANTS’ CONFERENCE  JUNE 8 – 11, 2011  SAN DIEGO BAYFRONT HILTON 4
  5. 5. Breakin’ Up is Hard to Do: Dividing the Marital Estate and Figuring AlimonyD◦I◦V◦O◦R◦C◦EWhat Can You Do?• Propose a Division• Figure Alimony Need & Ability to Pay 2011 ANNUAL CONSULTANTS’ CONFERENCE  JUNE 8 – 11, 2011  SAN DIEGO BAYFRONT HILTON 5
  6. 6. Breakin’ Up is Hard to Do: Dividing the Marital Estate and Figuring AlimonyDividing the Marital EstateSupporting Documentation•General - 5 Years of business & personal tax returns, with W-2s•Marital Residence - Real estate appraisal•Mortgage - Payoff or monthly statement•Checking/Savings Accounts – 24-48 months of bank statementschecks•Investment Accounts - 24-48 months of monthly/quarterly statements•Defined Benefit Pension - Vested benefit statement & plan document•Defined Contrib. Plan/401(k) Savings Plan, etc. - 24-48 months ofstatements•Stock Options - Vested & unvested grant statement & plan document•IRA - 24-48 months of monthly/quarterly statements 2011 ANNUAL CONSULTANTS’ CONFERENCE  JUNE 8 – 11, 2011  SAN DIEGO BAYFRONT HILTON 6
  7. 7. Breakin’ Up is Hard to Do: Dividing the Marital Estate and Figuring AlimonyDividing the Marital EstateSupporting Documentation•Vehicles - NADA valuation from Internet•Other Personal Property - List & estimates from parties; appraisalSmall Business - Business valuation from qualified expert•Credit Cards - 24-48 months of monthly statements•Dissipation of Marital Assets - Receipts, canceled checks, CCstatements, depo. excerpts, etc.•Electronic file copies, including passwords - Quicken andQuickBooks•Subpoena to all banks that a spouse may use•Request the entire loan file, including personal financial statements(“PFS”) and loan applications 2011 ANNUAL CONSULTANTS’ CONFERENCE  JUNE 8 – 11, 2011  SAN DIEGO BAYFRONT HILTON 7
  8. 8. Breakin’ Up is Hard to Do: Dividing the Marital Estate and Figuring AlimonyThe “Marital Balance Sheet”Factors to Consider•Spouses’ desire for a particular asset•Practicality, legality or necessity of one spouse owning anasset or owing a debt•Future income earnings from an asset•Future earning capacity of each spouse•Concept of offset•Attorney’s request for an unequal division 2011 ANNUAL CONSULTANTS’ CONFERENCE  JUNE 8 – 11, 2011  SAN DIEGO BAYFRONT HILTON 8
  9. 9. Smith v. SmithMarital Balance Sheet3/31/11 Child or Separate Proposed Division No. Description Title FMV Debt Equity Account Marital Husband Wife Notes REAL ESTATE 1 2 3 4 5 6 CASH & INVESTMENTS 7 8 9 10 11 12 13 14 15 16 17 RETIREMENT 18 19 20 21 22 23 24 25 PERSONAL PROPERTY 26 27 28 29 30 OTHER DEBTS 30 312011 ANNUAL CONSULTANTS’ CONFERENCE  JUNE 8 – 11, 2011  SAN DIEGO BAYFRONT HILTON 32 TOTALS 0 0 0 0 0 0 0 9 #DIV/0! #DIV/0!
  10. 10. Breakin’ Up is Hard to Do: Dividing the Marital Estate and Figuring AlimonyConstruction1.Excel2.Numbered lines3.Numbered pages4.Group asset and debt categories such as “Real Estate”and “Retirement”5.Last 4 digits of account #6.List debts with secured assets showing the net equity7.Display property claimed as separate in whole or in partso as to establish the claim 2011 ANNUAL CONSULTANTS’ CONFERENCE  JUNE 8 – 11, 2011  SAN DIEGO BAYFRONT HILTON 10
  11. 11. Breakin’ Up is Hard to Do: Dividing the Marital Estate and Figuring AlimonyConstruction8.Display the proposed division of each and every itemalong with the total net percentage to each spouse9.Offset the present value of a pension10.Offset the fair market value of a small business withother assets 2011 ANNUAL CONSULTANTS’ CONFERENCE  JUNE 8 – 11, 2011  SAN DIEGO BAYFRONT HILTON 11
  12. 12. Breakin’ Up is Hard to Do: Dividing the Marital Estate and Figuring AlimonyRelated Issues & Analyses for the MBS•Present Valuing a Defined Benefit Plan•Dissipation Analysis 2011 ANNUAL CONSULTANTS’ CONFERENCE  JUNE 8 – 11, 2011  SAN DIEGO BAYFRONT HILTON 12
  13. 13. Smith v. Smith Defined Benefit Pension Valuation 3/31/11 Case Information Date of Valuation 3/31/2011 Date of Marriage 1/31/1993 Date of Preparation 3/31/2011 Years of Marriage 18.2 Plan Information Employer ABC Corporation Date of Retirement 4/1/2020 Payout Method Straight Life Annuity Plan Name ABC Corp. Employees Pension Plan Participant Information Participant John Smith Date of Birth 3/27/1960 Sex M Age at Valuation Date 51.0 Race W Vested Percentage 100.0% Date of Hire 4/2/1990 Years of Service 21.0 Calculations Notes Monthly retirement benefit $4,961 a. Retirement age used in this calculation 60.0 Life expectancy at valuation date (1) 28.2 b. Number of years to retirement age (deferral period) 9.0 c. Years of life expectancy beyond retirement age (payout period) 19.2 d. b. - c. = d. Discount rate for payout period (2) 4.50% e. Present value of monthly benefits at retirement date 764,473 f. Present value of a. discounted with e. Discount rate for deferral period (2) 4.50% g. Expected value of retirement benefits at valuation date 514,417 h. Present value of f. discounted with g. Ratio of total benefits earned during marriage 86.7% i. Years of marriage / years of service Marital value of retirement benefits $445,828 j. h. x i. = j. 1) Life Expectancy Tables: "United States Life Tables, 2006", National Vital Statistics Reports, Vol. 58, No. 21, June 28, 2010, National Center for Health Statistics; Life Table for white males. 2) Derived from Federal Reserve Statistical Release; 5 Year average of 20 Year, U.S. Government Securities, Treasury Constant Maturities2011 ANNUAL CONSULTANTS’ CONFERENCE  JUNE 8 – 11, 2011  SAN DIEGO BAYFRONT HILTON 13
  14. 14. Breakin’ Up is Hard to Do: Dividing the Marital Estate and Figuring AlimonyDissipationDissipation: “The use of an asset for an illegal orinequitable purpose, such as a spouse’s use of communityproperty for personal benefit when a divorce is imminent.”Black’s Law Dictionary 2011 ANNUAL CONSULTANTS’ CONFERENCE  JUNE 8 – 11, 2011  SAN DIEGO BAYFRONT HILTON 14
  15. 15. Breakin’ Up is Hard to Do: Dividing the Marital Estate and Figuring AlimonyTennessee: “Ward Factors”The Trial Court must consider:1.Whether the evidence presented at trial supports the alleged purposeof the various expenditures; and if so,2.Whether the alleged purpose equates to dissipation under thecircumstances a. The typicality of the expenditure to the marriage b. The benefactor of the expenditure, i.e., it is primarily benefited the marriage or the sole dissipating spouse c. The proximity of the expenditure to the breakdown of the marriage; and the amount of the expenditure d. The amount of the expenditure 2011 ANNUAL CONSULTANTS’ CONFERENCE  JUNE 8 – 11, 2011  SAN DIEGO BAYFRONT HILTON 15
  16. 16. Smith v. SmithDissipation of Marital Assets by Husband Girlfriend Expenses3/31/11 Clothing Casino Check & Dept. Meals & Loans to Athletic ATM Cosmetic Date Num Description Memo Totals Travel Stores Ent. Gfriend Jewe lry Misc. Tickets Cash Medical 10/1/05 Refinance of Hs Car Per Hs Depo 0.00 10/1/05 Disney World Trip Hs Answers to Interrog. 5,000.00 5,000.0010/13/05 1032 Sports Tickets Etc. Per Answers to Interrog. 2,000.00 2,000.0010/24/05 1009 Best Buy 43922.00 2,500.00 2,500.00 11/1/05 1016 Check to Girlfriend 2,500.00 2,500.00 11/1/05 Credit Union Loan #12345 Unknown purpose 0.00 11/1/05 1045 Sports Tickets Etc. Per Answers to Interrog. 2,000.00 2,000.0011/28/05 Abercrombie And Fitch 518.95 518.9511/28/05 Banana Republic 219.58 219.58 12/6/05 Airline Per Answers to Interrog. 503.90 503.90 12/6/05 Airline Per Answers to Interrog. 503.90 503.90 12/6/05 Airline Per Answers to Interrog. 503.90 503.9012/20/05 1053 Check to Girlfriend 415.00 415.0012/27/05 Miguelas Clothing Girlfriend 692.65 692.6512/29/05 Miguelas Clothing Girlfriend 127.00 127.00 1/3/06 Airline 915.14 915.14 1/3/06 Airline Chicago trip 915.14 915.14 2/15/06 Cosmetic Dentist Inc. 5,000.00 5,000.00 2/15/06 Hair Plugs R Us Per Hs Admission 10,200.00 10,200.00 2/22/06 1123 Check to Girlfriend 360.00 360.00 4/10/06 5135 Big Law Firm 5,000.00 5,000.00 4/22/06 Billabong Cabazon 166.95 166.95 5/10/06 Victorias Secret 127.28 127.28 5/11/06 Barbie Live Per Answers to Interrog. 135.55 135.55 5/12/06 Atm Cash Withdrawal 402.00 402.00 5/12/06 Ticketmaster Per Answers to Interrog. 1,021.55 1,021.55 5/18/06 Best Buy 924.20 924.20 5/19/06 Girlfriends Diamond Ring Per Hs Depo 20,000.00 20,000.00 5/20/06 ABC Marina Per Answers to Interrog. 175.26 175.26 5/30/06 Marriott Hotels LA 578.28 578.28 6/8/06 Atm Cash Withdrawal 400.00 400.00 6/9/06 1130 Cash 1,300.00 1,300.00 6/9/06 Infinity Per Answers to Interrog. 0.00 7/10/06 Gap 411.85 411.85 7/10/06 Victorias Secret 343.05 343.05 8/9/06 Credit Union Loan #4567 Unknown purpose 0.00 8/17/06 Over-the-counter Withdrawal 6,000.00 6,000.00 9/8/06 1283 Cash 800.00 800.0010/16/06 Toyota Per Answers to Interrog. 0.0011/22/06 2011 ANNUAL CONSULTANTS’ CONFERENCE  JUNE 8 –3,333.792011  SAN DIEGO BAYFRONT HILTON9,302.00 Atm Cash Withdrawal Totals 5,901.47 11, 6,998.10 3,275.00 20,000.00 7,500.00 4,924.20 400.00 400.00 76,434.56 15,200.00 16
  17. 17. Breakin’ Up is Hard to Do: Dividing the Marital Estate and Figuring AlimonyCase Study – The SmithsPersonalHusband - (“money spouse”) – airline pilot – age 51Wife - (“non-money spouse”) – office worker – age 51Children, ages 15 and 1318 year marriageMajor AssetsMarital Residence in TN with 20 years on the mortgageRental House in D.C. areaH – Defined Benefit PlanH – Military Retirement 2011 ANNUAL CONSULTANTS’ CONFERENCE  JUNE 8 – 11, 2011  SAN DIEGO BAYFRONT HILTON 17
  18. 18. Smith v. SmithMarital Balance Sheet - Round 13/31/11 Child or Separate Proposed Division No. Description Title FMV Debt Equity Account Marital Husband Wife Notes REAL ESTATE 1 Rental Property-1234 Maple Cove, D.C. J 200,000 Appraisal dated 11/30/10; listed for sale 2 Estimated Sales Comm. on Rental Prop. Sale J (24,000) Estimated 3 Estimated Income Tax on Rental Property Sale J (35,000) 141,000 141,000 70,500 70,500 Estimated 4 Marital Residence-4567 Main St., TN J 250,000 Appraisal dated 12/15/10; listed for sale 5 Marital Residence-Mortgage #05-227 J (119,000) 131,000 131,000 131,000 Statement dated 2/28/11 CASH & INVESTMENTS 6 Checking Account #5689 H 2,500 2,500 2,500 2,500 Statement dated 2/28/11 7 Checking Account #9876 W 3,500 3,500 3,500 3,500 Statement dated 2/28/11 8 Savings Account #1234 J 11,500 11,500 11,500 11,500 Statement dated 2/28/11 9 ABC Corporation Stock-200 shr H 20,000 20,000 20,000 20,000 Statement dated 2/28/11 10 Amer. Century I #3698 W 20,000 20,000 20,000 20,000 Statement dated 2/28/11 11 Amer. Century-Money Market #5678 J 31,000 31,000 31,000 31,000 Statement dated 2/28/11 12 Amer. Century-II #6543 J 36,000 36,000 36,000 36,000 Statement dated 2/28/11 13 Jones Fund #1478 J 7,000 7,000 7,000 7,000 Statement dated 2/28/11 14 Janus-Wordwide #9998 J 2,000 2,000 2,000 2,000 Statement dated 2/28/11 15 Janus-Twenty #8889 J 9,000 9,000 9,000 9,000 Statement dated 2/28/11 16 eTrade Account #2589 H 4,000 4,000 4,000 4,000 Statement dated 2/28/11 17 Aviation Manufacturing Inc.-30% Int. H 300,000 300,000 300,000 300,000 Per Valuation performed by FVS, PLC 2011 ANNUAL CONSULTANTS’ CONFERENCE  JUNE 8 – 11, 2011  SAN DIEGO BAYFRONT HILTON 18
  19. 19. RETIREMENT18 ABC Co. Pension Plan #AB-123 H 514,417 514,417 (68,589) 445,828 445,828 PV of future benefits as of 3/31/1119 Military Pension Plan H 190,000 190,000 (20,000) 170,000 170,000 PV of future benefits as of 1/31/1120 Money Purchase Pension Plan #XY-9876 H 140,000 140,000 140,000 140,000 Statement dated 2/28/1121 Retirement Savings Plan #JK-6543 H 550,000 550,000 550,000 275,000 275,000 Statement dated 2/28/1122 IRA #02-3456 H 11,000 11,000 11,000 11,000 Statement dated 2/28/1123 IRA II #98-7654 H 122,000 122,000 122,000 122,000 Statement dated 2/28/11; 25% / 75% Split24 403b Plan #9876 W 38,000 38,000 38,000 38,000 Statement dated 2/28/1125 IRA III #6543 W 35,000 35,000 35,000 35,000 Statement dated 2/28/11 PERSONAL PROPERTY26 1992 Mercedes J 12,000 12,000 12,000 12,000 NADA Average retail value as of 1/31/1127 1999 Toyota W 3,200 3,200 3,200 3,200 NADA Average retail value as of 1/31/1128 2003 Chevrolet PU Truck H 8,800 8,800 8,800 8,800 NADA Average retail value as of 1/31/1129 Personal Property J 20,000 20,000 20,000 10,000 10,000 H & W Estimate30 Husbands Dissipation of Marital Assets H 76,435 76,435 76,435 76,435 Per Forensic Analysis OTHER DEBTS30 Visa #4529 J (4,000) (4,000) (4,000) (4,000) Statement dated 2/28/1131 Amex #1234 W (8,500) (8,500) (8,500) (8,500) Statement dated 2/28/1132 Discover #6549 W (9,500) (9,500) (9,500) (9,500) Statement dated 2/28/11 TOTALS 2,617,352 (200,000) 2,417,352 (88,589) 2,328,763 1,544,563 784,200 66.3% 33.7% 2011 ANNUAL CONSULTANTS’ CONFERENCE  JUNE 8 – 11, 2011  SAN DIEGO BAYFRONT HILTON 19
  20. 20. Smith v. SmithMarital Balance Sheet - Round 23/31/11 Child or Separate Proposed Division No. Description Title FMV Debt Equity Account Marital Husband Wife Notes REAL ESTATE 1 Rental Property-1234 Maple Cove, D.C. J 200,000 Appraisal dated 11/30/10; listed for sale 2 Estimated Sales Comm. on Rental Prop. Sale J (24,000) Estimated 3 Estimated Income Tax on Rental Property Sale J (35,000) 141,000 141,000 70,500 70,500 Estimated 4 Marital Residence-4567 Main St., TN J 250,000 Appraisal dated 12/15/10; listed for sale 5 Marital Residence-Mortgage #05-227 J (119,000) 131,000 131,000 131,000 Statement dated 2/28/11 CASH & INVESTMENTS 6 Checking Account #5689 H 2,500 2,500 2,500 2,500 Statement dated 2/28/11 7 Checking Account #9876 W 3,500 3,500 3,500 3,500 Statement dated 2/28/11 8 Savings Account #1234 J 11,500 11,500 11,500 11,500 Statement dated 2/28/11 9 ABC Corporation Stock-200 shr H 20,000 20,000 20,000 20,000 Statement dated 2/28/11 10 Amer. Century I #3698 W 20,000 20,000 20,000 20,000 Statement dated 2/28/11 11 Amer. Century-Money Market #5678 J 31,000 31,000 31,000 31,000 Statement dated 2/28/11 12 Amer. Century-II #6543 J 36,000 36,000 36,000 36,000 Statement dated 2/28/11 13 Jones Fund #1478 J 7,000 7,000 7,000 7,000 Statement dated 2/28/11 14 Janus-Wordwide #9998 J 2,000 2,000 2,000 2,000 Statement dated 2/28/11 15 Janus-Twenty #8889 J 9,000 9,000 9,000 9,000 Statement dated 2/28/11 16 eTrade Account #2589 H 4,000 4,000 4,000 4,000 Statement dated 2/28/11 17 Aviation Manufacturing Inc.-30% Int. H 300,000 300,000 300,000 150,000 150,000 Per Valuation performed by FVS, PLC 2011 ANNUAL CONSULTANTS’ CONFERENCE  JUNE 8 – 11, 2011  SAN DIEGO BAYFRONT HILTON 20
  21. 21. RETIREMENT18 ABC Co. Pension Plan #AB-123 H 514,417 514,417 (68,589) 445,828 445,828 PV of future benefits as of 3/31/1119 Military Pension Plan H 190,000 190,000 (20,000) 170,000 170,000 PV of future benefits as of 1/31/1120 Money Purchase Pension Plan #XY-9876 H 140,000 140,000 140,000 140,000 Statement dated 2/28/1121 Retirement Savings Plan #JK-6543 H 550,000 550,000 550,000 550,000 Statement dated 2/28/1122 IRA #02-3456 H 11,000 11,000 11,000 11,000 Statement dated 2/28/1123 IRA II #98-7654 H 122,000 122,000 122,000 30,500 91,500 Statement dated 2/28/11; 25% / 75% Split24 403b Plan #9876 W 38,000 38,000 38,000 38,000 Statement dated 2/28/1125 IRA III #6543 W 35,000 35,000 35,000 35,000 Statement dated 2/28/11 PERSONAL PROPERTY26 1992 Mercedes J 12,000 12,000 12,000 12,000 NADA Average retail value as of 1/31/1127 1999 Toyota W 3,200 3,200 3,200 3,200 NADA Average retail value as of 1/31/1128 2003 Chevrolet PU Truck H 8,800 8,800 8,800 8,800 NADA Average retail value as of 1/31/1129 Personal Property J 20,000 20,000 20,000 10,000 10,000 H & W Estimate30 Husbands Dissipation of Marital Assets H 76,435 76,435 76,435 76,435 Per Forensic Analysis OTHER DEBTS30 Visa #4529 J (4,000) (4,000) (4,000) (4,000) Statement dated 2/28/1131 Amex #1234 W (8,500) (8,500) (8,500) (8,500) Statement dated 2/28/1132 Discover #6549 W (9,500) (9,500) (9,500) (9,500) Statement dated 2/28/11 TOTALS 2,617,352 (200,000) 2,417,352 (88,589) 2,328,763 1,064,063 1,264,700 45.7% 54.3% 2011 ANNUAL CONSULTANTS’ CONFERENCE  JUNE 8 – 11, 2011  SAN DIEGO BAYFRONT HILTON 21
  22. 22. Breakin’ Up is Hard to Do: Dividing the Marital Estate and Figuring AlimonyFiguring Reasonable Need and the Ability to PayAlimony•Know your alimony code and case law•Property Division first•Alimony second•Single-month v. multi-year 2011 ANNUAL CONSULTANTS’ CONFERENCE  JUNE 8 – 11, 2011  SAN DIEGO BAYFRONT HILTON 22
  23. 23. Smith v. SmithWifes Need for Support3/31/11Monthly Basis - 1st Year OnlyGross Monthly Income 3,333Net Monthly Income After Taxes & Deductions 970Child Support 3,200Total Monthly Income 4,170Mortgage (1,950)Monthly Living Expenses (7,083)Shortfall (4,863)Alimony "Need" 5,000Surplus 137 2011 ANNUAL CONSULTANTS’ CONFERENCE  JUNE 8 – 11, 2011  SAN DIEGO BAYFRONT HILTON 23
  24. 24. Breakin’ Up is Hard to Do: Dividing the Marital Estate and Figuring AlimonySingle-month flawed for these reasons:1.Represents a snapshot in time2.Gross understatement of income by self-employed and commissionor bonus-dependant spouses3.Use of expense figures that appear to be historical, however thefuture expenses will inevitably be different due to new housingarrangements, additional child care expenses, duplications, andINFLATION4.Failure to incorporate the use of investment earnings available fromthe divided property5.Failure to incorporate the use of retirement assets or pensions atretirement date or for use immediately if necessary6.Overstatement of monthly expenses after listing those ordered to payas temporary support which may end 2011 ANNUAL CONSULTANTS’ CONFERENCE  JUNE 8 – 11, 2011  SAN DIEGO BAYFRONT HILTON 24
  25. 25. Breakin’ Up is Hard to Do: Dividing the Marital Estate and Figuring AlimonyThe Need and the Ability to Pay Analysis•A simplified, lifetime financial plan covering all of theremaining years of each spouse’s life expectancy•A forward-looking projection•Standard of Living•Earning Capacity•If I had a dime for every time I heard the statement“business is way-off this year” during the pendency of adivorce, I would be a rich man 2011 ANNUAL CONSULTANTS’ CONFERENCE  JUNE 8 – 11, 2011  SAN DIEGO BAYFRONT HILTON 25
  26. 26. Breakin’ Up is Hard to Do: Dividing the Marital Estate and Figuring AlimonySteps1.Calculate the remaining life expectancy of each spouse2.Allow for contributions to retirement plans and/or IRAs basedon past practices3.Incorporate an investment rate of return on the non-retirementfinancial assets4.Factor in the receipt of child support5.Figure the new mortgage note or rent based on anapproximation of the pre-divorce standard of living6.Analyze the personal living expenses – general ledger7.Calculate federal and state taxes on the projected earnings,other taxable incomes, itemized deductions and the taxconsequences for paying/receiving alimony 2011 ANNUAL CONSULTANTS’ CONFERENCE  JUNE 8 – 11, 2011  SAN DIEGO BAYFRONT HILTON 26
  27. 27. Smith v. SmithWifes Need for Support3/31/11 (A) (B) (C) (D) (E) (F) (G) (H) (I) (K) (L) (M) (N) (O) (P) (Q) + - - + + + + = - = - - = = Personal Employment Social Federal Net Living Exp. Annual Monthly Earnings Retirement Child Alimony Draws From Security Total Income Disposable Mortgage 2.5% (Deficit) (Deficit) Year Age 2.0% COLA FICA Deductions Support $5,000 Retirement 2.5% COLA Income Tax Income Prin & Int Inflation or Surplus or Surplus 1 51 40,000 (3,060) (15,000) 38,400 60,000 0 0 120,340 (10,297) 110,043 (23,400) (85,000) 1,643 137 2 52 40,800 (3,121) (15,000) 25,200 60,000 0 0 107,879 (10,998) 96,881 (23,400) (87,125) (13,644) (1,137) 3 53 41,616 (3,184) (15,000) 25,200 60,000 0 0 108,632 (11,445) 97,188 (23,400) (89,303) (15,515) (1,293) 4 54 42,448 (3,247) (15,000) 0 60,000 0 0 84,201 (11,836) 72,365 (23,400) (77,805) (28,841) (2,403) 5 55 43,297 (3,312) (15,000) 0 60,000 0 0 84,985 (11,991) 72,994 (23,400) (79,750) (30,156) (2,513) 6 56 44,163 (3,378) (15,000) 0 60,000 0 0 85,785 (12,086) 73,698 (23,400) (81,744) (31,446) (2,621) 7 57 45,046 (3,446) (15,000) 0 60,000 0 0 86,600 (13,243) 73,358 (23,400) (83,788) (33,830) (2,819) 8 58 45,947 (3,515) (15,000) 0 60,000 0 0 87,432 (15,647) 71,785 (23,400) (85,883) (37,497) (3,125) 9 59 46,866 (3,585) (15,000) 0 60,000 0 0 88,281 (15,705) 72,576 (23,400) (88,030) (38,853) (3,238) 10 60 47,804 (3,657) (15,000) 0 60,000 0 0 89,147 (15,704) 73,443 (23,400) (90,230) (40,188) (3,349) 11 61 0 0 0 0 60,000 75,000 0 135,000 (29,303) 105,697 (23,400) (92,486) (10,189) (849) 12 62 0 0 0 0 0 140,000 0 140,000 (30,559) 109,441 (23,400) (94,798) (8,757) (730) 13 63 0 0 0 0 0 140,000 0 140,000 (30,430) 109,570 (23,400) (97,168) (10,999) (917) 14 64 0 0 0 0 0 140,000 0 140,000 (30,259) 109,741 (23,400) (99,597) (13,256) (1,105) 15 65 0 0 0 0 0 140,000 0 140,000 (30,041) 109,959 (23,400) (102,087) (15,529) (1,294) 16 66 0 0 0 0 0 140,000 0 140,000 (29,775) 110,225 (23,400) (104,640) (17,815) (1,485) 17 67 0 0 0 0 0 140,000 15,000 155,000 (33,028) 121,972 (23,400) (107,256) (8,684) (724) 18 68 0 0 0 0 0 140,000 15,375 155,375 (32,927) 122,448 (23,400) (109,937) (10,889) (907) 19 69 0 0 0 0 0 140,000 15,759 155,759 (32,782) 122,977 (23,400) (112,685) (13,108) (1,092) 20 70 0 0 0 0 0 140,000 16,153 156,153 (32,591) 123,562 (23,400) (115,502) (15,341) (1,278) 21 71 0 0 0 0 0 140,000 16,557 156,557 (32,351) 124,206 0 (118,390) 5,816 485 22 72 0 0 0 0 0 140,000 16,971 156,971 (32,431) 124,540 0 (121,350) 3,191 266 23 73 0 0 0 0 0 140,000 17,395 157,395 (32,470) 124,926 0 (124,384) 542 45 24 74 0 0 0 0 0 140,000 17,830 157,830 (32,466) 125,365 0 (127,493) (2,128) (177) 25 75 0 0 0 0 0 140,000 18,276 158,276 (32,415) 125,861 0 (130,680) (4,820) (402) 26 76 0 0 0 0 0 140,000 18,733 158,733 (32,316) 126,417 0 (133,947) (7,531) (628) 27 77 0 0 0 0 0 140,000 19,201 159,201 (32,165) 127,036 0 (137,296) (10,260) (855) 28 78 0 0 0 0 0 140,000 19,681 159,681 (31,959) 127,723 0 (140,729) (13,006) (1,084) 29 79 0 0 0 0 0 140,000 20,173 160,173 (31,693) 128,481 0 (144,247) (15,766) (1,314) 30 80 0 0 0 0 0 140,000 20,678 160,678 (31,364) 129,314 0 (147,853) (18,539) (1,545) 31 81 32 2011 82 ANNUAL CONSULTANTS’ CONFERENCE140,000 21,72411,161,195 0 0 0 0 0 0 0 0 0 0 140,000 21,195  JUNE 8 – 161,724 2011  (30,969) 130,225 SAN DIEGO BAYFRONT (30,504) 131,220 0 0 (151,549) HILTON (155,338) (21,324) (24,118) (1,777) (2,010) 437,989 (33,506) (150,000) 88,800 27 290,703 4,308,986 660,000 3,015,000 (823,752) 3,485,234 (468,000) (3,518,072) (500,837)
  28. 28. Smith v. Smith Checking Account #5689 0Wifes Investment Savings Checking Account #9876 3,5003/31/2011 Savings Account #1234 0 See MBS Lines ABC Corporation Stock-200 shr 0Allocation: 100% 0% 25% 35% 40% American Century Accounts 20,000 6-16Balance at Divorce: 45,500 0 11,375 15,925 18,200 Jones Fund #1478 7,000Investment Type: Cash Fixed Inc. Fixed Inc. Equities Janus-Wordwide #9998 2,000Investment Vehicle: Average 12 Mo. C.D. U.S. Treas. Bond Fund Stock Avg. Janus-Twenty #8889 9,000Return %: 5.7% 1.0% 4.5% 5.0% 7.0% eTrade Account #2589 4,000 45,500 Net Proceeds Annual Cumulative Surplus After Sale of Investment Year Age Return Return Draws or Deficit Rental Prop. Balance 1 51 0 512 796 1,274 2,582 2,582 1,643 49,725 2 52 0 559 870 1,392 2,821 5,403 (13,644) 38,902 3 53 0 438 681 1,089 2,208 7,611 (15,515) 25,595 4 54 0 288 448 717 1,453 9,064 (28,841) (1,793) 5 55 0 (20) (31) (50) (101) 8,963 (30,156) (32,050) 6 56 0 (361) (561) (897) (1,819) 7,144 (31,446) 70,500 5,185 7 57 0 58 91 145 294 7,438 (33,830) 150,000 121,649 8 58 0 1,369 2,129 3,406 6,904 14,342 (37,497) 91,056 9 59 0 1,024 1,593 2,550 5,167 19,509 (38,853) 57,370 10 60 0 645 1,004 1,606 3,255 22,764 (40,188) 20,437 11 61 0 230 358 572 1,160 23,924 (10,189) 11,408 12 62 0 128 200 319 647 24,571 (8,757) 3,298 13 63 0 37 58 92 187 24,758 (10,999) (7,514) 14 64 0 (85) (131) (210) (426) 24,332 (13,256) (21,196) 15 65 0 (238) (371) (593) (1,202) 23,130 (15,529) (37,927) 16 66 0 (427) (664) (1,062) (2,153) 20,977 (17,815) (57,895) 17 67 0 (651) (1,013) (1,621) (3,285) 17,692 (8,684) (69,864) 18 68 0 (786) (1,223) (1,956) (3,965) 13,727 (10,889) (84,718) 19 69 0 (953) (1,483) (2,372) (4,808) 8,919 (13,108) (102,634) 20 70 0 (1,155) (1,796) (2,874) (5,825) 3,094 (15,341) (123,800) 21 71 0 (1,393) (2,167) (3,466) (7,026) (3,932) 5,816 (125,010) 22 72 0 (1,406) (2,188) (3,500) (7,094) (11,026) 3,191 (128,913) 23 73 0 (1,450) (2,256) (3,610) (7,316) (18,342) 542 (135,687) 24 74 0 (1,526) (2,375) (3,799) (7,700) (26,042) (2,128) (145,515) 25 75 0 (1,637) (2,547) (4,074) (8,258) (34,300) (4,820) (158,593) 26 76 0 (1,784) (2,775) (4,441) (9,000) (43,300) (7,531) (175,124) 27 77 0 (1,970) (3,065) (4,903) (9,938) (53,238) (10,260) (195,322) 28 78 0 (2,197) (3,418) (5,469) (11,084) (64,322) (13,006) (219,412) 29 79 0 (2,468) (3,840) (6,144) (12,452) (76,774) (15,766) (247,630)2011 ANNUAL CONSULTANTS’ CONFERENCE  JUNE 8 – 11, 2011  SAN DIEGO BAYFRONT HILTON 30 80 0 (2,786) (4,334) (6,934) (14,054) (90,828) (18,539) (280,223) 31 81 0 (3,153) (4,904) (7,846) (15,903) (106,731) (21,324) (317,450) 32 82 0 (3,571) (5,555) (8,889) 28 (18,015) (124,746) (24,118) (359,583) 0 (500,837) 220,500
  29. 29. Smith v. SmithWifes Retirement Savings3/31/2011 Defined Contribution Plans & IRAsAllocation: 100% 0% 25% 35% 40% Money Purchase Pension Plan #XY-9876 140,000 See MBS LinesBalance at Divorce: 854,500 0 213,625 299,075 341,800 Retirement Savings Plan #JK-6543 550,000Investment Type: Cash Fixed Inc. Fixed Inc. Equities IRA #02-3456 0 17-24Investment Vehicle: Average 12 Mo. C.D. U.S. Treas. Bond Fund Stock Avg. IRA II #98-7654 91,500Return %: 5.7% 1.0% 4.5% 5.0% 7.0% 403b Plan #9876 38,000 IRA III #6543 35,000 854,500 Annual Cumulative Investment Year Age Return Return Contribution Distribution Balance 1 51 0 9,613 14,954 23,926 48,493 48,493 15,000 0 917,993 2 52 0 10,327 16,065 25,704 52,096 100,589 15,000 0 985,089 3 53 0 11,082 17,239 27,582 55,903 156,492 15,000 0 1,055,992 4 54 0 11,880 18,480 29,568 59,928 216,420 15,000 0 1,130,920 5 55 0 12,723 19,791 31,666 64,180 280,600 15,000 0 1,210,100 6 56 0 13,614 21,177 33,883 68,674 349,274 15,000 0 1,293,774 7 57 0 14,555 22,641 36,226 73,422 422,696 15,000 0 1,382,196 8 58 0 15,550 24,188 38,701 78,439 501,135 15,000 0 1,475,635 9 59 0 16,601 25,824 41,318 83,743 584,878 15,000 0 1,574,378 10 60 0 17,712 27,552 44,083 89,347 674,225 15,000 0 1,678,725 11 61 0 18,886 29,378 47,004 95,268 769,493 0 (75,000) 1,698,993 12 62 0 19,114 29,732 47,572 96,418 865,911 0 (140,000) 1,655,411 13 63 0 18,623 28,970 46,352 93,945 959,856 0 (140,000) 1,609,356 14 64 0 18,105 28,164 45,062 91,331 1,051,187 0 (140,000) 1,560,687 15 65 0 17,558 27,312 43,699 88,569 1,139,756 0 (140,000) 1,509,256 16 66 0 16,979 26,412 42,259 85,650 1,225,406 0 (140,000) 1,454,906 17 67 0 16,368 25,461 40,737 82,566 1,307,972 0 (140,000) 1,397,472 18 68 0 15,722 24,456 39,129 79,307 1,387,279 0 (140,000) 1,336,779 19 69 0 15,039 23,394 37,430 75,863 1,463,142 0 (140,000) 1,272,642 20 70 0 14,317 22,271 35,634 72,222 1,535,364 0 (140,000) 1,204,864 21 71 0 13,555 21,085 33,736 68,376 1,603,740 0 (140,000) 1,133,240 22 72 0 12,749 19,832 31,731 64,312 1,668,052 0 (140,000) 1,057,552 23 73 0 11,897 18,507 29,611 60,015 1,728,067 0 (140,000) 977,567 24 74 0 10,998 17,107 27,372 55,477 1,783,544 0 (140,000) 893,044 25 75 0 10,047 15,628 25,005 50,680 1,834,224 0 (140,000) 803,724 26 76 0 9,042 14,065 22,504 45,611 1,879,835 0 (140,000) 709,335 27 77 0 7,980 12,413 19,861 40,254 1,920,089 0 (140,000) 609,589 28 78 0 6,858 10,668 17,068 34,594 1,954,683 0 (140,000) 504,183 29 79 0 5,672 8,823 14,117 28,612 1,983,295 0 (140,000) 392,795 30 80 0 4,419 6,874 10,998 22,291 2,005,586 0 (140,000) 275,0862011 ANNUAL CONSULTANTS’ CONFERENCE  JUNE 8 – 11, 2011  SAN DIEGO BAYFRONT HILTON 31 81 0 3,095 4,814 7,702 15,611 2,021,197 0 (140,000) 150,697 32 82 0 1,695 2,637 4,220 8,552 2,029,749 0 (140,000) 19,249 29 150,000 (3,015,000)
  30. 30. Smith v. SmithHusbands Ability to Pay Support3/31/11 (A) (B) (C) (D) (E) (F) (G) (H) (I) (J) (K) (L) (M) (N) (O) (P) (Q) + - - - - + + + - + = - - = = ABC & Military Defined Def. Benefit Federal Employment Contribution Plans Social & State Net Living Annual Monthly Earnings 401(k) Child Plans & Military Security Income Draws From Disposable Mortgage Expenses (Deficit) (Deficit) Year Age 2.0% COLA FICA Deductions Alimony Support Draw Draw* 2.5% COLA Tax Investments Income or Rent 2.5% Inflation or Surplus or Surplus 1 51 215,000 (8,958) (15,000) (60,000) (38,400) 0 0 0 (28,315) 0 64,327 (28,354) (63,516) (27,542) (2,295) 2 52 217,150 (8,989) (15,000) (60,000) (25,200) 0 0 0 (27,781) 0 80,180 (28,354) (65,104) (13,278) (1,107) 3 53 190,000 (8,595) (15,000) (60,000) (25,200) 0 14,412 0 (24,319) 0 71,297 (28,354) (66,731) (23,788) (1,982) 4 54 191,900 (8,623) (15,000) (60,000) 0 0 14,412 0 (24,762) 0 97,927 (28,354) (68,400) 1,174 98 5 55 193,819 (8,651) (15,000) (60,000) 0 0 14,412 0 (25,570) 0 99,010 (28,354) (70,110) 546 46 6 56 195,757 (8,679) (15,000) (60,000) 0 0 14,412 0 (27,480) 0 99,010 (28,354) (71,863) (1,206) (101) 7 57 197,715 (8,707) (15,000) (60,000) 0 0 14,412 0 (28,297) 0 100,122 (28,354) (73,659) (1,890) (158) 8 58 199,692 (8,736) (15,000) (60,000) 0 0 14,412 0 (31,480) 0 98,888 (28,354) (75,501) (4,966) (414) 9 59 201,689 (8,765) (15,000) (60,000) 0 0 14,412 0 (32,360) 0 99,976 (28,354) (77,388) (5,766) (481) 10 60 203,706 (8,794) (15,000) (60,000) 0 0 14,412 0 (33,228) 0 101,096 (28,354) (79,323) (6,580) (548) 11 61 0 0 0 (60,000) 0 42,500 146,412 0 (29,534) 0 99,378 (28,354) (81,306) (10,281) (857) 12 62 0 0 0 0 0 42,500 146,412 0 (48,114) 0 140,798 (28,354) (83,338) 29,106 2,426 13 63 0 0 0 0 0 42,500 146,412 0 (49,101) 0 139,811 (28,354) (85,422) 26,035 2,170 14 64 0 0 0 0 0 42,500 146,412 0 (50,063) 0 138,849 (28,354) (87,558) 22,938 1,912 15 65 0 0 0 0 0 42,500 146,412 0 (50,999) 0 137,913 (28,354) (89,746) 19,813 1,651 16 66 0 0 0 0 0 42,500 146,412 0 (51,910) 0 137,002 0 (91,990) 45,012 3,751 17 67 0 0 0 0 0 42,500 146,412 18,000 (58,372) 0 148,540 0 (94,290) 54,250 4,521 18 68 0 0 0 0 0 42,500 146,412 18,450 (60,147) 0 147,215 0 (96,647) 50,568 4,214 19 69 0 0 0 0 0 42,500 146,412 18,911 (61,931) 0 145,892 0 (99,063) 46,829 3,902 20 70 0 0 0 0 0 42,500 146,412 19,384 (63,726) 0 144,570 0 (101,540) 43,030 3,586 21 71 0 0 0 0 0 42,500 146,412 19,869 (65,531) 0 143,250 0 (104,078) 39,171 3,264 22 72 0 0 0 0 0 42,500 146,412 20,365 (67,346) 0 141,931 0 (106,680) 35,251 2,938 23 73 0 0 0 0 0 42,500 146,412 20,874 (69,172) 0 140,615 0 (109,347) 31,267 2,606 24 74 0 0 0 0 0 42,500 146,412 21,396 (71,009) 0 139,300 0 (112,081) 27,219 2,268 25 75 0 0 0 0 0 42,500 146,412 21,931 (72,856) 0 137,987 0 (114,883) 23,104 1,925 26 76 0 0 0 0 0 42,500 146,412 22,480 (74,713) 0 136,678 0 (117,755) 18,923 1,577 27 77 0 0 0 0 0 42,500 146,412 23,042 (76,581) 0 135,372 0 (120,699) 14,673 1,223 28 78 0 0 0 0 0 42,500 146,412 23,618 (78,459) 0 134,070 0 (123,716) 10,354 863 2,006,427 (87,497) (150,000) (660,000) (88,800) 765,000 2,750,712 248,320 (1,383,157) 0 3,401,005 (425,304) (2,531,735) 443,966 2011 ANNUAL CONSULTANTS’ CONFERENCE  JUNE 8 – 11, 2011  SAN DIEGO BAYFRONT HILTON 30
  31. 31. Smith v. SmithNet Worth Accumulation of Marital Assets3/31/11 Net Worth Accumulation Husband Wife of Marital Assets Estimated Estimated Estimated Estimated Value Value Value Value At Divorce At Death At Divorce At Death $2,500,000Marital Residence Equity - 2% Appreciation 0 0 131,000 518,249 $2,087,424New Home - 2% Appreciation 0 609,358 0 0 $2,000,000Investment Assets 321,500 1,435,242 266,000 (359,583) $1,500,000Retirement Assets 657,328 42,824 854,500 19,249 $1,264,700Other Assets & Debts 85,235 0 13,200 0 $1,064,063 W N h $1,000,000 o r e t 1,064,063 2,087,424 1,264,700 177,915 45.7% 92.1% 54.3% 7.9% $500,000 $177,915 $0 At Divorce At Death Husbands Total Marital Assets Wifes Total Marital Assets 2011 ANNUAL CONSULTANTS’ CONFERENCE  JUNE 8 – 11, 2011  SAN DIEGO BAYFRONT HILTON 31

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