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"This blog post explores a recent Texas divorce case highlighting the importance of protecting your financial interests, even when a prenuptial agreement isn't an option. The case, Rue v. Rue, involved financial mismanagement and serves as a stark reminder of what can happen when one spouse abuses the trust inherent in a marriage."
I often advise clients on prenuptial agreements when they find love again. I stand by my assertion that it's the right way to start a new marriage. Far from impoverishing a spouse if the marriage doesn't work by having accounts titled and access in one spouse’s name, the right prenup can reassure that new spouse that they will treated fairly, even generously, in the event of a divorce.
Prenups prompt questions. Prenups clarify unspoken questions. This is good.
But some very religious people cannot have a prenup because their religion doesn't allow it. Other people just get queasy at the word "prenup," as it if will jinx the marriage. I can understand the feeling it illicts from all the negative stories we hear from friends and media.
If you are one of those people, please pay attention.
There is an alternative to prenups. It is to structure accounts so that money can be accessed by both partners, while protecting other funds.
Lea is a perfect example. I served as her financial fiduciary in her divorce. She negotiated a good settlement, went back to work after sixteen years after her role ended as stay-at-home mom, developed new interests, made new friends - and fell in love. She came back to me because we'd agreed that if ever were she remarry, we'd sit down first.
She felt strong the pre-nup was direct conflict of her religious beliefs.
We developed an alternative - a way to protect her assets while honoring her religion and personal beliefs in love and commitment.
Jean wanted to fresh start with her new husband, to build a good life together. So the income she earns—about $80,000/year—goes into the couple’s joint checking account. Combined with his income, they will have a plentiful life.
We kept her brokerage accounts entirely separate from money used to finance marital life. None of her savings and investments go into their joint checking account. She uses money from her brokerage accounts to do things on her own—buy gifts, take vacations with her daughters, and pay for anything she would like to share.
She can even buy gifts for her husband with those funds. Her gifts to him would remain his, and they would be considered separately in the event of a future divorce.
Before the wedding, I documented her entire marital estate and archived it so that she will always have a baseline of what she owned on the day she married. What is solely hers will remain hers as long as she sticks to the plan. I did this at the guidance and advice of her attorney as well.
I created the best protection possible for her under the circumstances.
You can protect your assets even if you are if you don't have a pre-nup. But you need to start this before the wedding. it is imperative that you develop and record a complete and accurate picture of your financial circumstances. Ask a financial fiduciary how to structure this process for yourself. You'll need to be careful to stick to the rules developed so that what is yours remains yours on the chance that the marriage does not last forever and when it does… You have plenty more to work with in retirement.
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If you are nervous about bringing up the subject of money, or if you find your attempts to discuss it shut down by your betrothed, then something is wrong. It needs to be addressed, and don't marry until it is.
I've seen people with significant resources and strong personalities shutdown when it comes to talking to their fiancées about prenups.
They somehow think that talking about keeping their assets separate is a sign of distrust. But the truth is, fear of bringing up the subject is the ultimate distrust. That fear tells them that they don't trust their fiancées to have an honest conversation about something that is creating anxiety.
If you can't trust that person to react reasonably to a discussion, why would you marry that person? What else will you not discuss because of fear of how they will react?
People who truly trust each other can talk about money.
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Prenups can demonstrate love and caring attention to how their partner can be honored in case it does not work out. It is a great opportunity to craft your existence together honoring what you both already have or how to best title what you will build together.
A VA Loan is a loan that is specifically designed for veterans or military personnel. VA Loans make it easier for military personnel to either buy or refinance a new home. The loans are easier to qualify for and are backed by the United States Department of Veteran Affairs.
A VA loan is more attractive for veterans because they are much more flexible than other conventional loans. There is no down payment or mortgage insurance necessary which makes these loans very desirable.
Benefits of VA Loans
VA loans are also advantageous for veterans because there are lower closing costs and they are much easier to qualify for when compared to conventional loans.
Even though the funds don’t come directly from the VA, the VA will guarantee about 25% of the total loan from a bank. Therefore, interest rates tend to be lower and there isn’t any private mortgage insurance required.
The VA does put a limit on the closing costs that the buyer is required to pay, which makes it more affordable than other loans. You can pay off your VA loan early with no fear of getting hit with any prepayment penalties. VA loans also offer many different refinance options and there is no appraisal required.
If you are a veteran and are looking to purchase your first home or refinance another home, a VA loan can be very beneficial with many significant savings.
VA loans Qualifications Today
Just as with any loan, there are a few things to keep in mind that can help veterans qualify for a VA Loan:
Certificate of Eligibility
In order to qualify for a VA loan, the following is required: having enough income, a healthy credit score, as well as securing a Certificate of Eligibility.
Qualifications for the certificate are usually offered to those serving in the armed forces, their spouses, and retired military veterans. Make sure to have your Certificate of Eligibility approved before applying for a loan.
Credit Score
Not unlike other conventional loans, veterans must know their credit history to apply for a loan. VA lenders usually look for a credit score around 620, which is actually a lot lower than most other loans. Of course, a higher credit ranking can also help you get a lower interest rate.
Only Use A VA Loan for Your Primary Residence
The VA prefers that veterans and current military personnel use their loans only for buying or refinancing a primary residence. A single-family home, a condominium, or even an apartment building (but you need to live in one of the units) can be used as the primary residence.
Stable Income is Necessary
Lenders for VA loans need to see reliable, stable income. There is a standard debt to income ratio to qualify for a VA loan, which is essentially the amount of money you have each month after paying the bulk of your major expenses.
The typical debt-to-income requirement that most VA lenders require is around 41%.
VA loans are a great option for members of the military and like any loan, there are many different companies that offer VA loans. It’s important to look for a lender that has experience with VA loans to get the best price and the most out of it.
This BLOG was posted by Outreach Specialists of Consumer Advocate. You can learn more about Consumer Advocate at www.consumeradvocate.org . Thank you to Consumer Advocate for their input and guidance in the posting of this BLOG.
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there’s a world of opportunity in equities
The global equity market is large and represents a world of investment opportunities. As shown in Exhibit 1, nearly half of the investment opportunities in global equity markets lie outside the US. Non-US stocks, including developed and emerging markets, account for 48% of world market capitalization[1] and represent thousands of companies in countries all over the world. A portfolio investing solely within the US would not be exposed to the performance of those markets.
Exhibit 1. World Equity Market Capitalization
As of December 31, 2017. Data provided by Bloomberg. Market cap data is free-float adjusted and meets minimum liquidity and listing requirements. China market capitalization excludes A-shares, which are generally only available to mainland China investors. For educational purposes; should not be used as investment advice.
the lost decade
We can examine the potential opportunity cost associated with failing to diversify globally by reflecting on the period in global markets from 2000–2009. During this period, often called the “lost decade” by US investors, the S&P 500 Index recorded its worst ever 10-year performance with a total cumulative return of –9.1%. However, looking beyond US large cap equities, conditions were more favorable for global equity investors as most equity asset classes outside the US generated positive returns over the course of the decade. (See Exhibit 2.) Expanding beyond this period and looking at performance for each of the 11 decades starting in 1900 and ending in 2010, the US market outperformed the world market in five decades and underperformed in the other six.[2] This further reinforces why an investor pursuing the equity premium should consider a global allocation. By holding a globally diversified portfolio, investors are positioned to capture returns wherever they occur.
Exhibit 2. Global Index Returns, January 2000–December 2009
S&P data © 2018 S&P Dow Jones Indices LLC, a division of S&P Global. All rights reserved. MSCI data © MSCI 2018, all rights reserved. Indices are not available for direct investment. Index performance does not reflect expenses associated with the management of an actual portfolio. Past performance is not a guarantee of future results.
pick a country?
Are there systematic ways to identify which countries will outperform others in advance? Exhibit 3 illustrates the randomness in country equity market rankings (from highest to lowest) for 22 different developed market countries over the past 20 years. This graphic conveys how difficult it would be to execute a strategy that relies on picking the best country and the resulting importance of diversification.
Exhibit 3. Equity Returns of Developed Markets
Source: MSCI country indices (net dividends) for each country listed. Does not include Israel, which MSCI classified as an emerging market prior to May 2010. MSCI data © MSCI 2018, all rights reserved. Past performance is no guarantee of future results. Indices are not available for direct investment; therefore, their performance does not reflect the expenses associated with the management of an actual portfolio.
In addition, concentrating a portfolio in any one country can expose investors to large variations in returns. The difference between the best- and worst‑performing countries can be significant. For example, since 1998, the average return of the best‑performing developed market country was approximately 44%, while the average return of the worst-performing country was approximately –16%. Diversification means an investor’s portfolio is unlikely to be the best or worst performing relative to any individual country, but diversification also provides a means to achieve a more consistent outcome and more importantly helps reduce and manage catastrophic losses that can be associated with investing in just a small number of stocks or a single country.
a diversified approach
Over long periods of time, investors may benefit from consistent exposure in their portfolios to both US and non‑US equities. While both asset classes offer the potential to earn positive expected returns in the long run, they may perform quite differently over short periods. While the performance of different countries and asset classes will vary over time, there is no reliable evidence that this performance can be predicted in advance. An approach to equity investing that uses the global opportunity set available to investors can provide diversification benefits as well as potentially higher expected returns.
Source: Dimensional Fund Advisors LP.
Indices are not available for direct investment. Their performance does not reflect the expenses associated with the management of an actual portfolio. Past performance is not a guarantee of future results. Diversification does not eliminate the risk of market loss.
There is no guarantee investment strategies will be successful. Investing involves risks, including possible loss of principal. Investors should talk to their financial advisor prior to making any investment decision.
All expressions of opinion are subject to change. This article is distributed for informational purposes, and it is not to be construed as an offer, solicitation, recommendation, or endorsement of any particular security, products, or services. Investors should talk to their financial advisor prior to making any investment decision
[1]. The total market value of a company’s outstanding shares, computed as price times shares outstanding.
[2]. Source: Annual country index return data from the Dimson-Marsh-Staunton (DMS) Global Returns Data, provided by Morningstar, Inc.
Because my practice has morphed these last years from helping families in divorce to helping those in any major transition (getting married, losing a spouse, etc.), I see a lot of job loss. It can happen so fast and be completely unexpected. What to tackle first?
Typically, when you are walked from an employer, they are going to send you home with some paperwork or perform an exit interview on-site. In high times of stress, one's brain cannot focus and concentrate. Listen to your exit interview, take your paperwork and go home. Please do not sign anything until you have had a chance to review it. You do not need the stress and pressure of the HR Director peering over you and the immediate sense of shock of losing employment to make major decisions.
Instead, write down your questions, organize your thoughts and call HR later.
HEALTH INSURANCE
We get a lot of questions about about health insurance. Heck, I know many people that go to work only to obtain health insurance for their family. This is a major concern.
COBRA
By 1986 law, COBRA gives employees the right to continue coverage at the group premium rates. Typically, it is 100% of the premium (which might have been partially covered by the employer) and a 2% administration fee. This is a viable option and can provide consistent coverage for a family while other options are researched. The employer will send over coverage termination information and your insurance provider within 2 weeks will send you COBRA continuation options via the mail.
Healthcare.gov
Outside of open enrollment, one can obtain coverage due to job-loss. This is important to research while exploring COBRA options. It might be less expensive to obtain independent insurance or move to a short-term coverage policy rather than pay your COBRA premiums. I have researched this enough times with clients to know that every one family is different.
For example, a family with young children and frequent trips to the doctor, might decide to it advantageous to maintain consistency of coverage through COBRA. For a single person with minor health issues, a short-term medical policy through healthcare.gov can be significant savings.
I recently read a Motley Fool article that advised to research, research and do more research. Compare plans, check prices, and check doctor participation depending on your attachment to your physician.
Make a list of the medications you take and what they'll cost under various plans. List services you expect to need, too, such as visits to mental health counselors. Then try to estimate how much each candidate plan will cost you. Don't be afraid of high-deductible plans. If you're not likely to spend a lot on healthcare, they offer a good way to keep costs down. (Source: https://www.fool.com/retirement/2017/06/04/read-this-before-you-buy-health-insurance.aspx)
BUDGET
We say we are going to analyze our spending but let's face it, we get busy. This is the time now to put that thought to action. Sit down and list out all known expenses. I like to use receipts and an Excel spreadsheet - a legal pad will do! Take some time to get a handle on what needs to be paid and how you can address your imminent bills.
What is not acceptable is ignoring it. You cannot ignore your bills because you feel bad. They don't care. You can control your spending and your stress will reduce, the more your stay on top of it. If there are small bills that can wait to be paid, call the company and ask for small payment plan or an extension while you sort things out.
GET ORGANIZED
You are already disciplined. You got up every day, got ready and went to work. Continue to do so. Work on your resume, research new job opportunities ad treat it like your full-time job. I see the most success and the least down time with people that have a plan.
Get up, get ready, research, submit resumes, make calls, and have coffee with people who can help you in your field. You will be shocked at how much time it takes to get your next awesome role. It needs your time, dedication and attention.
GET SUPPORT
There is no shame in losing a job. It happens! Talk to your friends, arrange to do things to keep you occupied (hikes, movie rentals, pot lucks) that do not strain your budget. Seek support and ask for help. Your friends want to help but they do not know how and they cannot read your mind.
The more you can prepare for emergency, the better (like with an emergency savings account) but hey, this is life! and $h1t happens. Breathe and know that you can do this, get better and succeed in another role wherever you may land.
Sources:
https://www.dol.gov/agencies/ebsa/about-ebsa/our-activities/resource-center/faqs/cobra-continuation-health-coverage-compliance;
https://www.healthcare.gov/;
While the 401(k) plan has been around for decades, we are just now starting to see the cycle of this strategy.
Most people know that if you save in a 401(k) plan, you're able to deduct what you put into it on your income taxes. If you put $18,000 total a year into your 401(k) and you make $78,000 a year, then only $60,000 a year of your income is taxable.
However, what people don't talk about is how 401(k) plans are constructed, charged and the responsibility of the employer in managing those plans.
President Obama recently tried to hijack 529 plans and go back on the popular benefits.
529 plans, named for their section in the Internal Revenue Code, allow people to save after-tax dollars and come in different varieties.
An employee can place a percentage of their income into a 529 plan, which grows tax-deferred and comes out tax-free, as long as the money is being used for legitimate college costs...
EDUCATION TRANSPARENCY AUTONOMY
