COMMON ERRORS TO AVOID WHEN YOU’RE FACING DIVORCE INTRO: Divorce rates in the U.S. are among the highest in the world. It is never pleasant and can present very trying challenges to all parties affected. One area that inevitably must be addressed are financial issues resulting from divorce. Bruce Hagan, certified financial planner with RAI Investments and Corporate Securities Group is with us to discuss common financial errors to avoid when facing divorce. Q1: This is obviously a part of life people don’t plan on happening and hope they won’t have to deal with, but I read that the likelihood of a marriage ending in divorce is somewhere around 40%. A1: Yes, over one million divorces occur in the U.S. each year. There are life-altering events that occur in peoples lives such as the birth of a child, job changes, major illnesses, receiving an inheritance, death of a spouse, etc. Some are wonderful, exciting events and some are gut-wrenching ordeals. All, however, have financial implications that need to be dealt with in as objective, intelligent way as possible. Q2: I would think that in many divorces being objective might be a problem. A2: It certainly can be. This can be an emotionally charged process with feelings running the gamut from anger to guilt to greed to relief, you name it. You need to control your emotions as much as possible in regards to finances because decisions made will have very long-term consequences. Q3: What are some financial issues people should be aware of that are sometimes overlooked? A3: You need to be aware of the taxation consequences associated with alimony and child support. Alimony is taxable to the spouse receiving payment; child support is not. Q4: So whether a payment is designated as alimony or child support could dramatically effect the net after-tax dollars the receiving spouse winds up with. A4: Absolutely. Another consideration is the cost basis of property. If your intention is to provide assets equally and one spouse winds up with cash and one with an equal market value of stock, that may not be a fair deal. If the stock has a low cost basis , the sale of it could trigger a large capital gains tax. Q5: Could the same thing occur with a house? A5: Yes, also don’t assume that the wife should always get the house. She may wind up with a mortgage payment that is more than can reasonably be handled. And if you’re counting on alimony to support that payment, be aware that alimony might not always be there. Q6: Are there ways of insuring the alimony? A6: Yes, good point. The 3 common methods are: life insurance, disability insurance and by purchasing an annuity which will pay out the alimony. Q7: What are some other things to consider? A7: Have a thorough understanding of pension and retirement plans and how a company handles a division of retirement assets in the case of divorce. You might need a Qualified Domestic Relations Order (QDRO). Optional Question: Q: Sounds like good legal advice should be sought. A: Yes, especially when there are children involved and there are division of property issues. The discussion offered above and in the movie should not be considered an endorsement by Florida State University. They are offered in the educational sense of providing thought-provoking information for our Web audience. Copyright shared with Florida News Channel (FNC), all rights reserved. Broadcast 8/27/99