CaseMark Managing Divorce Financial Planning
Structures comprehensive divorce financial analysis covering marital estate valuation, asset/liability division, support calculations, tax consequences, and post-divorce financial projections for wealth management clients.
When To Use
- Client or their attorney requests financial analysis to inform divorce settlement negotiations
- Evaluating proposed settlement scenarios for long-term financial viability
- Projecting post-divorce cash flow, investment income, and lifestyle sustainability
- Analyzing tax impacts of different asset division approaches (e.g., keeping the house vs. liquidating and splitting proceeds)
- Coordinating with family law counsel on support calculation inputs
- Building a post-divorce financial plan including revised investment policy, insurance needs, and estate plan updates
Inputs To Gather
- Marital estate inventory: All assets (real property, investment accounts, retirement accounts, business interests, stock options/RSUs, collectibles, digital assets) with current valuations and acquisition dates
- Liabilities: Mortgages, HELOCs, credit card debt, student loans, tax obligations, contingent liabilities
- Income data: W-2s, K-1s, 1099s, business tax returns (3–5 years) for both spouses; deferred compensation schedules
- Expense profile: Current household budget, proposed separate household budgets
- Benefit/pension details: Defined benefit plan statements, Social Security estimates, stock option vesting schedules
- Pre/postnuptial agreements: Any existing contractual terms governing division
- State jurisdiction: Community property vs. equitable distribution state [VERIFY]
- Filing status and tax data: Most recent joint returns, estimated tax brackets post-divorce
- Insurance policies: Life, disability, long-term care — current coverage and beneficiary designations
Workflow
Compile the marital balance sheet
- List every asset and liability with fair market value, tax basis, and title (joint, H, W)
- Identify separate property claims (pre-marital assets, inheritances, gifts) and trace funding sources
- Flag illiquid or hard-to-value assets (business interests, real estate, restricted stock) that require appraisal [VERIFY valuation methodology and date]
Classify and characterize assets
- Distinguish pre-tax vs. after-tax assets — a $1M IRA is not equivalent to $1M in a brokerage account
- Calculate after-tax equivalent values using projected liquidation tax rates [VERIFY applicable capital gains rates and state tax]
- Note vesting schedules, lockup periods, and restrictions on any deferred compensation
Model asset division scenarios
- Build at least two division scenarios (e.g., 50/50 net value, offsetting retirement vs. liquid assets, one spouse retaining the residence)
- For each scenario, project: net worth at division, annual investment income, liquidity, and tax drag
- Quantify the cost of keeping illiquid assets (e.g., carrying costs on real estate, concentration risk in a single stock)
Calculate support obligations
- Input state-specific guidelines for child support [VERIFY state formula and income cap]
- Model spousal support (alimony) scenarios: duration, amount, tax treatment (post-2018 TCJA: non-deductible/non-includable for federal; check state treatment [VERIFY])
- Stress-test support adequacy against recipient spouse's projected expenses
Analyze tax consequences
- QDRO transfers from retirement plans: rollover vs. direct distribution, early withdrawal penalties [VERIFY plan-specific QDRO rules]
- Capital gains on asset sales triggered by division (especially concentrated stock positions or real property)
- Filing status change impact: compare joint vs. single/head-of-household brackets
- Dependency exemptions and child tax credits allocation
Build post-divorce financial projections
- Project each spouse's cash flow for 5, 10, and 20 years post-divorce
- Incorporate revised investment allocation appropriate for single-income household risk profile
- Model lifestyle sustainability: can proposed budget be maintained given projected income, support, and portfolio withdrawals?
- Identify gaps requiring adjustment (downsizing, return to work, modified spending)
Coordinate estate and insurance updates
- Flag beneficiary designation changes needed (retirement accounts, life insurance, TOD/POD accounts)
- Note estate plan revisions required (revocable trust, will, powers of attorney, healthcare directives)
- Evaluate life insurance needs to secure support obligations (amount and term)
Output
- Marital Balance Sheet: Itemized asset/liability table with FMV, tax basis, after-tax equivalent, and title
- Division Scenario Comparison: Side-by-side analysis of 2–3 settlement scenarios showing net value, liquidity, income, and tax impact per spouse
- Support Analysis: Child and spousal support calculations with sensitivity ranges
- Tax Impact Summary: Estimated tax consequences of each division scenario
- Post-Divorce Financial Projection: Multi-year cash flow, net worth trajectory, and sustainability assessment for each spouse
- Action Items: Checklist of beneficiary changes, insurance adjustments, and estate plan updates needed
Quality Checks
- Confirm all assets are valued on a consistent date; flag any stale appraisals (>6 months)
- Verify after-tax adjustments use correct basis and applicable tax rates — do not equate pre-tax and after-tax dollars
- Ensure support calculations use current state guidelines and correct income definitions [VERIFY]
- Validate that post-divorce projections use reasonable return assumptions (align with client's IPS or firm's capital market assumptions)
- Cross-check that total marital estate allocated across scenarios equals the same aggregate value
- Confirm no double-counting of assets that appear in multiple accounts or registrations
- Flag any asset requiring independent appraisal (business interests, real property, collectibles) that lacks one
- Mark all jurisdiction-dependent calculations with [VERIFY] for advisor review before client presentation