Latest / The Conscious Divorce / The Urgency of Divorce and Financial Preparedness
Transcript
- Justin: Divorce has a way of making everything feel urgent at the exact moment when your nervous system is least equipped to make long-term decisions. You may be trying to protect your children, process grief, respond to legal deadlines, find a place to live, and understand money in a way that you haven't done before. But here's the truth we're going to sit with today. Divorce is not only an emotional event, it's a financial reorganization of your life. You're not just dividing accounts. You are designing a cash flow. You're deciding what kind of home is sustainable. You're asking who pays for braces, the summer camp, the car insurance, the college visits. The uncovered medical expenses and the things nobody thought to put in the agreement. You're looking at retirement, taxes, credit, insurance, estate documents, and the financial habits that have worked inside the marriage, but will not work the same way outside of it. And I want to say this clearly at the top. You do not get financially prepared for divorce because you're greedy. You get prepared because confusion is expensive. Today we're talking about how to prepare yourself financially. before, during, and after divorce with Donna Kendrick, CFP, CDFA, and founder of Sefton Financial. Welcome back to the Conscious Divorce Podcast. I'm Justin Milrad, your host, a CDC certified divorce coach, MBA, financial planner, and founder of Reclaim and Reboot Transformational Coaching, and someone who has the lived experience we talk about on this show. But before we go further, a quick reminder and important note. The Conscious Divorce Podcast is for education and information purposes only. What you hear on the show is not legal advice, not financial advice, not tax advice, and not therapy or mental health treatment. Divorce involves real legal rights and real financial stakes. Please work with a licensed attorney for legal guidance. Work with a certified divorce financial analyst or a CPA or another financial qualified professional for money matters. And if you're struggling emotionally, Please reach out to a therapist or mental health practitioner. My guest today is Donna Kendrick, CFP, CDFA, and founder of Sefton Financial. Donna focuses her work on families in transition, including people navigating divorce, widowhood, blended families, career change, inheritance, and those moments when tomorrow suddenly looks very different from today. Donna also brings a deeply personal understanding of transition. After being widowed suddenly at age 40, she rebuilt her own career and created a financial planning practice centered on clarity, compassion, and practical decision making for families and major life changes. She's the author of The Divorce Money Trap Taking Control of Your Finances Before, During, and After Divorce, A Guide for Widowhood, and a Guide for Blended Families. Donna, welcome to the Conscious Divorce. Donna Jean Kendrick: Thank you so much for having me, Justin. It's a pleasure and a privilege. Justin: It's so great to have you here. Donna, I wanna begin with the emotional piece. Why is money so hard to look at during divorce? Donna Jean Kendrick: I think money is hard to look at because it is emotional. And you think for me, I'm like, okay, I'm a statistician by nature. Money is black and white. It's yes and no. And it's something that can be just calculated. But money and divorce is different because money is an ability for someone to set their new foundation post-divorce. Money can be their freedom. Money is understanding. And money does have an emotional pull to it because that's one thing that people are often trying to control in the marriage. or understand because there's usually one person in the relationship who had the financial savviness, right? I definitely know that was true in my marriage, right? And so money itself isn't just the math. It has emotional consequences of their ability to quote unquote be okay for both parties before, during, and after the marriage is resolved. Justin: Sure. And it it's such an important topic and it's kind of a third rail because people aren't always comfortable talking about it. And you know, any major life event from a death to a divorce to a health issue, money is a major consideration. And on Friday, you may have been very wealthy and well taken care of. And on Monday, you're really concerned about your future because something major has happened. to the point that you're willing to share, can you tell us a little more about your journey? You know, because I want our listeners to really understand your passion for what you do and why you do it. Donna Jean Kendrick: I'd be happy to and thank you for the opportunity. yeah, born and raised in Philadelphia, and you know, my dad was a Philly firefighter, my mom's a stay-at-home mom, and they didn't talk often about money, right? So all I knew was that the extra cash that was hidden in envelopes was in between the winter curtains, and that when dad needed some money, that's where he went to go borrow from the envelopes. That was like my money training as a kid, right? Went to Penn State, majored in statistics. And just loved basically math, right? And and how we work with money. Wound up getting married. and I ran the everyday expenses of the house. And my husband at the time asked me to give up my career to follow him abroad. And so we wound up living about seven years on and off, like a military life, over in Rome, Italy. And I remember asking him the one thing I asked him to do was since I'm not gonna be earning, we were we call them yuppies, right? We were both earning exactly what we the same thing. So it was like whose whose career could we step back into at the time? And his career needed him to stay in the government. And mine could probably get stepped back into or recreated. And all I asked him was, Go ahead, Greg, just make sure you fully fund your four one K because now you're saving for both of us. I don't have abilities to fund there. But besides that, that was really the only thing he took care of financially and I took care of the everyday bills and running things for the kids and can we afford to move back to the states when we're done living abroad? Things like that. What up having the opportunity to move back abroad from abroad to the US and back home to the Philadelphia area in 2013. And about two to three months after we moved to the Philadelphia area, Greg died suddenly. yeah, and I wasn't prepared for it at all. Right. And the breadwinner, the only person making money in the house, I think I was working part-time there at the school, making like $17,000 a year. That was 2013. So not all that long ago. The breadwinner was gone. And when he's gone, his paycheck is gone the very next minute. But he had also taken his life. And so I had a whole lot of emotional grief going on. At the same time, I'm making these major financial decisions for me and my kids. When I say major, it's more like, Wait, we had life insurance. How do I get access to it? Wait, what do you mean? I have to sign the life insurance over to pay for his funeral because I'm broke. I have no cash reserves. Wait, but I need that money to live, right? All the credit cards stopped because I didn't have any assets in my any credit cards in my name. I had one American Express from back when I graduated college. Right. And so now I have no access to credit. We have pretty much spent all of our cash reserve because if remember, we just moved to the area. Like we had put all of our money down on the down payment on the house while we were selling a house previous to living here. So bought one, waiting to sell one, not a lot of liquid cash. Breadwinner just left and I was like, what am I gonna do now? Right. I had to understand social security, I needed to understand his pension process, I needed to see where I could get any liquid cash. and I had to lean on my community, my friends, but what I really knew was that I needed to lean lean on some professionals, the people that could do things that I couldn't do. I need to lean on my estate attorney. I need to lean on my financial planner. And like many, many, I think they say it was between 70 and 80% of women who are widowed move their financial planners. I did the same. I looked for a widow that I met that was doing okay with her kids and was like, who do you use as a financial planner? And that's how I found my financial planner. She looked like she was doing okay. But he was actually very genuine and very empathetic. And in our book, The Divorce Money Map, we actually have like a series of pages of how to interview a financial planner, how to interview an accountant, how to interview an estate attorney, where to take your notes. Because I would have loved to have had that back at the time that this was happening. But let's move forward. He kind of told me, all right, you can get by on oodles of noodles and social security benefits and your little pension for X amount of time. But if you want to live your life differently, and if you want to start saving for your own retirement, you need to get back to work. And you need to be making X amount of money by X amount of time for the math to work. So have at it, kiddo. So year two, I was like, like I I have to, I have to recreate myself. Now my industry had gone away during those seven years I wasn't in the in the workplace. I was down to that one credit card, that American Express, that let me carry the years of credit that my husband and I had together since I was the original owner. So I felt like, I've got a little life insurance, I have an education, I've got one credit card. What do we do? and so I decided to go back to school to learn to be a financial planner because that was the one thing that was most impactful for me after Greg left was my financial planner's ability to slow the roll, teach me more than just the basic. budgeting for the family to teach me about the investing and the impact of taxes and how it would all work. So remember when I told you that Greg just handled the 401k? As a spouse, I never asked him how are you invested in your 401k? I just knew the money was going from his paychecks. We were abroad during 2008, 23rds, 2009, what I didn't know is Greg had gotten scared and he had pulled all the money and was sitting in cash and the TSP for the government. So we didn't earn a dime. didn't earn a dime after losing a ton up until that year of 2013. And so this financial planner was educating me from the decisions we made in the past to where we were now. So when it was time to go ahead and flip my career on its head, I wanted to make sure I did something in mission and I wanted to work with widows, which then ultimately became divorcees because the grief and making decisions in grief and a spinning world is very, very similar. Which is why I went back and became a C D FA, so that I understood a little bit more of those moving parts in divorce. And that's really where I really started with the zero book of business and just switched my career and really decided to live a life of mission of what helped me the most after the loss of my husband. And now how do I pay it forward? And that's our story. Justin: I think it's amazing what you've done and I'm sorry for your loss, I'm sure it was very hard on you and and hard on the kids. But I'm I'm so happy that you're getting yourself into a place where you can help other people because that's absolutely critical and you know, the one thing I tell people, regardless of where they are in life, is get your house in order. And many people don't you hear about people, you know, dying without an estate plan or without a penny. you know Donna Jean Kendrick: Okay. Justin: without life insurance. And, you know, not not that divorce is a good thing, but in many ways it's an opportunity to kind of restart and recalibrate your life. And and regardless of whether you've gotten your life in order from, you know, that perspective of of being organized, it gives you the opportunity to adjust it. So, you know, if you take anything from this podcast today, know that there are a lot of things that you need to do post divorce to make sure that you're set up for the future. You know, life insurance, estate plan, will, beneficiaries, you know, living trusts, things like that are just so important. And the one question that I get from probably ninety-eight percent of my clients, whether it's a male or a female, on the financial side is am I gonna be okay? And I don't know that answer until we're able to figure out what their financial situation is, what is their monthly budget, you know, and and what is this divorce gonna cost. But I think it's important for everyone to know that, you know, the first year out of divorce, women are gonna be forty five percent less well off on average and men twenty one percent. So that means things are gonna change. So, you know, going hiring an attorney. Which is the default of most people as their first partner, you know, I don't always think is the best opportunity for you. You know, hiring someone like a divorce coach and then a CDFA and starting to build your team so you have a better picture before you're paying the higher hourly rates makes a lot sense, a lot of sense. And then you can really answer the question of what do I need to be okay? What am I looking at? So You know, let's start talking about divorce. So someone decides to get a divorce. you know, before any sort of negotiation starts or discovery, what are the first financial documents, you know, that people should be gathering in? What are the questions they should start asking themselves? Donna Jean Kendrick: Yeah, so a lot of the it's almost like recon work, right? So if you weren't the person who handled everything, even if you were, like there's a lot of things that get hidden, forgotten about, intentionally and unintentionally. so what I always like to say is start gathering the bait major documents, your social security cards, your date of birth, copies of birth certificates, the things that even if you're staying married as a couple should be in your fire safe box or your you're safe, right? Copies of 401k's Social Security statements go to SSA.gov. And right now, almost I don't know if you remember, we used to get like green sheets of paper with our social security estimates. Like now, now they're all online, right? So see if you've accessed that, if you've created your social security account. but then more than anything, too, one of the first steps I love to ask my clients to have. and this is for anyone blending families or about to divorce, is go to annualcreditreport.com and pull a free copy of your credit report. That is almost like a starting point to identify what accounts are open because there's a few things we want to do. We want to gather documents, we want to guarantee gather the statements that we have at home. We also want to identify our assets, what we own, and we want to identify our liabilities, what we owe. And that's the annual creditreport.com. That's gonna pull up all the accounts that are open in your name. what might be open in joint name, because remember you have separate credit scores, you and your spouse, but you can have joint accounts that of impact them both. Right. So you really want to take a safeguard on that. And then every three months, go ahead and pull another free copy from annualcreditreport.com. It's not going to tell your FICO score, but it's going to give you a list of those accounts. And make sure that you're familiar about all of them. And if you're not, go find the documents, find the creation, find the email passcodes. To go and identify those accounts and to see where your liability might be on those accounts. Or it might just be something, you know, you opened up when Sears was in existence and you forgot about it. Easy enough. But we want to start that point of the triage for it. But you also want things like death certificates, marriage certificates, if there was inheritance that came to your name, those are those documents you want to start organizing, putting together and put into a fire safe box, or start scanning them up. in the divorce money map it's you literally start left to right. What are the documents we're going to be looking for right now? And then what are the assets we're looking for right now? Because many of us don't even know where to start or we're making these decisions while in emotions. So to have something to just follow along, almost mindless, even though you have to make the activity, but then go ahead and highlight those areas that you don't have. A lot of this work is one, to make you feel as if you're more educated about where everything is. Two, to do a lot of the legwork before you're paying three to four hundred dollars an hour for a divorce attorney who might not have a financial background to start telling you to do it, right? You're almost pulling everything in one spot and this is your go-to. Justin: this is great advice and you know, I also think people really need to understand that there's assets and liabilities and you know, they need to understand the difference between what's marital and what's premarital. because you may think you're wealthy, but you don't realize, you know, what are what are the liabilities. and the other way around. You may think that you're in lots of debt 'cause you have lots of credit card debt, but there may be some significant assets and some smart things get that can be done. So can you talk a little bit about kind of the marital balance sheet, what that has, and also explain what premarital assets are and any other sort of assets that are typically protected. Donna Jean Kendrick: Yep, definitely. So premarital assets will start there. What did you own? What was in your name before you came to the marriage? Right. now we talk about inherited assets too. Many of times if you inherit some assets and you keep them in your name, you don't move them into a Dwayne account. They continue to be almost as if a premarital asset of yourself. So, but if you take that inheritance and you buy a house and you put it in both of your names, not now it's everybody's. Right. Those are general guidelines, just kind of keep in mind about what was yours, right? So what did you own before you came in? And that goes into everything as to what was the value of your 401k before the marriage, right? And what was your average rate of return? Some people can get really deep into it, but I just like to know exactly what value that was. Where was that 401k? Did it wind up rolling into a new employer's, right? But tracking what you came to. Did you own a property that you sold to put as a deposit on a new property? Things like that are the pieces of information we want to gather together. And then we go into marital assets. Those are things that have grown during your marriage. It's going from everything from banking accounts, saving and checking and money markets to joint investment accounts. If you have stock in some great fund out there that's AI and made you rich. Fantastic. How is that titled? When did you buy it? Right. Did you buy it before you got married? Okay. How much do we pay for it? That's called the basis, right? Versus now this is marital. And so everything's gonna be either in your name or your spouse's name or in both of your names, right? And does someone have either rights? Do you someone have power of attorney over your finances? That could be your spouse. And they could actively be able to make some choices for you while you're still married or going through divorce. Check your estate documents and see if your power of attorney is active right now over finance or only if you're incapacitated. Oops, you might want to change that ASAP, right? You're looking also at value of life insurance. If you have a whole life insurance or permanent life insurance, that has a cash value to it, not just if you die. So what you're looking for is really identifying the things that you own, your assets first, the things that you owe. The houses, the cars. But sometimes we have to go in a little deeper. There's Bitcoin out there, right? And I don't like to talk about it. My broker dealer hates for me to talk about it. So I'm just gonna say things that you might own electronically. Like see how they are titled. Do you have? I remember when my late husband died, the deed to the swim pool club in the neighborhood was in his name. And when he passed, I had to go buy it from his estate to get the deed in my name for the swim club. Like, come on, are you kidding me? Like that was ours. As a married family, but no, it was in his name. So these are the things that we have to look for. How is the house titles? Is it jointly? How are the cars titled? And always pay attention because you could have a house titled in one spouse's name, but the mortgage could be in both. So therefore the asset is in the titled spouse's name and the mortgage, well, that's in both of your name. That's the liability side of life. Liabilities, those are the things: the car insurance, the mortgages, the things you found on the credit report. What do we owe? And a big it's called the balance sheet. When we add up everything that we own versus everything we owe, what's the outcome there? And there's different things called quality of money. Some things are just straight cash, some things are top stocks that have we call cost basis as well as capital gains. Some can be taxed as if it's own ordinary income, some can be taxed a little kinder if you've had them over a year. These are things that even though you could be putting them on a balance sheet. The numbers still aren't truly the same. Some numbers have more strength. Some numbers have compounding growth to it. Those are things we have to be very careful of. And that's why we always say lean into a CDFA, lean into a financial planner, lean in so that the description of each of these quality types of money are added to that asset sheet because it's not always apples to apples. Justin: And I think that's a really, really important point. Not all dollars are the same. one one thing I wanna mention just from a personal standpoint, you know, I had quite a lot of premarital, you know, assets in my name. But what I didn't do was keep good records. I threw, you know, like five, six years, you know, before the divorce, I threw out all my old files because we thought We had the marriage that would last forever, was the marriage everyone wanted. And I threw away so many things. And you know, certain companies and organizations only keep records for seven to nine years, depending on, you know, what they are and what their legal responsibilities are. So with with premarital assets, you sometimes have to prove they're premarital. And also an asset can have a combination that's partially premarital and partially marital. So if you can't prove it, sometimes it becomes a lot harder. So don't throw away documents and be very resourceful as to where you search for stuff, you know, old emails, scan files, things like that. Really, really, really important. Donna Jean Kendrick: Yeah. even in in the widowhood situation, right, we are looking at old bank account statements and we're seeing was there a term policy paid for out of that bank account? That's the only evidence we have that there might be insurance on the back end, right? So even though, like you're right, we don't want to be hoarders, we don't want to have years and years of documents. What if something happens to us? Someone else has to sort through that in the world of PDF at least though get the scans, make the files, and have them sitting there. You can still be clean and organized, but have them there. and those important ones, like you said, like what was the value that day, that statement when I bought it? Keep those. Well said. Justin: Yep. No no doubt. What about if you're in this situation, you aren't really the controlling spouse of finances? And you know, we know most most households, there's one person who's in charge of the the finances, and you don't have access to those records and you start panicking. You're like, I I I need to know what we have. You know, I know we have stuff, but I have no idea what it's worth. What what do you advise an individual, you know, going through that? You know, how do they cope? How do they move forward? How do they get that information? Donna Jean Kendrick: Yeah, I mean, and that can be very scary, right? And that can make you feel so vulnerable. And sometimes it even borders on what I like to call financial abuse, right? When someone is withholding that information or withholding funds or emptied out the joint bank account right before they served you with papers, right? How do you go back and prove that? I think a lot of it is one, finding the right financial partner to be with you, whether that's your divorce attorney who can ask for some of that information and discovery and you know. They might not get it and they might get it. Like I I can't even say. It can be so tough. But I would say no matter what, start going almost like like Scooby-Doo when we were younger. Like, hmm, I'm starting with this really weird situation and I gotta back up, right? And just one, breathe. Two, find yourself some good counseling, right? Because this can be very anxiety ridden and this can become all consuming. And you still have to be a functioning adult most of the time and go to work. Even while dealing with a divorce. But then start looking for those clues, just like that example of okay, well, I do have access to the joint bank account. Still, let me go back and see where some of this information was. Do you have a list of old passwords, right? What do you have rights to and what do you not have rights to? You still have rights to a lot of information while you're still married, right? And start collecting that information. and start again looking for clues, right? Go through the Addict that might have had the 2022 tax documents. Let's go through that. Leaning into the professionals that have helped you along the way. Your tax accountant. yeah, HR, if you work at the same companies, right? But a lot of it is one thing I love to lean into when someone's finding that situation is well, let's just control what you have and let's get that organized first. So, yes, we might not know where everything is, but let's make sure we know what you have. And at least that can feel like a little bit of control as to, okay, this is me and this is what I have. I remember my own parents. My mom is a stay-at-home mom. Right. So she was like, I have access to like one checking account and that's it. Okay, that was it. But she knew she was married to a firefighter and she knew that there was someone at pension services that could help her. Right. So she leaned into the resources. She knew what she knew about herself. And that's where she started her discovery of all the benefits my dad had. 'Cause he knew it. He was just gonna wait a while to give it to her because he wanted to make her stressed out, make her feel a little poor, right? And I love my dad, but this is what happened, right? So that she would say yes to a divorce settlement sooner rather than later. Mm-hmm. Justin: You know, so talking about the fairness in the settle in a settlement, you know, a lot of people enter divorce thinking the goal is a fair split. But you and I both know that fair and workable are not always the same thing, especially in cases where there's what's called equitable division. So how should someone think about that distinction between fair and workable? Donna Jean Kendrick: Workable is money that will work, or assets, or liabilities that you have to take with you that will work for you to help you establish your life on the other side. So when everything is settled, if you say yes or no to this asset, does it help it become workable for you in life? One of the big questions people give me is like what you keep saying liquid cash, liquid cash, liquid cash, what does that mean? And that means cash that you can readily get use of, right? You might have $300,000 in a joint bank account, which I did, but you might have that sitting in a joint bank account and you have a house worth $300,000. On paper, someone say, okay, I'll take the bank account, you go ahead take that house. Well, the house has taxes to it. The house also needs repair. The house also doesn't have an ATM slot in the front for you to get cash out of when you need to go pay for braces for little Jimmy. These are the things that we have to look about. So the liquid money, the cash in the bank account, for many people can be much more workable than the actual house taking that piece. We'll also talk about retirement money, 401k. If you're under 59 and a half, there's a lot of extra fees. That go to a withdrawal out of those. You're going to pay your taxes to it. You're also going to have a 10% penalty to it. And most likely that's money we need because now we're living on half of what we had before, half of our marital savings, most likely, if it's a fair divorce. But that's money you're going to need to be able to support yourself in the future. So it's pretty much not workable for you to be able to say, I'm going to use that money for a down payment on my new condo. So that's a lot of the difference between a workable resolution versus an equitable or a fair split of 50-50. I think the big thing for me, and I felt it as a widow, and I see it for my divorcee clients who haven't been in the workforce that long or took a step back part-time because they were raising kids, is the fact of my late husband's ability, the decision we made on who gives up our career when we moved to Rome, his ability to stay employed and get step up. bonuses or step up raises in the government was pretty set in front of you. If you take this role every year, you'll get this level, right? The whole way through. For myself, like I had to catch up on time. I was seven years back on my career. I've missed a lot of time. Therefore missed a higher salary. Therefore I couldn't put as much into my 401k because I had a lower salary. Thus I missed some credits and Social Security. So There should be a little bit of compensation for that because someone else has the ability to earn more in the future. And that has to be recognized. Justin: there's a lot of truth in the saying cash is king, but there's also, timing, ages and stages make a big difference. with some of my clients who are higher net worth, they're kind of like, Should I take the cash or should I take the retirement? And we kind we talk through it in all the pros and cons. And while cash is king, often if they get a big payout, they're gonna spend it. You know, their their eyes are wow, I'm gonna buy a bigger house or I'm gonna buy a, you know, a boat or a car. Whereas retirement, we can always say, well, you know, it's not the same. It's not a dollar of retirement isn't the same as a dollar that's already had taxes paid on it. However, if you really don't need the money now, you got another 10 or 15 years to invest it and for it to accrue. So that one dollar may be worth five dollars, in 10 or 15 years. every situation I think is a little different. so kind of looking for your advice on, you know, How do you decide whether settlement is workable with your situation? and also, you know, take into consideration the ages and stages that people are in. Donna Jean Kendrick: Yeah, I mean I guess that's it. And that's the value of financial planning. Where are you now? Where do you want to be and how we're gonna get there? So a lot of it is understanding what is your client's goals at the end of the divorce, right? And so it's so hard to think of where do I wanna be when you're in the midst of all of we call it the fog, right? But we do want to say, do you still wanna live, for my example, in Philadelphia? Or did you want to move somewhere else? If you have kids, are you allowed to move somewhere else? So you're really understanding what What type of life do you want to live on the back end? To say the exact life I'm living right now. Yeah, it might be nice, but probably not realistic. Things are going to change. It's two people re-establishing two households, right? So a lot of it is understanding is where do you want to live? Can you work where you're living? Are you okay renting? Or do you really want to purchase a property? Is that best for you? How many years do you have to save for retirement? Are you in your early 30s, right? Can you take some more risk in those investments to let it grow? Because you have a good 35 years to keep on working until you bump into Medicare, if it's still at 65 at that point in time. These are the things that we want to discuss versus my own mom who had a gray divorce at 76, right? What does that look like? Where can she survive on her own social security? And is he much older, most likely to pass? And then maybe she can qualify for his as a widow benefit, right? But you can't plan on the other person dying. Not part of the plan. Don't do it. Right. Like these are those things. But a lot of it is I I want the clients to really understand, especially for some of those moving parts, like the alimony that might not be secured by life insurance. Set up your life so those things that you have to control of, just to our question before of what do you say when you don't have. All of the information. Well, you need to know what you have. So I want you to be able to make life decisions on the amount of assets and income that you know you have control of, that's yours. And then if we have a different lifestyle, because we have additional flows of income from the ex-spouse, okay. But don't count on that. It things can go different even after a settlement. And I want them to be very reasonable in where they are and where do they want their life to go. Let's go back to that settlement. Are the resources that you are receiving going to help? Are you the older spouse and you're about to retire? You might want that IRA money, right? And maybe you don't want a house anymore. You're gonna live with your mama, gonna live in her basement. Awesome, right? She's gonna leave the house to you later. You might not need that liquid cash, right? These are the things that we just have to understand what makes our clients tick. And will that money match? Will that settlement match with it? Some of its negotiation, right? But you really have to understand what do I need to be me and what quality of money will support. Justin: You know, I I encourage everyone at every stage of adulthood, whether they're married, single, divorced, you know, meet with a CFP professional because it doesn't take a lot of time and effort to do it, but you really plan out your life. And so many people just drift. And when you really have a plan. you can really maximize it because you don't know what life is gonna throw at you. God forbid someone could just die, be in an accident, you can get divorced, you know, be you know, have a terminal illness. You just don't know. So the sooner you can plan and hedge your bets and optimize what you have, the better. And I've seen it. I've seen it on both sides. Donna Jean Kendrick: Yeah, I always tell my clients too that have a plan. Like, this isn't one and done. Like, yes, we are getting to the point of we are now post-divorce, right? This is where we are right now. Where do we want to be in a year? 30 days, 60 days, 90 days. Let's go to that. But then that plan in my mind is a living, breathing document. Life's going to change. Your kids are going to grow up. You might meet somebody else. The plan's going to have to change too. And to lean in on a professional so that you're not always worrying about it. So it's not always that thought that you're trying to control. You've got a professional who's making sure they're making decisions in your best interest and with ethics, helping you along the way. So instead of worrying about it day after day, like set up a quarterly review, check in once a month. These are the things that you might need to learn those new money habits, especially too if you weren't the the one who was savvy in the beginning. Ask for the education or just even say, not my cup of tea. I want to check in on it, but I am asking you to run this for me. That's okay too, right? Like that's fine. We all have our strengths and weaknesses. But I agree with you, the plan is ever changing. But then after a little while post-divorce, usually it's about two to three years, I see my divorcees be like, Whew, now I'm ready to dream a little, right? Now I have two to three years of this new career under my belt. My kids are a little older, right? I'm not living and making decisions just to help them in their grief and empathy and living in the split family, as they call it, right? Now, now I think I'm ready for a little something different. Well, that's where we go and we make new goals because life changes. Can I lean into one more thing? Beneficiary designation, before, during, and after. Where is everything titled? Life insurance, the whole bit. I can't tell you how many widows I have. Justin: Yeah. yeah. Donna Jean Kendrick: That are like, yeah, he died and his first girlfriend Fifi got the life insurance 'cause it was never changed. That's all I'll say. Review, review, review. Have your financial planner review, review, review every year. Justin: That's that's one I will never forget because I saw it hurt someone to the tune of eight million dollars. So that's a big one. we talked about at least in the early days, your your net worth goes down significantly, you know, in a divorce in many cases. Smart tax planning can really make a difference. Can you talk about things that one should consider while they're in divorce negotiations, such as tax credits and other tax benefits that, individuals can think about? to ensure that they, minimize the tax they have to pay and maximize, any sort of investments that can grow tax free. Donna Jean Kendrick: Yeah, one of the big things to think about is if you are splitting or taking stocks, mutual funds, taxable investments that aren't looped into an IRA, some of those have short-term capital gains. You've owned them for less than a year, some have long-term capital gains. That means that you've owned them for over a year, but some have appreciated nicely over the years and some have not. And if you're trying to sell one of those positions and there's a lot of growth in it, you might get hit with some big capital gains. So we're really saying just sit with your financial advisor, just sit with that money manager and say, predict this for me. Which actual stocks do I want to take if I don't need money right now? But if I do, right? And what will that do to my income tax bracket at that point in time if they're short-term capital gains? I think another thing to remember too is you can say, okay, I'm going to take the kids and write them off on my taxes this year. And then maybe you get to write them off next year. And how do those things work? Especially if you have a house with multiple kids, right? So maybe the the condition is okay, the top two kids go to spouse A and the young one goes to spouse B. So they have deductions for a longer basis of time. that's a lot of what you have to look at. And I think a lot of times too, we might share the same accountant when we're doing married finally jointly, right? And it might be time to go find somebody on your own, right? Who can sit there and even before you sign that divorce paper, take a look back at your last few years of your taxes, take a look at the settlement, the statements that support it, the positions, and lean into them and be like, how's this gonna hurt me on taxes? Right. And am I going to be okay? Right, because a lot of times too, especially if you're splitting pensions in the future and you are about to go into retirement, a lot of people don't even think that the pensions can be taxable. Some can be, right? So be really careful of that. Yep. Justin: Let's talk about the house, you know, because it's often the the biggest asset that many couples have. And you know, often they can come to some agreement and typically it's one spouse takes a house or they sell it and they divide the proceeds. Can you talk about what someone needs to really think about and work through so that they can truly make a good decision so that they're not gonna be, you know, so called house poor? Donna Jean Kendrick: Mm. Yeah. And so we have a whole section of that in the divorce money map and it's labeled Should I Stay or Should I Go? And we're talking about the house. So many of the individuals want to keep the house for stability for the kids and it is it is where your heart is, right? They don't they're already splitting up the the marriage and they don't want the kids to have to move from their neighborhood too. But we're really talking about the reasonability, if that's the word, of you being able to support that house. One of the big ones that we are seeing recently is back in a few years ago, there were some great mortgage rates out there, 2.9, 3%. Right now here in the Philadelphia area, we're looking at like six, nine, well above if you need to, plus some higher house values than they were years ago. So should you be saying, all right, I'm gonna give you half that house, you have to remortgage the house to afford it. That could be a huge impact on the monthly mortgage, not just for the new equity of the house that's grown, because the house you bought together at 400,000 is now worth 800,000. You're buying out the house for the new value. But now you're gonna be losing that beautiful mortgage, reapplying for a new one for a longer term, for a higher interest rate. And a lot of people don't understand that. They're just like, can I assume the mortgage? Call your mortgage broker, see if you can. But for many of times, that's really not how that negotiation is going to work, where one person just takes over the mortgage. There's usually a cash outlay for a value of the house. Sometimes you can barter with other assets within, which is why you understand what are your assets, what are your liabilities, what can you retitle, what can you give in a taxable way, right? yeah, be very careful of taking, you know, stock from someone's name into another person's name. Like, Careful like how that all works. This isn't inheritance, it's a divorce. Here we go. but then more than anything, too, let's look at your school. Let's look at the school district that you have. Right? Do you think there's going to be an increase in taxes where you live with your kids? Can you afford those taxes if they go up? Even if you don't have a mortgage anymore, you're still paying state, local, and educational taxes on that house. Let's look at the insurances. We've had in the Philadelphia area, there was in the suburb of Philadelphia, tornado, which was unheard of a few years ago. The insurance companies then went ahead and started raising rates for anyone in this area, even though we're really not in Tornado Alley. We're in Philadelphia, right? But they started raising rates to the point that people had to move providers because they just couldn't afford the insurance on the house anymore. That's going to happen to you. Do you have enough cash reserve? Do you have enough liquid? Cash, that liquid cash comes back again to be able to afford the annual maintenance on the house. These are all things that a lot of times people are just like, I'll figure it out. Future me will figure that out later. I just want to get my kids through high school. Well, you might be able to do it with renting a condo in that same school district, allowing yourself to breathe for a year or two before you make that next big decision on where to buy. I remember back in 2008 and 2009 where you couldn't sell a house, right? So if you can't sell this house and make it a liquid asset, are you gonna be okay? These are the things people have to sit and consider. Septic tanks, things like that. like we had one breakdown, big old tree root in it, $6,000. Like, do you have that cash on hand to be able to support the home? Justin: Yeah, you really don't want to be living paycheck to paycheck. one other point, if you are going into mediation and you're looking to be awarded the house, make that phone call, fill out the application, see if you will qualify for the ability to assume the loan, because you know, like Donna said, there's a big difference between paying three percent interest and paying seven percent interest. So really, really important. Donna Jean Kendrick: Yeah. Justin: Let's move to kids, child Donna Jean Kendrick: One thing can I add? Justin: yes, please. Donna Jean Kendrick: Many of times I've seen the divorce settlement stipulation saying, Yep, you can stay in the house and we'll settle the value of the house after the kids graduate if you're in the savvy ability to be able to do that, but you cannot cohabitate in that house. Your boyfriend or girlfriend can't move in. And if you do, it automatically triggers a sale. Be very careful about that wording and that negotiation and that consideration. Justin: let's talk about kids, child support, and hidden parenting costs. child support is the one thing, you know, that that you'll know what you have to pay monthly, but parenting after divorce includes many expenses that aren't always obvious or factored in. Can you talk about some of the expenses that get missed? Donna Jean Kendrick: Yeah. Well we've got the big one, which is college, right? So a lot of times it's not even entered into a divorce agreement around here, right? And it can be, but many times once that child is 18, they're 18, parent responsibility, all done financially, right? But who's going to be helping that kid pay? If there's a parent plus loan, who's going to be co signing it? And can the dreams that you have for little Johnny come true if no one else is contributing? It's a big thing. I think another thing that I've seen happen with our clients is one parent owns the 529 beneficiary of the child, but they're not checking yearly to make sure that the balances are still there. The funds are then pretty much taken. So you've actually negotiated an assuming that college is taken, but the other parent has actually emptied those funds because truly they own it. They took a tax consequence on it. And there really is no 529 for little Johnny. So that's a big part of it. Let's move down from college. You have things like braces, slepaway baseball camp, their first car, insurance for them on your household when they learn to drive. Because now, even though it's just that little kid driving at 16, they could probably drive any of the cars in your house if you have more than one. And so you're insuring them for all of those houses, right? These are the things that you have to negotiate, or I say put a slush fund together in this divorce. compromise, right? To say, well, who's paying for this and who's not? I had clients that would fight over when did the bill come in on your visitation or on mine, and that's how they decided to split the bills, right? But what if it's private schooling? What if little Johnny got kicked out of public school? Now we have to pay for private. Hmm. How are we gonna do that? It's hard. Justin: You know, there's often ambiguous language in the settlement agreement, such as, you know, parents will share reasonable expenses. Well, we all know that the definition of reasonable may be very different, especially if it's contentious. So I advise parents really work with your attorneys to put some stronger words in there, maybe some caps, maybe if you disagree on things, ways to address that. and definitely work with someone like Donna who can help you understand what are the real expenses and what are the things I'm thinking about and the things I'm not thinking about so you don't miss it because often that's when the co-parenting fights happen. You know, you're divorced, life moves on, and then one parent contacts the other parent and says, our child is going to university at University of Texas and it's a hundred thousand dollars a year. you know, for the next four years, so I'm gonna need two hundred thousand dollars. And that other parent was never expecting it, wasn't included in the conversations, and that's when things can get ugly. So to the point that you can avoid and answer these questions in advance or create some sort of mechanism to address at the time, you'll be a much happier co parent. And it also keeps the kids out of the the fighting. Donna Jean Kendrick: Agreed. Yeah. I remember my parents divorced, my mom would actually write a note to my dad and pin it to my shirt. And I'd climb into my dad's car and he would reach over and take the note and then coming back, he would pin one back to me. And I was like, my God, like I'm like a carrier pigeon here. I was. I was. No text messages back then. I'm a little old, but go ahead. Justin: You're the messenger. Let let's talk about retirement, you know, things like pensions, quadros, four one Ks, any sort of long term security. In a divorce, what are some of the areas that individuals can make expensive mistakes? Donna Jean Kendrick: I'm gonna use again my parents as a good example. I think people always remember things from stories. So my mom, when she negotiated the divorce, did not take any of my dad's firefighter pension. Now we have to remember in Philadelphia, the firefighter pension they do not contribute to social security. So therefore she didn't have a spouse that she was married to over 10 years, accruing any social security credit. So she has no social security because she was a stay-at-home mom in the future. She waived the pension in exchange for alimony. Part of his paycheck, she looked at it as year after year. But what she didn't know is that if she got remarried, the alimony went away. Like no one. I don't know if she wasn't listening or no one told her, but she left the pension aside, which had the ability to continue growing, be a guaranteed source of fixed income. There's now no social security. She takes alimony. And guess how quickly she got married after the stamp of the divorce? Three months. So she pretty much negotiated away her rights to that 25 year marriage and the assets within it for the house. She wanted to keep the house and for alimony. So now we have to think about this. Like things have gotten much more clear, transparent, and the laws are, very easily disclosed. Let's look at the disclosure we even had to say for this podcast. So I'm happy about that. So something like what happened to my mom hopefully wouldn't happen again. But we talk about quadros. So just remember quadro is almost like the order from the divorce for the 401k or the IRA to split. Let's call it that. And sometimes you have to wait for a quadro to be processed, right? So remember, once this divorce saddles, it's not like a magic wand comes down and poof, everything's divided in half. There's a process to it. And the quadro is one of those processes to it. I always encourage divorcees to lean in too if they could actually take a distribution before the quadro gets put in place. Sometimes there's some leniency on taxes to take a distribution out prior to that. Always ask the plan administrator if that's something that you can do moving forward. The plan administrator is the person who writes the rules or implements the 401k at someone's work site. Most of times that pension then will become everyone does a little different, but most of the times you'll then have a pension in your name, as well as your ex-spouse has one in their name and you carry on as if you yourself are employee of that pension. Sometimes you can't touch anything until the other emplo the other spouse retires. Then when they retire, then you can make your choices on pension. And remember too, when you make a choice on a pension, sometimes there's many different distribution choices. Do you want it all in one lump sum with a portion coming through? Do you want to leave any survivorship to maybe young kids, even though you're of retirement age? things like that you have to take a look at, as well as how is that impacted with social security moving forward? Justin: So many things to think about, which is why it's so important someone like you can help someone. So we are nearing the end of our time. So we're gonna do a quick lightning round. You ready? Donna Jean Kendrick: Okay. Let's do it. Justin: All right, what's one financial document everyone should find today if they're about to focus on getting ready for their divorce? Donna Jean Kendrick: I say two years of taxes. Justin: Fantastic. one mistake that cost people the most. Donna Jean Kendrick: Keeping the house. Justin: One question to ask before keeping the house. Donna Jean Kendrick: Can I afford it? Justin: One overlooked retirement issue. Donna Jean Kendrick: one overlooked retirement issue, the difference between tax deferred and tax-free money. Justin: One message for someone scared to look at their finances. Donna Jean Kendrick: Just get organized. Just start getting organized and you will feel more in control just with that. It's the first part. Gathering your documents, starting to get organized on your own. Yep. Justin: And that's the note I wanna end on. Financial clarity is not about winning the divorce. It's about protecting your future, your kids, your choices, and your peace. You don't have to get You do not get financially prepared because you're greedy. You get prepared because confusion is expensive. Donna, where can our listeners learn more about your work? Donna Jean Kendrick: so you can go to Donadine Kendrick dot com and there you have my authorship, you have our speaking opportunities, you have our podcast, and you also have a link to our practice, which is Sefton Financial. That's my maiden name. And that's where we do all of our financial planning for families in transition. Justin: Outstanding. And can you mention your your three books? Donna Jean Kendrick: Yep. So we have the divorce money map. That's our most recent. That's a workbook style book. we have a guide to widowhood, navigating the first three years with your heart, soul, and finances intact. And then we also have a guide to blended families. And that comes from my own experience of actually remarrying after the loss of my first husband and being a pain in the butt to work with. Mm-hmm. There's a lot of good stories in that one. So this merging assets and navigating financial challenges when you blend families. Thanks. Justin: Thank you for spending time with me today. This episode was built to go deep, and I hope it gave you something real to work with. If this episode hit home for you, I'd genuinely be grateful if you take a moment to rate and review the show. Reviews help other people in the middle of exactly what you're going through find their way to this content that matters. Share this episode with someone who's stuck in one of the rabbit holes. You might not know how to help them, but let this episode help do it for you. And if you want to go deeper on any of what we covered today, come find me at www.reclaimandreboot.me. I offer a free 30-minute consultation for people who are ready to get strategic about their divorce and their recovery. No pressure, no pitch, just a real conversation about where you are and what might actually help. You can also find my books, U2.0, Divorce a Better Way Forward, and the U 2.0 workbook. As well as the new co-parenting playbook at www.reclaimandreboot.me or available on Amazon.com. They're built to walk alongside you through exactly the kind of stuff we talked about today. Until next time, remember this. You don't have to believe everything you think, and you're further along than you feel. Keep moving, keep building. Your U two point z isn't a destination, it's just a direction. Have a great day.