5 Tips for Dividing Mutual Funds and ETFs In a Florida Divorce

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Dividing mutual funds and exchange-traded funds (ETFs) during a divorce can be tricky, but it doesn’t have to be stressful. If you’re divorcing in Florida, these five tips will help you navigate the process, protect your interests, and work toward a fair resolution.

1. Consider Your Short-, Medium-, and Long-Term Financial Interests

Before you even think about dividing assets, you should take the time to consider and write down your short-term, medium-term, and long-term interests.  For example, are there investment opportunities now where liquidity is important?  Or do you wish to build on the relative stability of a buy-and-hold strategy?  Do you have an employment-based retirement or profit-sharing plan where it will be easier to save for the future?  Or do you need to keep more of the family’s tax-advantaged accounts to secure your long-term plan?  Do you prefer the control of a defined contribution plan or the consistency of a defined benefit plan? Working with a Collaborative Facilitator and Neutral Financial Professional during divorce can help you identify your interests and adjust your strategy to ensure it aligns with your new circumstances.

2. Understand Florida’s Equitable Distribution Law

Florida follows the law of equitable distribution. This means marital property, including mutual funds and ETFs acquired during the marriage, is divided fairly, though not always equally. Yes, both spouses usually end up with approximately 50% of your family’s net estate, but you can agree to divide it however you wish.  Many spouses mistakenly believe that this means that every asset and every account has to be split in half, but that is not the case.  So long as both of you end up with approximately 50% of your net estate, with adjustments particular to your circumstances, you do not have to split every brokerage or bank account in half.

You can begin by gathering detailed statements for all your investment and other accounts. Identify which assets are marital (shared) and which are separate (this is a complicated area of the law, and an experienced family lawyer can help you do this; you can read more about asset protection here). This will help you understand what’s on the table for division.

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Asset Protection and Florida Divorce

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If you are facing divorce in Florida and have accumulated substantial assets, you may be wondering what asset protection strategies are available. Fortunately, there are some steps to consider, both before and during divorce. Florida is an equitable distribution state, meaning the law divides marital assets fairly, though not necessarily equally. Below are some methods to explore (please note that this is just an overview, and you should speak with a lawyer to determine if these apply to your situation and how to employ them):

Asset Protection Before Divorce

Prenuptial or Postnuptial Agreements.

A prenuptial agreement is signed before a marriage, and a postnuptial agreement is signed during a marriage. Both can be legally binding agreements that essentially allow you to make your own law and specify how assets will be divided and spousal support will be handled in case of divorce. These agreements must be entered into voluntarily, with full disclosure of assets, and include other elements that can help ensure that it holds up if challenged.

You can learn more about prenuptial and postnuptial agreements here.

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Financial Education Books For Spouses Going Through Divorce

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It is common when going through divorce in Florida or elsewhere for one or both spouses to be lost when it comes to finances and retirement planning.  One of the best things that you can do to make divorce less traumatic and to help ensure that you and your spouse’s interests are being met is to involve a Neutral Financial Professional within a Collaborative Divorce process.

It is also important to educate yourself when it comes to finances.  Below are a list of books that I have personally found helpful to educate myself.  Even if you are not going through divorce, you may get something from these resources.

The Total Money Makeover by Dave Ramsey

If you have medical school student loans, a high interest mortgage or home equity lines of credit, or other forms of large debt, and you just don’t know how you could possibly pay it off in any reasonable amount of time, Dave Ramsey’s The Total Money Makeover is for you.  As someone who went to a very expensive law school and incurred six figures in educational debt, I found this book immensely helpful.  I am a big believer in the Financial Independence (sometimes also called Financial Independence Retire Early, or “FIRE”) movement; so many influencers who have put themselves on the path to FIRE have mentioned that they started off by getting out of debt after reading this book.

The Simple Path to Wealth by J.L. Collins

J.L. Collins’ The Simple Path to Wealth is the book I wish I read when I was just starting my career.  His main message is that investing does not need to be complex, the stock market will crash but it will also rebound and grow, and that you can build significant wealth over time by simply investing in a total U.S. stock market index fund and maybe also a total U.S. bond index fund (depending on your age and risk tolerance).  J.L. Collins is known as the Godfather of FIRE, and he tells audiences that you can actually find most of the ideas in the book for free in their raw form in his blog’s Stock Series.  I have found both the book and Stock Series helpful to explain the markets and prevent me from selling my portfolio when the market has crashed.  Further, the Stock Series, which Collins updates regularly, does a good job at explaining many of the types of investment vehicles that get addressed in divorce, such as brokerage accounts, traditional and Roth 401(k)s, traditional and Roth IRAs, 403(b)s, and TSPs.  Beyond educating yourself, The Simple Path to Wealth may be a great book to provide as a gift to your young adult children as the content started as a letter to J.L. Collins’ daughter, explaining to someone who didn’t want to think about investing how they could build wealth without giving it much thought.

I Will Teach You to Be Rich by Ramit Sethi

Admittedly, the title is kind of cringeworthy, but I found the content in Ramit Sethi’s I Will Teach You to Be Rich to be helpful nonetheless.  He provides very practical advice on everything from lowering interest rates you pay on credit cards, to opening high yield savings accounts, to automating saving and investing.  He also believes strongly that you don’t need to live like a hermit to build wealth, and that it is important to mindfully spend money on those things that bring you happiness.

Atomic Habits by James Clear

James Clear’s Atomic Habits explores the science of habit formation and how small, incremental changes can lead you to significant improvements over time.  Clear stresses that consistent, tiny improvements—what he calls “atomic habits”—can compound over time, leading to profound personal and professional transformations.  His concepts mesh pretty well with the books discussed above, especially when he addresses the power of compound interest to transform small, consistent investments over a long period of time to vast amounts of wealth.  Besides becoming financially healthier, this book helped me become physically healthier, as well, by influencing me to make small, consistent changes in my diet and exercise, leading to the shedding of 30+ pounds over the course of eighteen months.

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How Are Medical School Student Loans Handled In a Florida Divorce?

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When you’re facing a divorce in Florida, one of the complex financial issues you might encounter is how to handle student loans, particularly medical school student loans. These debts can be substantial, often amounting to hundreds of thousands of dollars, and it’s natural to wonder how they will be treated during the divorce process. Understanding your options and rights is crucial, especially if you and your spouse are seeking a Collaborative Divorce, which focuses on finding amicable solutions privately rather than through a public divorce court battle.

Understanding Marital vs. Non-Marital Debt – Med School Loans

In Florida, the law distinguishes between marital and non-marital assets and debts. Marital debts are those incurred during the marriage, regardless of whose name they are in or who incurred them. Non-marital debts, on the other hand, are typically those incurred before the marriage or after the date of separation.

If you took out medical school loans before you were married, these debts are generally considered non-marital, meaning you would be solely responsible for them. However, if you took out the loans during the marriage, things get a bit more complicated.

Medical School Student Loans as Marital Debt

If your medical school student loans were taken out during your marriage, they will be considered marital debt. This means that both you and your spouse could be responsible for repaying them, even if it was taken out in only one spouse’s name.  If some student loans were taken out prior to the marriage and other medical school debt was taken out during the marriage, then some loans will likely be considered non-marital and other med school loans will be considered marital. In a traditional divorce, this could lead to a lengthy and contentious battle, especially if the loans are significant.  More commonly, especially in a Collaborative Divorce, only one spouse ends up taking responsibility for paying off the marital portion of the loans, while they also typically get something in return to offset the debt.  Alternatively, the other spouse may take on a different set of debts as an offset.

In a Collaborative Divorce, you and your spouse have the opportunity to work together to find a fair and equitable solution. The Collaborative Process encourages open communication and cooperation, allowing both of you to express your concerns and preferences.

At the end of the day, a court will likely order, and most divorcing spouses agree on, an equal distribution of your family’s marital net worth.  So, for example, if your family has a total of $3 million in marital assets and $1 million in marital debts, equaling a net marital estate of $2 million, then likely each of you will end up with around a net worth of $1 million from the marital estate (though most people agree to an equal distribution of your marital assets/debts, you can also agree to an unequal distribution if it makes sense for your family or as an alternative to alimony).  For this reason, when determining how you are going to split your assets and debts, it is important to look at not just one debt, like medical school student loans, but at your family’s full financial picture.

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Kiplinger: “Think of Prenups and Postnups as Financial Planning Tools”

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In an insightful article in Kiplinger, “Think of Prenups and Postnups as Financial Planning Tools,” Andrew Hatherly, a Chartered Retirement Planning Counselor, delves into how prenuptial and postnuptial agreements are not just for those planning for the worst.  Rather, they can be essential tools in financial planning, particularly for couples marrying later in life. This blog post discusses the contents of article, which you can read here.

When you think of prenuptial and postnuptial agreements, what comes to mind? For many, it’s the idea of planning for a potential divorce. However, these agreements can be so much more than just a contingency plan—they can be crucial financial planning tools that help you and your partner start your marriage on solid ground, especially if you’re marrying later in life or have substantial assets.

Why Consider a Prenup or Postnup?

In today’s world, where financial independence is increasingly important, prenups and postnups (which is like a prenup, but it is signed after you are already married) offer a clear framework for managing your assets. Whether you’re entering a marriage with significant wealth, a business, or debts, these agreements provide clarity. They help you and your partner establish expectations and protect what matters most to you both.

If you’re getting married later in life, you likely have accumulated assets, retirement accounts, or even a business that you want to safeguard. A prenup or postnup can protect these assets and ensure they’re distributed according to your wishes, not just the default laws of your state. Additionally, if one or both of you have children from a previous marriage, a prenup or postnup can help ensure that they’re provided for.

Debts: A Growing Concern

Let’s not forget about debt. Whether it’s from student loans, credit cards, or a previous mortgage, debts are increasingly common. A prenup or postnup allows you to specify how these liabilities will be managed during your marriage. This means one partner isn’t left responsible for the other’s debts, which can alleviate a significant source of stress and conflict.

Financial Transparency and Communication

One of the biggest benefits of drafting a prenuptial or postnuptial agreement is the open financial dialogue it fosters between you and your partner. These agreements require both you and your fiancé/spouse to fully disclose their financial situation, including assets, debts, and income. This transparency can prevent future misunderstandings and ensure that you both are on the same page when it comes to money management.

It’s not just about protecting yourself; it’s about ensuring that your financial partnership is built on honesty and mutual respect. By having these discussions early on, you set the tone for how you’ll handle financial decisions throughout your marriage.

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How We Review Your Prenuptial Or Postnuptial Agreement With You

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Your fiancé or spouse’s lawyer has provided you with a prenuptial agreement or postnuptial agreement, and it is a behemoth.  It is common for these documents to be 30 to 60 pages of dense “legalese,” sometimes with hundreds or thousands of pages of additional financial disclosure.  Don’t just sign the agreement without understanding it!  It can have a significant impact on your rights in the event of divorce or the death of your spouse.  Further, these documents are rarely “take it or leave it,” and you can negotiate terms that address your needs.

This post discusses how we review and negotiate prenuptial agreements and postnuptial agreements for our clients.

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Child Support in Florida

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Child support in Florida is the financial obligation aimed to provide a fair and consistent means of sharing the costs of raising a child between separated parents. There’s a Collaborative Law process that offers an alternative way to address child support matters. This approach emphasizes cooperation, open communication, and prioritizing your child’s well-being. In this post, we’ll take you through the fundamentals of child support in Florida and the benefits of pursuing child support solutions through the Collaborative Process.

CALCULATING CHILD SUPPORT

In Florida, you’ll find child support guidelines laid out in Florida Statutes §61.30. You’ll notice that the calculation takes into account key factors like your income and your partner’s income, the number of children involved, and the time each of you spends with them. It’s essential to understand that the state utilizes a specific formula incorporating these elements to calculate the exact amount of child support owed.  Though you may deviate from these calculations under certain circumstances, the child support guidelines determine the default amount you can expect to pay or be paid.

CONSIDERING YOUR INCOMES

Remember, both your incomes play a pivotal role in calculating child support. It’s worth noting that not all types of income are straightforward (for example, income from a private business). Additionally, it’s important to keep in mind that if either of you is voluntarily unemployed or not fully utilizing your earning capacity, income may be attributed to you based on your potential earning capacity.

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Florida Alimony Reform 2023

Florida Alimony Reform 2023: What is is and what does it mean?

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INTRODUCTION ON FLORIDA ALIMONY REFORM 2023

Florida alimony reform is here.  Our legislature passed, and the governor signed, a transformative overhaul to §61.08, Florida Statutes, commonly referred to as the Alimony Statute.  As of July 1, 2023, Florida has virtually eliminated new awards of permanent alimony, codified temporary alimony, and implemented limits to the length and amount of alimony a court could order.  The Alimony Statute now only refers to the following types of alimony (also known as spousal support or spousal maintenance): Temporary, Bridge-the-Gap, Rehabilitative, and Durational, each of which can be paid over time or in a lump sum. In this blog post, we explore each and highlight some of the recent significant changes.

Keep in mind that, though this is now the default law and limits what courts can order, spouses can always agree to do things differently through a private process such as Collaborative Divorce or mediation.

NEED AND ABILITY TO PAY

Before alimony can be awarded, a court must first determine whether one spouse has an actual financial need, and whether the other spouse has the ability to pay and meet that need. The burden is on the party requesting alimony to show both their need and the other party’s ability to pay.  Though determining need and ability to pay may seem straight forward, the issue becomes a lot murkier when one of the spouses has inconsistent income because they are a small business owner, executive with a unique compensation package, or a seasonal worker.

Additionally, though seemingly obvious, many people seeking alimony do not realize that the household income that once supported one home may now have to stretch and support two, and there may or may not be sufficient funds to cover both. It is with this in mind that the new statute considers an additional factor in analyzing need and ability to pay: the anticipated financial needs and necessities of life for each party after the divorce is over.

LENGTH OF MARRIAGE

There are many factors a court may take into consideration when determining an alimony award. However, one of the major changes is how the court measures the length of the marriage. Now, the Alimony Statute defines a short-term marriage as one that last less than 10 years, a moderate length marriage as 10 to 20 years, and a long-term marriage as exceeding 20 years. Traditionally, the length of marriage is measured from the date of marriage until the date of filing for divorce or another date as agreed upon by the spouses.  In a Collaborative Process, where many cases do not get filed until after a full resolution is reached, we tend to use a date listed in a Collaborative Participation Agreement in place of the date of filing.

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Divorce: Is Bitcoin a Marital Asset?

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Bitcoin has sure been in the news a lot lately.  The cryptocurrency, though volatile, has traded at over $50,000 in recent weeks.  Billionaires have publicized opposing views about Bitcoin, with Bill Gates warning investors to stay away while Elon Musk has sung its praise.  Regardless, more people seem to be getting on the Bitcoin bandwagon, and thus it is popping up more and more in divorce matters.

In fact, you may be wondering: Is Bitcoin a marital asset for purposes of divorce?

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Interview: Mosten on Peacemaker Practice Self Survey

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I recently had the opportunity to interview ADR legend Forrest “Woody” Mosten.  Woody has been on the forefront of Mediation and Collaborative Practice and is the founder of Unbundled Legal Services.  Woody also happens to be a friend and mentor of mine and my co-author of “Building A Successful Collaborative Family Law Practice” published by the American Bar Association in 2018.  You can find the video below.

You can find the Peacemaker Practice Self Survey reproduced below.

PEACEMAKER PRACTICE SELF-SURVEY

Forrest S. Mosten and Kevin Scudder[1]

Peacemaker Professionals are lawyers, mental health professionals, and financial professionals who deliver services to clients in a number of roles: Advisor, Information Provider, Organizer, Legal Counselor, Mediator, Evaluator, and other forms as service-provider.

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