In this Modern Divorce podcast, host Billie Tarascio talks with Shanna Tingom, a Certified Divorce Financial Planner, who specializes in helping plan the financial aspects of a divorce by developing a plan. While an attorney can navigate the legal aspects of divorce, the CDFA can create the financial plan to get through the divorce so that you are best positioned to survive and thrive after the judge signs the divorce orders.
Taking a second home while letting your ex keep the first? Not so fast. A CDFA can show you how you might get slammed with capital gains taxes and come out with far less in the end, without taking the right steps. Trading IRA funds to buy out an ex's stake in the family home? A CDFA can help you decide if that's the best move for your bottom line and how to make that move.
This discussion is perfect for anyone who is concerned about their finances and making a budget work in divorce. To connect with Shanna, go to heritagefinancialAZ.com
In this Modern Divorce podcast, host Billie Tarascio talks with Shanna Tingom, a Certified Divorce Financial Planner, who specializes in helping plan the financial aspects of a divorce by developing a plan. While an attorney can navigate the legal aspects of divorce, the CDFA can create the financial plan to get through the divorce so that you are best positioned to survive and thrive after the judge signs the divorce orders.
Taking a second home while letting your ex keep the first? Not so fast. A CDFA can show you how you might get slammed with capital gains taxes and come out with far less in the end, without taking the right steps. Trading IRA funds to buy out an ex's stake in the family home? A CDFA can help you decide if that's the best move for your bottom line and how to make that move.
This discussion is perfect for anyone who is concerned about their finances and making a budget work in divorce. To connect with Shanna, go to heritagefinancialAZ.com
Billie Tarascio: [00:00:00] Hey there. It's Billie Tarascio from the Modern divorce podcast here with another episode. And I'm so excited to be joined by a local certified divorce financial analyst. Shanna Tingom Shannon. Welcome to the show.
Shanna Tingom: [00:00:42] I'm so excited to be here, Billie. Thanks for having me.
Billie Tarascio: [00:00:45] Absolutely. So, did I say it correctly? Certified divorce, financial analyst?
Shanna Tingom: [00:00:50] You did, or CDFA for short
Billie Tarascio: [00:00:52] CDFA. Okay. Let's start with what is a CDFA?
Shanna Tingom: [00:00:57] That's a great question. So we are often in financial world, like me, I'm a financial planner by trade. Sometimes we're CPAs or other divorce specialists and we're specially trained in the finance side of divorce from splitting assets and it, and their tax implications to coming up with, settlements that work today and in the future, and just all aspects of the financial side of things.
Billie Tarascio: [00:01:23] Fantastic. So you, you said you are a financial planner by trade,
is that correct?
Shanna Tingom: [00:01:29] Yep. That's what I do for my day job. I work with clients that are going through divorce or after divorce as part of that practice.
Billie Tarascio: [00:01:38] Okay.
And when did you become a financial planner?
Shanna Tingom: [00:01:42] Oh, wow. It's been almost 10 years now.
It'll actually be 10 years in October that I've been fully licensed. And, I started my career with another firm and six years ago in April, I started Heritage Financial Strategies. And so that's my baby. And but I've been in the financial services industry, my whole career from banking to mortgage to real estate.
And now doing what I love, which is putting it all together.
Billie Tarascio: [00:02:05] Fantastic. So you were in, you were doing finance prior to that in a different field.
Shanna Tingom: [00:02:12] Yes, exactly. So I worked for a couple of large regional banks and just, you know, working with clients that come into the bank and do those sort of things.
And that's really how my career morphed is, you know, really learning more about the financial side of things and deciding 10 years ago that I wanted to get licensed and really dig in and roll my sleeves up. And I absolutely love it.
Yeah, it's a great industry to be in. It's probably the most, I mean, obviously child custody is, is of course crucially important, but next to child custody, figuring out your financial stability and security and a plan and a path moving forward often feels so difficult for people going through divorce, but it is just so crucial.
Billie Tarascio: [00:02:54] So what drew you to this specialty?
Shanna Tingom: [00:02:57] Yeah, that's a great question. I've been through divorce myself. And luckily when I went through it, I was young and we were broke and we didn't have kids. So it was super easy. Right. You take your car and student loans, I'll take my car and student loans and we'll call it quits.
But as I was practicing as a planner, I realized that that isn't often the case. And so I was seeing a lot of people, women primarily, but not always that had come to me after they had made the deal that, and the papers were signed and. In such a terrible situation that I just knew there had to be a better way.
And so I started learning a little bit more about it, and that's really what drew me to wanting to be able to help folks during the process. So they don't make those bad mistakes. They can't undo later.
Billie Tarascio: [00:03:41] Could not agree with you more. I was speaking with a gentleman earlier today who entered into an agreement to pay his former wife, $12,500 a month for life.
He is now he's 77 and retired and of course does not have the income to pay his ex-wife $12,500. But that's just, that's just today. I mean, those examples, women and men, those examples come across my desk and your desk every single day. So I want to talk today about who is a good candidate to be working with a CDFA.
Shanna Tingom: [00:04:21] Yeah, well, you know, I, I, this sounds like a bit of a broad brush, but I think everybody's should talk to one of us and they may not need to engage us, but they can at least understand the stuff they should be looking out for if they don't have a lot of assets or, you know you have a fairly uncomplicated divorce.
Like I had, you might not need to engage us, but there are certain things that you do need counsel on. Like if you're going to split a retirement account, pensions, especially are complicated. If you're going to split other assets or give up one asset for another, those are folks that really, really need to talk to somebody like us and possibly work with us throughout the process.
Billie Tarascio: [00:05:01] Yeah. So if you've got assets or if you're making some sort of a financial commitment that's almost everybody. Now, the nice thing about child support is it's modifiable. If your circumstances change, you can always modify it, but you cannot modify property division.
And, and if you agree to make spousal maintenance non-modifiable, then you cannot modify that. So, yeah. Tell me, like if I were coming to you and let's just do a hypothetical. So I'm coming to you and I'm getting divorced and I'm representing myself. I don't want to work with an attorney. My spouse and I are mostly amicable.
We've got a fairly complicated, like fairly sophisticated financial portfolio, but we're not fighting over everything. How, how would you begin your engagement?
Shanna Tingom: [00:05:46] Yeah. Those are some of the most challenging for us to work with, but a lot of fun. And so I usually engage with one or the other spouse.
I can be an intermediary that is not the position that I typically like to take. So normally it's the female, the woman that comes to me and says, Hey, I've got all this stuff. My spouse wants to split it evenly, but I don't even know what I've got and I need your help understanding that before I can understand how to divide it.
And so that's really where we start is with a lot of education. What's a retirement account. What's a 401k versus an IRA versus a traditional investment account. And is there life insurance? Does there need to be life insurance? What about the equity in the home or the vacation home? Really understanding a budget because there's everything in the divorce process revolves around that affidavit of financial information, which is truly just a budget. So we really do a lot of education before we sit down and start having those negotiations around how to split things.
Billie Tarascio: [00:06:44] Okay. And do you help with the budget?
Shanna Tingom: [00:06:48] Yes, absolutely. We do. As part of that process, we do have a, you know, a budget coach on staff that we can bring in if we need to, or maybe it's simply just going through the last couple of years of, or transactions.
You know, we look at the last couple of months and say, is this a normal. Situation, how much are the power bills and the how much did we spend in food and how much are the kids' activities? Those are types of things that really seem overwhelming when you're in the midst of a divorce, but it's fairly easy for us to unwind.
Billie Tarascio: [00:07:18] Okay, so I'm coming to you and I'm saying. We want to get a divorce i want to keep the house he's going to take the retirement They're about the same. What do you
Shanna Tingom: [00:07:26] yeah, well, first we need to figure out if you can afford to keep the house. That's a big one. I see a lot of women make that mistake when they couldn't afford it or shouldn't have tried to afford it.
Cause they often give up a lot of assets in order to be able to keep a house that maybe they shouldn't have kept, but if we can afford to keep the house, then we look at what's worth trading off for that. You know, don't give up a pension that is a lifetime pension in order to keep the house. You know don't give up your position on you know, parenting time or those types of things to be able to keep the house.
And so we look at what we can trade off for that and what it might be worth down the road. And there are lots of tax considerations that go into this one. Yeah.
Billie Tarascio: [00:08:05] I want to talk about that because it's not something that very many people understand, and it's not something that all attorneys understand or properly way. But what you just brought up is worth addressing and that is trading off parenting time or child custody the schedule that you want in exchange for a financial agreement.
And this happens all the time because Arizona is essentially a 50, 50 parenting time state. If both parents want equal parenting time and there's no abuse or neglect, the court is most likely going to do that. Now, when you have a couple that has been working one way for a very long time, let's say mom has been taking care of the kids for a very long time. Now you have teenagers and they're not interested to transition to equal parenting time.
And none of them. Are really used to that. That is not what they want. And, That's what they're going to get if they go to court. So she may end up trading. You know the future for financial position for getting the last couple of years with her kids.
Shanna Tingom: [00:09:03] Oh my God. Gosh. And that is so short-sighted, that is really making a very longterm decision based on short-term fear.
And it, that's the worst possible negotiating position to be. So let somebody wait for you. When you don't really even want to fight for yourself, sometimes that's just necessary. And so, you know, to give up this all so important. In order to keep quote the kids in the same school district or their life.
Oftentimes what I see is a six months or a year down the road, having that conversation with the, and it's often the female, although not always I wish that I hadn't agreed to that. I wish that we could make a fresh start in a different house, even if it's a rental.
Billie Tarascio: [00:09:47] Yeah, you're right. It's just a short, sighted decision and it's not a good decision. And the best thing you can do under that circumstance, in my opinion, is to break up the two issues. Buy for Kate them treat them completely separately. First decide one and then decide the other do not make them dependent on one another because you're really mixing apples and oranges and your timeframes are not even close to the same you know you've got a teenager who's got you know, two or three years left versus the rest of your life.
Shanna Tingom: [00:10:15] Yes. Oh my gosh. It's so scary. And you know, there are lots of ways that you can eat that you can deal with the house scenario, right? If you, if your goal is that you want to keep your, you know, junior in high school, in the house until they graduate, that is a short term, very short term decision. We can make that agreement as part of the process that the house gets sold.
At a certain point in the future or, you know, we can sell it and lease it back. There's just lots of ways that we can handle that versus giving up a lot in order to get that short-term solution.
Billie Tarascio: [00:10:46] Absolutely. So let's talk about some of the tax consequences. Of the decisions that we make when we are getting a divorce. So the first rule that i'm aware of is that divorce is a non-taxable event. Can you explain what.
Shanna Tingom: [00:11:01] It's not, it's not. And so you know, if you're taking personal property like cars and goods in the house and. You know, those types of things there aren't tax consequences for that.
If you're splitting up cash, there's no gifting rules. You know, if you have cash and savings accounts or checking accounts there are, there are no tax consequences for that, but if you're splitting up investments, retirement accounts, equity in the home and each one has to be considered and weighed when you're looking at who's going to get.
Billie Tarascio: [00:11:33] And when we say that divorce is a non-taxable event, it means you're not going to pay taxes at the moment of the divorce. Right. But each asset will have tax consequences that follow that piece of property whatever it is after your divorce
Shanna Tingom: [00:11:50] Yes, exactly. And far after in some cases. So, you know let's take the, the, the most important, I think that a lot of people deal with first, which is theQRDO splitting up of retirement accounts. You have a one time opportunity.
If you're going to be taking, let's say part of his retirement account to take a distribution prior to it being rolled over into a different account. And not have to pay the 10% penalty that you would have to pay if you're under 59 and a half that opportunity goes away when they split it into two different accounts.
And. Let's say you take it and roll it into your current investment account. Boom. That 10% penalty applies if you're under 59 and a half, no matter what. So if you know, you're going to have to take a distribution, that distribution is going to be taxable, and then there's a possibility of a penalty. Do it right from the get-go.
Okay. I want to make sure I understand this. So I can't take. My retirement account that i'm getting in the QRDO i can't take my portion from the quadro and move it into a different retirement account that i already have without being taxed at that moment.
Shanna Tingom: [00:12:57] If you move it into retirement account, that is a like retirement account. It is not a taxable event. However, if you want to take a distribution from it and you're under the magic 59 and a half, that's when it's taxable and possibly penalized, if you don't do it. Right.
Right okay and i've heard that some people take advantage of that opportunity to take that money out without the penalty in order to pay off debt
Do you advise that or not?
Shanna Tingom: [00:13:23] Well that depends. So we'll we'll we would look at that in the planning process and where else we could potentially pay that debt off if you're paying 20, 30% on the debt, then yes, it probably may that, but I definitely wouldn't do it to pay off mortgage debt. That's at two or 3% .
Billie Tarascio: Okay. And let's talk about the mortgage. So there's this big, huge tax-free gains that you get from your primary residence and that's $500,000. If you're a married couple and $250,000 in tax-free gains, if you're single now, what happens to that limit? If you're divorcing, how does the divorce affect that limit?
Shanna Tingom: [00:13:57] Yeah, that's a great point. Simply it cuts it in half. And so if you have a bunch of gains or a bunch of capital gains that you think you're going to be taking out of your primary residence and you don't plan to hold it for more than a couple of years, it would make sense to sell it while you have the $500,000 exclusion. Because as soon as you've split that community into you each take two 50 with you.
And so you may end up with a big tax bill in a few years that you weren't anticipating.
Billie Tarascio: [00:14:25] Okay all right so part of the analysis needs to be how much of a gain do we currently have?
Shanna Tingom: [00:14:32] Yes, exactly. And another piece of this could be, I've had clients that have come to me and say, well, she wants to keep the primary residence.
And so he's going to keep the vacation home or the, you know, the Lake house or whatever. And while that sounds great, he's kind of getting the short end of the stick there because unless he moves into it, that's not considered a primary residence. It is all taxable when the property is sold.
Okay and how much of the time do you have to live in it actually to make it a primary residence.
Shanna Tingom: [00:15:01] Two of the last five years.
Billie Tarascio: [00:15:03] All the time.
Shanna Tingom: [00:15:04] Yeah, pretty much it has to be considered your primary residence.
Billie Tarascio: [00:15:07] Okay. All right. So no snowbirding.
Shanna Tingom: [00:15:09] No.
Although I have, I've had people change their primary residence just for that purpose. Because that can be a huge, you know, financial savings to do so, but it, that you do have to live there two over the last five years per IRS requirements.
Billie Tarascio: [00:15:23] Okay so how do people work with you what does your fee structure look like what does the engagement usually look like.
Shanna Tingom: [00:15:30] Yeah, exactly. So I, I engage them for a full year. And I do a flat fee anywhere between $2500 to $5000, depending on the complexity of their situation, that covers however many hours it takes for us to get to that year.
Most of my clients get resolved within that year. If we do go over then we'll we'll talk about that and sign a new fee agreement. But essentially I'm trying to save you as the attorney, Billie billable hours on this financial stuff. So it's a huge savings for the clients.
Billie Tarascio: [00:15:59] Absolutely and are you running different scenarios and talking about different outcomes under different versions of splitting up
Shanna Tingom: [00:16:07] Yeah, absolutely. We run different scenarios. We look at the, the options that exist. Sometimes there's maybe only one good option and sometimes, maybe there's three or four good options. So we're looking at all of those, the impact of taking a greater split of the community assets versus let's say a large spousal support award.
Those types of things are all, all things we can run scenarios on.
Billie Tarascio: [00:16:30] Okay. And what about when we have business buyouts? Usually many times you'll see one spouse buy out the interest. In the business of the other party by either trading the house or the home equity or retirement assets. Or by paying. Out of the business over time. What are your thoughts on that scenario.
Shanna Tingom: [00:16:49] Yeah, that's a, that's a great question. So I think a lot of it depends on, you know, how active each spouse was in the business. There's often one that that kind of is more attached to it than the other. Not always, but, but that's the case sometimes. And you know, it can be emotionally a hard thing to be financially tied to a business that you no longer really care for. So we, we take all of that into consideration and really look at those. Sometimes they, you know, I I've had scenarios where one spouse will put the other spouse on payroll in order to kind of make it easier to, to make those spousal support payments.
It doesn't always make sense. But you know, there are a number of ways that we can run that scenario. And if they can afford to we can, we can cash out definitely and let them walk away from the business. So all, all different kinds of scenarios we can look at.
Billie Tarascio: [00:17:39] If you are bought out of your interest in the business is that by out taxable income?
Shanna Tingom: [00:17:45] I think a lot of that depends on how it's done. So the answer would be typically it is if it's a lump sum buyout. But a lot of it depends on how the business is set up as well as what the financial situation is moving forward. So these are all conversations. We'd bring a CPA or enrolled agent in to have with the clients as well.
It's a really complicated, I mean, If you are trading a couple hundred thousand dollars of your interest in the business for a couple hundred thousand dollars in home equity, then I think at that moment, it's a non-taxable event, but whatever asset you take travels with you. So if you get bought out over time, I think it's income. You're going to pay income tax on it. If you take the house and you've got this $250,000 exemption, you don't have to pay tax on it. Um but you don't have any income coming in so it's just a tough situation.
Shanna Tingom: [00:18:40] Oh, yeah. And, and divorce brain is a real thing. I mean, I know you and I both deal with, with folks going through this all the time and when you're in the thick of the emotions and in the midst of it, you're going to be asked to make a lot of decisions that cannot be undone once you're through the process.
And so it really helps to have somebody that can help you think through all of these, because it's hard when you're in the middle of it.
Billie Tarascio: [00:19:01] Absolutely. And you know, one of the things that you and I have talked about before is that these are massive decisions with huge impacts. And it's a very sophisticated financial transaction for people, but the process of divorce is so uncomfortable that people will often do anything they possibly can. Just to make it stop.
Shanna Tingom: [00:19:21] I hear that a lot actually. Yeah, I hear that a lot from women like that, get to the point where they're like, I will give him whatever he wants, so the conflict will end. And while I think that's an admirable approach, it can have far reaching consequences far, even beyond your generation, your kids and your kids' kids could be affected by the decisions that you make today.
So let us have the conflict. Let us. Deal with the emotions with you? I often joke with the divorce clients that I work with that I don't bill by the hour. So if you're going to have an emotional breakdown, do it in my office because we can just sit there and cry and then they can come to you all emotionally, ready to handle it.
Billie Tarascio: [00:20:03] Yes, that is so great. And oftentimes people think if I just settle my divorce, it will make the conflict go away. Or the grief process will somehow suddenly speed up and things will get easier and it's just not worth it. And it's not usually the case. And so to me, this reminds me of the prisoner that's being interrogated and is extremely uncomfortable because you've been awake for 20 hours and you haven't edited any food and the cops keep saying you did it. And so maybe if I just say I did it and I give them what they want.
That it will all go away. And of course the cons is the consequences are that you may end up in jail for something you didn't do. And I feel like divorced negotiations can sometimes be the same dynamic.
Shanna Tingom: [00:20:47] Yeah, exactly. And oftentimes by giving in even more, that just fuels the flames of any sort of control issues that they may have on the other end.
And so this is the time where you need somebody to prop you up to so that you can stand up for yourself and start rebuilding the life that you want after. This is all over with. So let us help you with that.
Billie Tarascio: [00:21:08] You are exactly right. And it's one of the reasons that the transaction is so complicated. Is because you've got years of dynamics of usually a husband and a wife. And those dynamics can not easily be undone. It's hard to all of the sudden wake up one day and set boundaries that you wish you would've set 10 years ago.
And really one of the best tools that you have is getting advisors and people to stand in between you and the other person. And one of the things that I love so much about you as a CDFA is you're not billing by the hour. So it's not cost prohibitive.
Shanna Tingom: [00:21:43] Oh, gosh. Yeah. And that, that, you know, that's a that is something that you, you can't take lightly because, if you think if I have to go to court and act as an expert witness, that's the only thing that's not covered in my agreement. So I bill about $250 an hour for court preparation and court time in court.
So I mean the average divorce. The average year of time that I spend working with somebody is far more than 10 hours of my time. And you know, the average client that comes to me only spends $2,500 in a retainer for that, for that entire year. So if I were billing by the hour, it would cost you far more.
That's a steal. That's awesome.
Shanna Tingom: [00:22:23] Yeah, I know. I know. Yeah. And, and you know, it you just never know until you get into it, how long it's going to take and, you know, running multiple scenarios, multiple negotiation conversations you not having to worry about the clock starting to tick, as soon as I pick up the phone or, I'm answering email.
So I will, you know, I will let my clients rely on me as much as possible for that emotional. Support because then you, as the attorney, Billie can spend your time doing what you're best at, which is the good negotiating and dealing with the paperwork and all of that fun stuff.
Billie Tarascio: [00:22:55] Absolutely. I love that. So when you do go to court to testify as an expert witness what does that usually look like and what are you usually testifying
Shanna Tingom: [00:23:05] Gosh. I've done all kinds of different things, but essentially the if the conversation, in court is, is different than the norm, right? So if we're proposing a different type of a asset split or a settlement based on this client's specific needs that's maybe where my expertise will come in. So why would, why would I recommend one thing over another? Or why are we not proposing what the court standard is in this particular case? Th those are the types of conversations that I get involved with in front of a judge.
Billie Tarascio: [00:23:38] Fantastic and can i ask how often does the judge agree with you.
Shanna Tingom: [00:23:42] Very very often.
And you know, that's the reason, you know, I think that I'm prepared to go to court, but I don't want to, I want us to stay out of court, but if I need to go in there and defend our position and our assertion, then I'm more than happy to do that. And I'm fully capable of it.
Billie Tarascio: [00:24:01] Fantastic. I just love working with you. Shanna. Love it. Love it. Love it. I think you are a fierce powerhouse and an amazing advocate for women. And if people want to get ahold of you how do they find you?
Shanna Tingom: [00:24:15] Yeah. So HeritageFinancialAZ.com is our website. We have a whole section on that website, helping with your divorce and you'll find some calculators there.
Some blog posts that I've written, you can also schedule a consultation in the top right corner of my website at, and we could talk either on the phone virtually, or you can come into one of my offices and I am more than happy to help.
Billie Tarascio: [00:24:36] Awesome thank you so much for your time today i can't wait to have you on again it's been a great conversation
Shanna Tingom: [00:24:42] Thanks Billie. I appreciate it.
Billie Tarascio: [00:24:44] Bye