Dear Liz: My wife recently asked for a divorce, which was difficult to hear. That said, I want to move forward with my life and part of this is being on sound economic footing. I have been the primary earner in our marriage for most of our 12 years together, even though my wife was capable of working full time. Since we live in California, does she get 50% of everything, including money I had prior to our marriage? And if I originally put in only one-third of the down payment on our house, am I only eligible for one-third of the appreciation, or do I get half?
Answer: Even in community property states such as California, assets acquired before marriage are typically considered separate property. Assets acquired during the marriage, however, are generally split 50/50. If you can trace your down payment back to your separate property, you may be able to get a reimbursement for that amount before the remaining equity is split between you. Your attorney can offer further guidance.
Dear Liz: My husband is 13 years older than I. Unfortunately, when he went in to sign up for Medicare several years ago, the clerk talked him into taking his Social Security as well since he had reached full retirement age. Now I am wondering when to take mine. My benefit at full retirement age would be more than half of his but less than his full amount. Considering that there is a fair chance I will outlive him, what should I do about claiming? We are supporting an elderly relative and the expenses are fairly high. Other than that we are well off.
Answer: As you probably know, it’s the higher earner’s benefit that determines what the survivor ultimately gets. By starting at his full retirement age, your husband missed out on several years of delayed retirement credits that could have boosted both benefits by up to 32%.
There’s nothing you can do about that now, but you can be careful to maximize your own benefit. That means waiting at least until full retirement age to apply. Delaying until age 70, when your benefit maxes out, makes sense for most people, but consider using a claiming strategy tool such as Maximize My Social Security or T. Rowe Price’s Social Security Optimizer.
Dear Liz: As a certified financial planner for the past 31 years who has never run afoul of any regulatory body, I cringe every time I hear you recommend people seek out only fee-only financial planners!
While we certainly do fee-based work where appropriate, sometimes it is simply better for the consumer if their advisor receives a commission not a fee. As an example, assuming all other factors being equal, if a client were to maintain an account for 10 years with a fee-only advisor charging 1% per year, wouldn’t the client pay considerably more in fees than if they placed their portfolio in a commission-based account where the advisor were to receive a one-time 5% fee?
I certainly understand conflicts can arise, but don’t they do so in most aspects in life? And isn’t this really just a matter of ethics? Can’t a fee-only advisor lack ethics just like an advisor who receives commissions?
Answer: The most important differential among advisors is whether they’re fiduciaries and therefore obliged to put their clients’ best interests first. As a certified financial planner, you’re held to a fiduciary standard and must disclose any potential conflicts of interest to your clients.
Most advisors are held to a lower “suitability” standard. That means the advisor can recommend investments that pay higher commissions, even if those investments aren’t the best option for their clients.
Fee-only financial planners typically are fiduciaries and have opted for a compensation arrangement that avoids the conflicts of interest inherent with commission-based recommendations. These planners are paid only by the fees they charge their clients, which can be hourly rates, project fees, retainers or a percentage of assets under management.
Liz Weston, Certified Financial Planner, is a personal finance columnist. Questions may be sent to her at 3940 Laurel Canyon, No. 238, Studio City, CA 91604, or by using the “Contact” form at asklizweston.com.
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