The Fundamentals of Divorce

Question 1

In a divorce settlement, what mistake is commonly made by financial professionals without proper training?

Answer 1

An equal division is not necessarily an equitable division. In many cases, one spouse sacrificed his or her career for the other spouse. In those cases it may not be equitable to divide the property equally.

Question 2

Which of the following is a common mistake that divorcing couples make?

Answer 2

Funds withdrawn from a retirement account before the age of 59 1⁄2 will be subject to additional income tax as well as an early withdrawal penalty. It is important that the client understand the impact of this decision.

Question 3

What impact have the “no fault” divorce laws had on divorces in the United States?

Answer 3

Divorce rates have increased since California in 1970, and all other states (except New York) by 1985, enacted no fault divorce laws.

Question 4

Which of the following individuals is most likely to seek the services of a CDFA® professional?

Answer 4

Couples who use the services of a CDFA® professional are likely to have a joint income of $100,000 or greater and joint assets that exceed $100,000. Mary and her husband have income and assets that exceed these amounts.

Question 5

Jane, a clinical social worker, has also been trained as a mediator. Which of the following is an appropriate way to use her mediation training?

Answer 5

Jane is qualified as a mediator.

Question 6

From a client’s perspective and without regard to the cost, at which of the following times should an individual hire a CDFA® professional?

Answer 6

The best time to hire a CDFA® professional is when the client is considering getting a divorce. For example, it may be easier to gather financial information before the other spouse knows about the divorce. There may also be Social Security and health insurance planning issues that necessitate postponing the divorce.

Question 7

Which of the following activities are appropriate for a mediator to do?

Answer 7

The mediator is a neutral third party.

Question 8

Which of the following is NOT an appropriate service that CDFA® professionals can provide?

Answer 8

Unless a CDFA® professional is trained in business valuations, he or she should not prepare business valuations and analysis.

Question 9

Which of the following is NOT a reason for a CDFA® professional to interview clients?

Answer 9

A CDFA® professional is not trained to interview clients to complete answers to interrogatories. This is something that the attorney would complete.

Question 10

Susie, age 35, gave up her career to stay home with the children for 10 years. Which of the following questions would be inappropriate for the CDFA® professional to ask her?

Answer 10

It is not appropriate for the CDFA® professional to ask Susie how much spousal support she would need if she does not return to work. Given her age of 35, Susie should be expected to return to the work force—unless she suffers from a medical condition that would prevent her from working or if her children require care and it would not be cost-effective for her to work.

Question 11

Jacob is divorcing his wife, Andrea. Jacob has hired Michelle, a CDFA® professional, to work on his divorce case. Which of the following actions are appropriate for Michelle?

Answer 11

A CDFA® professional should review both parties’ financial information to do a complete and thorough job and make recommendations that are fair and equitable to both parties.

Question 12

Which of the following tasks can a CDFA® professional perform without having additional training?

Answer 12

CDFA® professionals are trained to act as expert witnesses.

Question 13

Which of the following is a criminal offense?

Answer 13

Practicing law without a license is a criminal offense.

Question 14

Which of the following statements by a CDFA® professional would be considered providing legal advice?

Answer 14

The CDFA® professional should not tell a client that he or she should sell the house. Only an attorney or judge can tell a client what they “should” do; this is providing legal advice.

Question 15

Which of the following individuals may be appointed by the court to help the spouses negotiate a settlement?

Answer 15

The court can appoint a mediator to help the parties settle their case.

Question 16

Mary is working as a CDFA® professional for her client, Stephanie. Stephanie would prefer to pay only one person to do as much as possible for her. What can Mary do for Stephanie that would NOT be a conflict of interest with her duties as a CDFA® professional?

Answer 16

Testifying as an expert witness in court is one of the duties a CDFA® can perform.

Question 17

Bob, a CPA, has prepared tax returns for Andy and Amy for more than a decade. Andy and Amy are now getting a divorce, and Amy wants to hire Bob as her CDFA® professional. Which of the following should Bob tell her?

Answer 17

Since they were Bob’s clients prior to the divorce, he cannot work for them as a CDFA® professional.

Question 18

Matt has been Sam’s financial planning client for 10 years; a few months ago, Sam set up an IRA for Matt. Sam has never met Matt’s wife, Kim, nor has she ever been Sam’s client. Sam is also a CDFA® professional, and now that Matt and Kim are getting divorced, Matt wants to ask Sam some questions about the financial aspects of his divorce. Which of the following rules would govern what Sam is permitted do for Matt?

Answer 18

Sam can meet with just Matt, since he alone has been Sam’s client.

Question 19

Which of the following roles is probably the most important role a CDFA® professional can play during the divorce process?

Answer 19

This is one of the most important roles that a CDFA® professional plays in the process. Clients with unreasonable expectations may refuse reasonable or even generous settlement offers, and they may also lose faith in their team’s professional abilities.

Question 20

Which of the following resources would be least likely to provide the CDFA® professional with information about state laws and procedures with regard to divorce?

Answer 20

State accountant associations would not be the primary source for laws and regulations about divorce.

Question 21

Which of the following is NOT something that attorneys use to determine how the law is likely to be applied in a case?

Answer 21

Local mediation reports are not used as precedent to determine how the court is going to rule. Mediation reports are not archived the way that court cases are archived.

Question 22

A divorce statute may list factors that the judge must consider when dividing property in a divorce. Which of the following is an appropriate action for the couple to take when negotiating a property settlement?

Answer 22

The judge can reject a settlement agreement. For instance, if one spouse would eventually end up on public assistance, the judge may want the parties to adjust the settlement in a more equitable way.

Question 23

Barry is going to represent himself in his divorce. Which of the following is NOT likely to be a negative consequence of this action?

Answer 23

Barry will not have to pay attorney fees to an attorney.

Question 24

Which of the following would be appropriate advice to give clients about hiring attorneys?

Answer 24

CDFA® professionals should always encourage clients to hire their own attorney. Each spouse should have his or her own attorney to get the best possible representation.

Question 25

Jake is divorcing Judy because of her marital infidelity. They live in a no fault state. Judy’s marital infidelity will have no impact on which of the judge’s following decisions?

Answer 25

“No fault” means that a divorce can be granted without finding that one spouse was guilty of marital misconduct.

Question 26

Which of the following recognizes common law marriage?

Answer 26

The District of Columbia recognizes common law marriage.

Question 27

According to statistics, approximately how many divorce cases use the “pro se” approach to settlement?

Answer 27

Approximately 50% of the parties in divorce proceedings do not hire an attorney. This includes cases where no parties are represented. However, in many cases, one party is represented and the other party is not represented.

Question 28

How many days is the typical residency requirement for filing for divorce?

Answer 28

The typical length of time is 90 days in most states.

Question 29

Which of the following statements best describes how residency requirements work?

Answer 29

In all states, at least one of the spouses must be a resident for a certain period of time before the court has jurisdiction and the divorce proceedings can begin.

Question 30

A “cooling off period” is defined as the minimum period of time it takes to accomplish which of the following?

Answer 30

The cooling off period is the minimum time it takes to complete a divorce once the complaint has been filed. The state establishes this period to ensure that both parties want to proceed with the divorce.

Question 31

How long can a temporary order last?

Answer 31

A temporary order is used to address issues (such as support, custody, and sometimes property issues) that come up while the couple is waiting for the divorce to be final, whether that takes 90 days or five years.

Question 32

In which of the following situations is a temporary order usually granted?

Answer 32

A temporary order is commonly used to order one spouse to pay support to the other until the divorce is final.

Question 33

A permanent order is the only order that can be used to resolve which of the following issues?

Answer 33

A permanent order is always required to dissolve the marriage.

Question 34

Dick and Carol were divorced on January 2, 2014. Dick moved out of their home in November of 2013 and now lives alone in an apartment. He does not have any dependents. Carol will not sign any tax return that he prepares. When he prepares his 2013 tax return, which filing status can he use?

Answer 34

This is the only way Dick can file his taxes. Unfortunately, “Married filing Separately” is the most costly way to file a tax return.

Question 35

Which state does NOT recognize legal separations?

Answer 35

Texas does not recognize legal separations.

Question 36

An attorney’s consultant can be required to do which of the following?

Answer 36

Conversations with the client when the attorney is not present are not protected by attorney-client privilege.

Question 37

Which of the following individuals typically does NOT negotiate a divorce settlement?

Answer 37

A judge does not negotiate a settlement. A judge issues orders and may or may not consider what one side or the other wants when deciding how to settle the case.

Question 38

Positional bargaining is a type of mediation that has which of the following characteristics?

Answer 38

Positional bargaining starts with the solution: one party proposes a solution and the other party makes an offer.

Question 39

Which of the following does NOT occur at the introductory mediation negotiation session?

Answer 39

The parties make counteroffers in the negotiation sessions.

Question 40

Which of the following questions would occur during cross examination?

Answer 40

This question is typical of cross examination.

Question 41

What is the key document that is used to collect financial data pursuant to a divorce?

Answer 41

The key document used to collect the financial data is usually called a financial affidavit or a financial statement.

Question 42

Which of the following is NOT a characteristic of a deposition?

Answer 42

A deposition is the sworn testimony of a witness taken outside of court.

Question 43

How often can the financial affidavit/statement be revised?

Answer 43

There is no limit on the number of times that the financial affidavit/statement can be revised. There is an obligation to change incorrect information or it may be deemed a fraud on the court.

Question 44

What is considered the newest alternative dispute resolution model?

Answer 44

Collaborative divorce is a new and highly effective divorce method that utilizes collaborative law, a new dispute resolution model in which each party retains an attorney who has gone through specialized training.

Question 45

What percent of divorce cases go to trial?

Answer 45

Only about 5% of divorce cases actually go to trial.

Question 46

Which of the following is NOT a method of discovery?

Answer 46

A summons is not a method of discovery. A summons is a written notification to the defendant or respondent that an action has been filed against him or her. It notifies a spouse of his or her rights and obligations in responding to the complaint for divorce.

Question 47

Which of the following methods of discovery consists of the sworn testimony of a witness taken outside of court?

Answer 47

A deposition is the sworn testimony of a witness taken outside of court in the presence of lawyers for each side. There is also a court reporter present to record the proceedings, and the testimony must be given under oath.

Question 48

Which of the following roles would be appropriate for the CDFA® professional?

Answer 48

CDFA® professionals are trained to provide information about the financial impact of a divorce.

Question 49

Which individual would have the easiest time hiding income information?

Answer 49

Manipulation of financial data may be relatively easy for the self-employed, such as a doctor, dentist, lawyer, accountant, financial consultant, independent contractor, or someone who runs a cash business. Although Adam is not self- employed, his dad has control over what he is paid and they can easily manipulate Adam’s income to show that he makes less than he actually does.

Question 50

Alice is a CDFA® professional who lives in the state of Washington. She has divorce clients in both Washington and Oregon. Which of the following is true about Alice’s practice?

Answer 50

A CDFA® professional will need to be familiar with the divorce laws and procedures in his or her home state and any other states where the CDFA® professional will be conducting business.

Question 51

Which of the following is a legitimate reason for an appeal by one of the parties?

Answer 51

A judge’s decision can be appealed if one of the parties believes there was an abuse of discretion.

Question 52

When is the best time to change the title on assets?

Answer 52

All appropriate documentation should be amended or filed, if possible, prior to the divorce being finalized. Failure to do so can have huge implications if one of the spouses dies prior to the documents being submitted.

Question 53

Which of the following methods of alternative dispute resolution uses a decision maker to make a binding decision for the parties?

Answer 53

Under arbitration, the power to decide is totally with the arbitrator. Other methods of dispute resolution, such as mediation or collaborative divorce, are not binding.

Question 54

The financial affidavit/statement is important for which of the following reasons?

Answer 54

A financial affidavit/statement is a sworn statement about financial assets and liabilities and an essential document in divorce settlements.

Question 55

Which of the following methods of alternative dispute resolution uses attorneys that have gone through specialized training—above and beyond their law degree—to represent each party?

Answer 55

In a collaborative divorce, each party retains an attorney who has gone through specialized collaborative training. The primary job for both lawyers is to help the parties settle the dispute.

Question 56

Which of the following actions should the CDFA® professional take to handle errors discovered in the information provided by the client’s spouse?

Answer 56

Once the CDFA® professional has reviewed the data and identified discrepancies or questionable areas, his or her role is to bring these issues up to the client’s attorney to determine what changes are needed.

Question 57

Mary is paid every other week and has a gross salary of $1,800. Her deductions include a federal tax deduction of $325, state tax deduction of $77, Social Security deduction of $111.60, and Medicare deduction of $26.10. Assuming Mary’s federal and state tax deductions are correct, what is Mary’s correct gross income per month?

Answer 57

Mary is paid bi-weekly and therefore has 26 pay periods per year. You must multiply $1,800 by 26 pay periods and divide by 12 to get the correct answer.

Question 58

Tom is paid every other week and has a gross salary of $1,800. His deductions include a federal tax deduction of $325, state tax deduction of $77, Social Security deduction of $111.60, and Medicare deduction of $26.10. Assuming Tom’s federal and state tax deductions are correct, what is Tom’s net monthly income?

Answer 58

Tom is paid bi-weekly, which means he receives 26 paychecks. His deductions for the period total $539.70, leaving a net income of $1,260.30. $1,260.30 multiplied by 26 then divided by 12 equals $2,730.65.

Question 59

Jay is paid every other week. How do you calculate his monthly gross income?

Answer 59

When someone is paid every other week, you must multiply his or her gross pay by 26 and divide by 12 in order to calculate monthly gross income. This takes into account all 26 paychecks.

Question 60

Which of the following expenses is LEAST likely to be double counted?

Answer 60

Mortgage payments are not typically double counted. However, the escrowed portion (property taxes and insurance) of the payments may be double counted.

Question 61

Buddy earns $17,660 per month with take-home pay of $14,600 per month. His wife Selena is asking for $6,900 per month in combined child support and spousal support because that is her actual budget for herself and their three small children. If Selena is your client, which of the following actions should you take for her?

Answer 61

A CDFA® professional’s role is to take information provided by his or her clients and their attorneys, analyze the proposals, and then show them the results. In this case, the CDFA® professional should show Selena the financial impact of the support that she is requesting.

Question 62

Doug’s gross wages are $360,000 per year, and he is paid monthly. If he multiplies his withholding from his January 31 paycheck by 12 to calculate the annual deductions, why would these calculations be wrong?

Answer 62

Since Doug’s wages are over the Social Security tax wage limit of $118,500, his deductions will be overstated.

Question 63

Which of the following payroll deductions needs to be added back to net income to calculate take-home pay?

Answer 63

The 401(k) contribution needs to be added back to income because it is a voluntary savings program.

Question 64

Children’s expenses are generally separated from the parents’ expenses for which of the following reasons?

Answer 64

The reason for separating the children’s expenses from the parents’ is to determine if both spouses are counting the same expenses or if neither spouse is including a major expense.

Question 65

Which of the following transportation expenses should be listed under another category?

Answer 65

The auto insurance should be listed under the insurance expenses. All the other options are correctly listed under transportation expenses.

Question 66

Mark earns $134,000 per year or $11,167 per month. His deductions are listed as $2,458 for federal tax, $467 for state tax, $692 for Social Security, $162 for Medicare, $1,800 for a 401(k) contribution, $500 for payment of a 401(k) loan, and $25 for union dues. Assume the union dues and payment of the 401(k) loan are mandatory and reduce his gross income. Using the given tax information and assuming federal and state taxes are correct, what is Mark’s take-home pay for divorce planning purposes?

Answer 66

The Social Security deduction must be adjusted in this calculation because only $118,500 of Mark’s income is subject to tax. His 401(k) contribution must be added back because it is discretionary savings. The 401(k) loan and union dues are mandatory payments, so they have to be deducted to calculate take-home pay.

Question 67

In addition to statutory factors, which of the following factors would judges consider when determining the amount of maintenance that should be paid?

Answer 67

The contribution to the other spouse’s earning capacity is relevant because it means that one spouse probably sacrificed his or her career for the benefit of the family.

Question 68

Expert witnesses are used in court for which of the following reasons?

Answer 68

Expert testimony is presented to a judge in order to help the judge understand the evidence as it pertains to the witness’ area of expertise.

Question 69

Which of the following individuals can testify on opinions and conclusions?

Answer 69

Only expert witnesses can testify about their opinions or conclusions.

Question 70

How does an individual become an expert witness?

Answer 70

An individual becomes an expert witness based upon education, training, and experience in some art, science, profession, or calling. The person may state an expert opinion regarding a relevant matter or provide reasons for giving this opinion.

Question 71

Which of the following individuals would be most appropriate to act as an expert witness on financial matters in a divorce case?

Answer 71

A CFP® has the knowledge to testify as an expert witness. In this case, the CFP® has not worked with either spouse prior to the divorce, which would make him or her the most appropriate choice.

Question 72

Which of the following best describes “Voir Dire”?

Answer 72

“Voir dire” is a process by which an opposing attorney is given the opportunity to demonstrate that a witness is not qualified to give an expert opinion.

Question 73

A witness is asked which of the following during direct examination?

Answer 73

The attorney who called the witness will ask open-ended questions during direct examination. These are questions that cannot be answered “yes” or “no,” but rather require more complete responses.

Question 74

Which of the following occurs during direct examination?

Answer 74

During direct examination, the attorney who called the witness asks open- ended questions. These are questions that cannot be answered “yes” or “no,” but rather require more complete responses.

Question 75

During which of the following events should an expert witness explain the general procedures and assumptions used to generate the financial projections?

Answer 75

During direct examination, the expert witness is given a chance to testify about the general procedures and assumptions he or she used to generate the financial projections.

Question 76

Is hearsay admissible in court?

Answer 76

Expert witnesses are allowed to rely on hearsay, which is an out-of-court statement offered to prove the truth of the matter asserted.

Question 77

Which of the following is NOT recommended when testifying in a divorce case?

Answer 77

To avoid confusion and misunderstandings, a witness should avoid using industry jargon, acronyms, and slang.

Question 78

Which of the following is a characteristic of cross examination?

Answer 78

During cross examination, opposing counsel asks the witness closed-ended questions, ones that can only be answered by “yes,” “no,” or “I don’t know.”

Question 79

Which of the following describes what occurs during cross examination?

Answer 79

During cross examination, the opposing counsel will ask the witness questions.

Question 80

A financial expert witness is important in a divorce case for which of the following reasons?

Answer 80

An expert witness provides testimony to assist in determining and understanding specific factual evidence for which the witness has specialized knowledge and experience.

Question 81

Which of the following alternative dispute resolution models uses experts from the legal, financial, and mental health fields?

Answer 81

Collaborative divorce is a team approach to divorce in which the divorcing family obtains professional help from experts in the legal, financial, and mental health field. If needed, medical and child experts are also involved.

Question 82

A divorcing couple is NOT a good candidate for mediation if which of the following statements applies to them?

Answer 82

A couple should not participate in mediation if either party is mentally ill, there is or has been domestic violence, there is a history of substance abuse, the parties want the mediator to make the decisions, one of the parties is unable to express his or her own opinions, or either party is ignoring the best interest of the children.

Question 83

Which of the following is true after the divorce is final?

Answer 83

After the divorce is final, the parties are responsible for filing the paperwork to transfer assets.

Question 84

Sara earns $240,000 per year and is paid monthly. Her January 31 paystub shows that she contributed $1,375 to her 401(k) for the month. Which of the following payroll deductions will have to be adjusted to an average monthly amount to calculate Sara’s correct monthly take-home pay?

Answer 84

There is a maximum amount of income that is subject to Social Security tax per year. The maximum in this example is $118,500. The tax is not taken out pro-rata over the year, but it is taken out until the tax is paid on the first $118,500 that is earned. Once Sara makes more than $118,500, no Social Security tax is withheld. To determine Sara’s monthly take-home pay, the proper entry for Social Security would be an average monthly contribution of $612.25.

Question 85

Assume that Blake’s annual wages are $144,000 and he contributes $16,500 to his 401(k). Blake paid the following expenses: $5,760 for state and local taxes, $3,600 for real estate taxes, $8,600 for interest paid on his home mortgage, and $1,400 for donations. Assuming Blake files as a single person and claims a $4,000 personal exemption, how much is his federal taxable income?

Answer 85

The personal exemption must be subtracted.

Question 86

Using the above information, how much are Blake’s federal income taxes?

Answer 86

The personal exemption must be subtracted

Question 87

Randy is paid monthly and has a gross pay of $12,500. On Schedule A—Itemized Deductions of his tax return, he lists deductions of $6,397 for state and local taxes, $4,200 for real estate taxes, $5,000 towards the principal on his home mortgage, and $9,800 for interest paid on his home mortgage. In addition, he has contributed $16,500 from his gross income to his 401(k). What are Randy’s total itemized deductions?

Answer 87

Randy’s 401(k) contributions and payment on mortgage principal are not itemized deductions.

Question 88

Marsha is paid monthly and her paystub shows gross pay of $10,000. Her payroll deductions are listed as $2,280 for federal tax, $450 for state tax, $620 for Social Security, $145 for Medicare, $1,375 for her 401(k), and $500 to buy U.S. savings bonds. Assume that Marsha’s federal and state taxes are correct. What should she report as her monthly net take- home pay on her financial affidavit?

Answer 88

Marsha’s 401(k) contributions and savings bond purchases are not included in her take-home pay. Her income that is subject to Social Security is limited to $118,500.

Question 89

Bob earns $180,000 per year and his limit on Social Security withholding is $118,500. What is his Medicare tax deduction per month?

Answer 89

All wages are subject to Medicare tax at the rate of 1.45%.

Question 90

Which of the following individuals is least likely to qualify as an expert witness?

Answer 90

Having been through a divorce three times does not qualify Marty as an expert witness. To be an expert witness, a person must have specialized education or training.

Question 91

Which of the following does NOT belong on a curriculum vitae for a CDFA® professional?

Answer 91

While a CV should include relevant published works, publication of a children’s book would not be relevant to the financial issues in a divorce.

Question 92

Which of the following correctly describes how an expert witness gets qualified?

Answer 92

The lawyers can stipulate that a witness is qualified to provide expert testimony. However, after your client’s attorney has offered you as an expert witness, the other attorney has a chance to ask questions designed to disqualify you (“voir dire”).

Question 93

Which of the following is the correct sequence of the four basic steps of direct examination?

Answer 93

There are four basic steps to direct examination: explain the assignment, explain procedures and assumptions, summarize work, and admit exhibits.

Question 94

During cross examination, which of the following actions should the expert witness take if the client’s attorney objects?

Answer 94

After a client’s attorney objects, an expert witness should not answer the question unless the judge overrules the objection. If the judge sustains the objection, then the expert would have answered a question that he or she should not have answered.

Question 95

During cross examination, which of the following actions should the expert witness take if the client’s attorney objects?

Answer 95

Only documents that are essential to the case should be brought to the witness stand. Any documents that are brought to the stand will be subject to examination.

Question 96

During which of the following segments of the trial will the attorney give an expert witness the chance to elaborate on answers given to opposing counsel?

Answer 96

After opposing counsel completes its cross examination, your client’s attorney will be able to ask you questions during redirect examination. This will give you the chance to elaborate on some of your answers given during cross examination.

Question 97

On cross examination, which of the following actions should the expert witness take when he or she does not understand the question?

Answer 97

When presented with a question that he or she does not completely understand, the expert witness should ask opposing counsel to repeat it.

Question 98

Which of the following is the correct sequence of your courtroom appearance as an expert?

Answer 98

The correct order is: voir dire, direct examination, cross examination, and redirect examination.

Question 99

Which of the following should the expert witness do during cross examination?

Answer 99

On cross examination, the expert witness should limit his or her answer to the narrow question asked, then stop talking. The witness should never volunteer information or answers.

Question 100

What adjustments must be made to calculate gross pay?

Answer 100

Gross income does not need to be adjusted.