After finalizing her divorce, Rachel faced a financial reality that felt not only overwhelming but uncertain. Along with her share of investments and retirement accounts, she now held a significant portion of her ex-husband’s Restricted Stock Units (RSUs) and Non-Qualified Stock Options (NQSOs). These complex assets were unfamiliar territory, and Rachel knew she needed more than just financial advice—she needed a team that would provide clear, compassionate, and strategic guidance. That’s when she turned to Bordeaux Wealth Advisors. Our Certified Divorce Financial Analyst (CDFA) guided her step by step, ensuring she felt confident and supported throughout the process.
Tax-Savvy Allocation of Retirement Accounts
One of the most impactful strategies we employed was a customized division of her retirement accounts – specifically, a mix of Roth and traditional IRA assets. With Rachel in a higher tax bracket, we focused on maximizing her share of tax-free Roth IRA assets. Here’s why it worked:
- Every dollar in a Roth IRA is worth more in after-tax value than a dollar in a Traditional IRA. By allocating a larger portion of her share to the Roth assets, we ensured Rachel could keep more wealth without future tax liabilities.
- This strategic division also benefitted both parties by allowing them to share more after-tax wealth, optimizing the long-term value of Rachel’s portfolio.
Our team’s tax experience allowed us to guide Rachel through a division that wasn’t just “equal” in value – it was designed to maximize her financial freedom and security.
(A small chart here could compare the after-tax value of a traditional 50/50 split versus the Roth-adjusted split, highlighting how Bordeaux’s approach led to a more tax-efficient outcome.)
Thoughtful Planning of RSUs and NQSOs
Rachel’s Bordeaux team also developed a tax-efficient plan for her stock options. Rather than advising Rachel to liquidate her stock options all at once, which would have resulted in a large tax hit, we recommended selling her RSUs incrementally over time, reducing her exposure to market fluctuations and allowing her to take advantage of long-term capital gains tax rates when possible. This planning minimized her tax burden and provided her with a steady stream of income to support her children’s needs, a top priority in her new financial life.
Other Key Considerations that Shape Rachel’s Financial Strategy
The Bordeaux team brought a few insights that were crucial to maximizing Rachel’s long-term financial security. Here are some of the key areas we considered in her financial strategy:
- Bonds vs. Highly Appreciated Stock: In a typical divorce settlement, the value of bonds and stocks might be seen as interchangeable. However, due to tax liability, $1 worth of bonds may be worth more than $1 of highly appreciated stock. This is because appreciated stock comes with built-in capital gains taxes, whereas bonds generally have lower taxable implications. By carefully considering the tax consequences, we can ensure you are maximizing your wealth.
- Deferred Compensation: Deferred compensation plans are often overlooked in divorce settlements because one spouse may not even be aware of them. However, we may assist in uncovering these assets by carefully reviewing client-provided pay stubs and other financial documents. If deferred compensation is involved, it’s critical to account for its value and potential future payouts in the asset division process.
By providing this level of detail, we ensure that every aspect of Rachel’s financial landscape is considered, maximizing the value of her assets and minimizing any potential tax liabilities.
Navigating Divorce with Confidence: The Bordeaux Approach to Financial Security
By the end, Rachel was not only equipped to manage her assets but felt empowered by the knowledge her team shared with her. She knew that Bordeaux was always there to support her, providing the steady guidance she needed as she adjusted to her new financial future. This confidence, combined with strategic financial planning, gave Rachel peace of mind, knowing she had a compassionate, experienced team looking out for her and her family.
At Bordeaux Wealth Advisors, we combine our deep experience with compassion, helping clients like Rachel navigate life’s transitions with clarity, confidence, and peace of mind.