Finances and Divorce Archives | Page 2 of 4 | Collaborative Law Institute

June 12, 2017

In Part 1, vortex was defined as: 1) a whirling mass of water or air that sucks everything near it towards its center; 2) a place or situation regarded as drawing into its center all that it surrounds, and hence, being inescapable or destructible.

The second definition provides a visual for what many think a divorce “looks like.” While the end of a marriage is emotionally tumultuous and devastating, the actual legal process of uncoupling does not have to be. But, it is critical that you choose a process that promotes healing. The Collaborative Process does just that. Collaboration is a holistic approach to divorce. It can be utilized by couples who are ending either a marriage or significant relationship, or who have a child or children together. Although some people question whether it is an appropriate process when domestic abuse or mental health/chemical dependency issues are present, many others think it can (and should) at least be attempted. If you don’t want to be another “divorce horror story,” the Collaborative Process will likely be a great fit. Collaboration focuses on the future (i.e., the relationship of co-parenting in two homes) rather than the past (i.e. the vilification of one spouse); is a win-win for both partners (rather than a court-imposed win-lose); and emphasizes the well-being of the entire family. You don’t air your dirty laundry in court, and you aren’t (literally) judged. In fact, you never set foot in a courtroom. The negotiation model is interest-based/win-win, rather than positional/win-lose. You pay attorneys to help you solve problems, not argue and keep you stuck in the past. Every family is unique, so every family deserves a unique solution. And if you have young children, please keep in mind they need you present and available. You can’t be present when you are fighting the other parent in court. In Part 3, we will discuss the various professionals in the Collaborative Process and how their expertise can help you avoid the divortex.

January 20, 2017

When divorcing, whether one spouse stays in the family home is often a pivotal decision. For most, there are several considerations that go into deciding whether to sell or stay. The tax impact of selling the marital home is unlikely to be at the top of that list, but with home values on the rise, it is worth understanding. The current tax rules are quite favorable to people realizing a gain on the sale of their home. The IRS allows each taxpayer to avoid paying capital gains tax on the first $250,000 of capital gain on the sale of one’s residence. That means that a taxpayer filing “single” could exempt the first $250,000. A couple filing “married filing jointly” can avoid paying taxes on $500,000 in gains. The capital gains tax on a $250,000 gain can range from $0 to about $75,000 so it is worth it for divorcing couple to make sure they cover this in their divorce arrangements. To qualify for the exemption, the IRS requires that the home meet the principal residence test, which is based on ownership, use and timing. For ownership, you need to have lived in the home for at least 2 years, (24 full months) in the 5 years before the sale. These 24 months do not need to be continuous. The use criteria require that the home be your principal residence for those 24 months. This can be an issue if one spouse was employed in another city, where they kept a second residence. One spouse meets the use test, but the other does not. Finally, the timing criteria requires that you have not excluded the gain on the sale of another home in the past 2 years. Tax law gives divorcing couples some leeway in these criteria. Transfer of home ownership between divorcing spouses is not considered to be a taxable event by the IRS. If ownership is not transferred during the divorce, detailing the home ownership arrangement in the divorce decree is key to minimizing taxes when selling the home later. An ex-spouse that continues to be an owner of the home but does not live there, can still use the exclusion if there is written documentation in the decree that lays out this arrangement. Dealing with home decisions during the divorce can be a complex. Be sure that in your home decision analysis, you are clear on your tax implications! And keep in mind that cabins, vacation homes and investment real estate generally will not meet the principal residence test, so they may have tax consequences when sold. For a comprehensive review of your personal situation, always consult with a tax or legal advisor. Neither Cetera Advisor Networks LLC nor any of its representatives may give legal or tax advice.

September 20, 2016

You may find cooking a daunting enough task as it is, but cooking for just one can be downright grueling, and can often lead to unhealthy eating. If you find yourself undereating, forgetting to eat, going through the drive thru, or just grabbing something quick because you don’t have the energy to cook for just yourself, you are not alone. These quick bites are often unhealthy or what should have been a snack size portion of {insert your guilty pleasure here} has suddenly became a 2,000 calorie “dinner.” Even if it’s not just you for dinner, but you and young kids with small appetites, sometimes it still feels too cumbersome to make a “real meal.” We encourage you to be the healthiest you that you can be, so here are our best tips for cooking for one.

Don’t shy away from buying in bulk. Your freezer is your friend, so whether you are buying in 1 pound packages or 10, freeze in manageable portions. Learn what manageable means to you – do you want leftovers to take to work for lunch the next day, or do you only want to eat that meal once?
Speaking of buying in bulk, those bulk bins at the grocery store can save you money by only purchasing what you actually will use. Walk the bulk isle and learn what your store has to offer there.
Prep before you freeze. Make fajitas for tonight, but prep enough to freeze in portions for later. Do so by cutting and seasoning your meats and veggies, so that all you need to do later is defrost and throw in a skillet.
Love lasagna? Probably not enough to eat it for a week strait. Lasagna and casseroles can be cooked and then frozen into individual portions. Convenient and much healthier than store bought frozen dinners, which are full of preservatives.
Make meals that turn into something else – no magic wand required! Pork roast in the crock pot for Sunday night can easily become Monday’s pulled pork sandwich, and Tuesday’s shredded pork tacos, without any extra prep or much thought.
The deli and meat counters allow you the freedom to purchase in as small of quantities as you need. Purchase fresh deli meat when it’s on sale, have them portion out in quarter pound packages right there, freeze, and then you can pull out only what you need to last you a day or two.
Learn what freezes well. For instance, eggs can be frozen individually in ice cube trays and then once frozen dump into a freezer bag or container. While some produce freezes beautifully, some not so much.
If you don’t like to turn on your oven for “just one person” consider purchasing a toaster oven, which can do all the work of a oven and a toaster, and can often still be stored away, in a cabinet.

Hopefully these tips help you to make healthy eating a priority even when you are just cooking for yourself. A little prep work goes a long way, and can help save you from getting lost in a carton of ice cream come dinner time! If you have a good tip for cooking for one, please let us know in the comments below!

August 1, 2016

While researching for this post, I came across a number of divorce-related blogs. The blog medium provides an efficient and concise opportunity to share information and educate the public. This blog focuses on the collaborative process — where clients commit to an out-of-court, non–adversarial process. Here are some other blogs that may provide additional information as you navigate the divorce process:

Jeff Landers writes in Forbes Magazine about complex financial issues that women face in divorce. He is a Certified Divorce Financial Planner who has extensive experience with high asset divorces. His blog is informative and financially savvy.
Divorced Girl Smiling is a personal blog written by a woman during – and now after her divorce. It is a personal account of her experience, as well as a gathering of resources for others who may be going through the same thing. The archived blogs provide a great path through the litigation process, and provides some insight into why a non-adversarial approach may be better.

However you choose to get advice, being armed with information and prepared for the process can help you feel confident and ready for the transitions that come with divorce. There is a lot of information available online, if you know where to find it.

May 16, 2016

Being a single parent demands so much of a person’s time and energy that taking care of longer-term financial concerns often take a back seat. So many single parents face financial restrictions that make it seem they are constantly on a financial tightrope. Getting off that tightrope and onto solid financial ground should be a priority for every single parent. Finding solid financial ground starts with determining your financial goals and monthly cash flow. Determine your financial goals The first step on the path to a more secure financial future is to determine your financial goals. Your financial goals should include short-term, medium-term and long-term goals. Short-term goals may be to reduce spending and not rely on credit cards to make it to the next paycheck. Medium-term goals could be paying off your credit card(s) and creating an emergency fund. Long-term goals may be saving for your children’s college expenses and retirement. Figure out your cash flow All of your financial goals require one thing – saving money. To do so, you need to figure out how much you spend and then create a budget that incorporates saving. Tracking your spending can be pretty easy these days with online account aggregators like Mint.com. To better understand your spending habits when using credit cards, you may need to go old school and save the receipts to review your purchases. This is particularly helpful if much of your shopping happens at Walmart, Target or Costco, where your shopping cart could include groceries, video games and clothes. One way or another, figure out how much of your spending is essential and how much is unnecessary spur of the moment buys. Create a budget that accurately matches your essential spending and replaces most of your unnecessary spending with savings. Be mindful of not only what you buy, but also how you buy it. Using high interest credit cards are an impediment to meeting your financial goals. Paying off high interest credit cards is a financial goal that improves the odds of meeting your other financial goals. Save the tax-free way Tax-deferred investment accounts such as Investment Retirement Accounts (IRAs) for retirement and college-funding accounts, such as 529 accounts, are a good way to meet those long-term goals. These accounts often can be opened with a couple hundred dollars. Setting up automatic monthly contributions from your bank account to these accounts can be done for amounts as low as $25. Both types of accounts grow without being taxed until the money is withdrawn. For 529 accounts, there will be no taxes if the withdrawals are spent on qualifying college expenses. Figuring out your budget shouldn’t be a chore done after the kids are in bed. It should be a family project. Developing good financial habits that lead to meeting financial goals is an essential skill that all parents should share with their children.

April 13, 2016

Determining who is best qualified to help you reach your financial goals, understanding what they can do for you, and getting clarity on how they get paid for their services may be a challenge if this is all new to you. Here are some useful tips to find the right financial professional to help guide you through your financial matters. Designations The finance industry excels at creating financial designations for every conceivable financial situation. If you are looking for a financial planning generalist who can help you with most issues, look for someone with either a CFP^®, ChFC^® or CFA^® designation. A Certified Financial Planner^® (CFP^®) is the dominant designation for financial planners. The Chartered Financial Consultant^® (ChFC^®) designation is similar to CFP^®. A Chartered Financial Analyst^® (CFA^®) is an expert in investment management, but has also studied the basics of financial planning. In addition to one of these designations, many financial advisors who work in the divorce area also have a CDFA™ designation (Certified Divorce Financial Analyst^®). Background Check Once you find some candidates with the right credentials, do your homework and check out their website to see how much experience they have and if they indicate any specialty. You should also look into whether they have had any disciplinary issues with regulators, by performing a FINRA BrokerCheck® search. The Financial Industry Regulatory Authority (FINRA) has a file on every advisor working with a FINRA-registered brokerage firm at www.finra.org/Investors/ToolsCalculators/BrokerCheck Initial Meeting Questions Most financial planners will be happy to sit down with you for an initial meeting at no cost or obligation. The initial meeting is your chance to learn more about the financial planner and their business, to explain your situation and learn what services the planner offers. The following are some essential questions to ask at the initial meeting. What experience do you have? The financial planner may have significant financial experience but it is the experience they have counseling individuals that really matters. What is your approach to financial planning? Ask what types of clients and financial situations the advisor typically works with. For example, a planner that specializes on working with business owners may not be the best choice if you are newly divorced and in need of budgeting help. What services do you offer? Some financial advisors may focus on helping you with your investment needs, where others will also provide comprehensive financial planning (i.e. retirement, education, estate, tax and budget planning). Many planners expect to manage your portfolio along with the other services that they offer. Financial planners may also be good resources for and work closely with tax accountants and attorneys. Do you work alone or with a team? Financial planning is often done with a team approach where several specialists will assist the lead planner. When your financial planner is in meetings, it is good to know if there is someone else in the firm who can answer your questions or take care of basic requests in a timely manner. How much do you typically charge? How do I Pay for your services? Financial planners may charge for their services in several ways. If they are only creating a plan for you, it may be a set project price or by the hour. If they are will be managing your investment portfolio on an on-going basis, they may earn a commission on the investments or a charge a fee based on the size of your portfolio. There are numerous questions that you should consider based on your own situation. Remember that you are under no obligation in this meeting. If you intend to work with this planner over the long-term, it may take more than one meeting to determine if they are the right fit for you. Whatever planner you decide to work with, make sure you know what services will be provided and how the planner will be compensated.

April 5, 2016

73582147-wedding-cake-top-with-groom-bride-and-lawyer-gettyimages

When a couple divorces, the final decree or order from a Court typically dictates how property shall be divided, how the children shall be parented, and what support will be paid moving forward. The decree will give you the dates and amounts of payments. The decree will also tell you what amount each of you is awarded of accounts or who shall keep the house. But there are some things a divorce does not dictate. After a divorce is final, here are six things you (or your attorney) should do to finalize the division and move forward:

Divide cash accounts. Bank accounts and investment accounts can be divided on your own. You both may need to work together to close joint accounts or transfer funds from one individual account to another. At the end of the process, you should have no joint accounts unless you have agreed to own something jointly.
Pay-off and close joint credit cards. Joint credit card should be paid off and closed. You can take care of this on your own.
Divide retirement. Retirement accounts need to be divided precisely as outlined in the decree. Non-qualified plans (like IRAs) can be divided with a copy of the decree and direction from the account holders – you can do this on your own. Qualified plans (like pensions, 401(k)’s or 403(b)’s) need a court order and you will have to have your attorney draft this or hire a consultant.
Property title transfer. Title for any real estate that was awarded in the decree needs to be transferred to the individual owner. This can be done with a quit claim deed or order from the court that needs to be recorded with the county property office.
Health insurance. Set up your own health insurance if needed or work with your former spouse to continue coverage for them.
Estate planning. Your original will (if you had one) is no longer valid after divorce so you will need a new one. Hire an estate attorney to draft up a new will.

April 4, 2016

One of the challenges of divorce is separating income that used to be joint income, along with separating into two households versus one. This is a recipe for cash flow drain for most couples. All of the sudden the same income(s) that supported one household must now support two households. I want to share an example of how cash flow solutions can be achieved through the collaborative divorce process. Assume we have a couple struggling to make their cash flow positive which is often the case with divorce. A substantial strain on their living expenses is secondary private school tuition for two more years for their child. This amounts to approximately $15,000 for tuition the first year and another $18,000 for the second year. They are attempting to make these payments from existing income. The strain of these payments coupled with divorce has become unbearable. The parents are both determined to keep their child in this private school through the eighth grade. Additional assumptions include this couple having a small first mortgage on their home. This mortgage requires a monthly payment of approximately $1600. In our example, we would research refinance options including home equity loans. After researching options an acceptable bank loan could provide them with the flexibility needed to lower the monthly cash flow shortage from over $1300 to approximately $220. While this does not completely cover the entire cash flow shortage, it improves it significantly. The parents could draw from other savings if needed to make up this shortfall or look to further reduce some expenses. An agreement could include that each parent would pay one-half of the cost of the second year private school tuition. They both would have the flexibility to pay their share of the tuition from income sources, from savings, or some combination of the two. Structuring this part of their plan allows them to accomplish several goals. One is to keep their child in the private school for the two additional years until graduation. Secondly, it allows one spouse to stay in the home until the child enters the public school system and graduates from high school. At that time, the spouse retaining residency in the home could either buy out the other spouse’s interest in the home or the home could be sold with sale proceeds being shared between the two spouses. Not all cash flow challenges can be so easily resolved. What makes this situation work is everyone knowing what the goals are and everyone working together to help the couple find solutions that are in the best interest of the family and their children. Collaborative divorce, with the use of selected experts in their fields, can help divorcing couples navigate difficult issues with money, children, relationships, and emotions. To learn more about collaborative divorce visit www.collaborativelaw.org and be sure to check out our blog site on a variety of topics at www.collaborativedivorceoptions.com.

March 15, 2016

88962094-household-bills-in-shape-of-question-mark-gettyimages

Once you have completed your divorce, the list of things to figure out can be daunting. It can be easy to push off those things that don’t seem to affect your daily routine. Some of those things that you have been putting off are likely financial – a lump sum distribution from the divorce just sitting in cash, a 401(k) in need of rollover or perhaps a credit card balance that never seems to get any smaller. It’s time to make understanding your financial situation part of the process of building a new life. The longer you wait, the greater likelihood that your inaction will impact your long-term financial success. If you don’t know where to start, then it may be a good idea to seek out the assistance of a financial planner. While financial planners may have specialties, the financial planning process is fairly standard for all planners. At the core of the financial planning processes is evaluating your financial needs and goals, and helping you take steps toward meeting those needs and goals. The general steps to the financial planning process are as follows: 1. Determining your financial goals What are you looking to achieve? Do you need to invest that cash in your savings account or rollover a 401(k)? Do you need to figure out how you are going to pay for your child’s college education? Do you need to get a firm handle on your expenses and cash flow? (budgeting) 2. Gathering your information If you have recently completed your divorce, this step should be easy. For your divorce, you needed to collect all of your financial information. You can just pass this information on to a financial planner (bank, retirement, and investment statements, liabilities (credit cards, car loan, mortgage), and your income information, such as a pay stub and a tax return. A copy of your divorce decree also provides pertinent information. 3. Analyzing your information The financial planner will stitch together all of the financial documents in your life to create a picture of your financial situation. 4. Creating your financial plan A financial plan lays out your financial goals and your financial situation. From there, your financial planner will work with you to create a plan of action for meeting your financial goals, based on your financial situation. 5. Implementing your financial plan Your financial plan is going to be a little different from everyone else’s plan. Implementation of a financial plan can take many forms as well. It may involve reallocating your portfolio, setting up a program to save for college, purchasing insurance, or creating a budget. 5. Monitoring the progress of your financial plan In the stock market and life, things happen, situations change. Financial plans are not engraved in stone, never to be changed. They have to be flexible to adapt to the changes that happen in the financial markets and in life. While the financial planning process is fairly standard across the industry, the financial products and solutions recommended by financial planners are not. Much like your physical health, if you are not sure if the recommended products or plan of action are best for your financial health, seek a second opinion. You are more likely to be committed to following a financial plan if you understand the financial products in your portfolio and are certain that your financial planner has put your interests first.

February 25, 2016

As an attorney with two small children, I am very aware of how crazy family life can be, even on the good days. I am always looking for ways to create more peace in my day-to-day life, and in the lives of my clients. Many people experience the stress of fearing the unknown in the beginning of a divorce, which is normal. Although it seems counterintuitive, getting organized on paper can help lower your stress levels during a divorce. Many couples struggle, in the midst of hectic family life, to get their financial paperwork together for review. To help with this, I provide my clients with a checklist at the initial consultation outlining everything we need. This reduces a daunting task to a series of concrete steps that will just take time to complete, while the stress of not quite knowing what needs to be done is (somewhat) relieved. If you keep your tasks organized on paper, they can’t worry you as much, and the same goes for your thoughts. Just like piles of forgotten paperwork, racing, unorganized thoughts can contribute to stress. I recommend getting a personal notebook to jot down meeting notes, as well as your ongoing thoughts, to-do lists, and concerns throughout the divorce process. It is a good way to keep everything recorded in tangible form, which makes it easier to maintain your peace of mind. Writing your thoughts down helps you keep track of the big picture as well as little things to remember, and you can rest better at night knowing you won’t forget anything important. Recording accomplishments, thoughts, and tasks will not only help the divorce process go more efficiently, but it can really bring you a sense of peace, control, and empowerment as well. At the end of the day, this is what we are all looking for.