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As part of organizing your financial affairs following a divorce, you should also make preparations for your financial affairs after your death. Planning your estate is an essential part of getting one’s financial matters in order at any point in life, but divorce opens up some interesting issues with estate planning. Minnesota state law has dealt with divorce and the validity of estate documents made while married in an interesting manner. Minnesota statutes Section 524.2-804 states that if a divorced person’s most current will was completed while still married it will be applied as if the ex-spouse died immediately prior to the divorce.  The ramifications are that a will remaining from a failed marriage will be applied as if both ex-spouses have died.  The property then passes on to the contingent beneficiaries, such as children and siblings.  Furthermore, the Minnesota statutes state that the dissolution of marriage also revokes any assignment of fiduciary or representative capacity on the ex-spouse, such as serving as executor, trustee, conservator or guardian. Minnesota lawmakers appreciated the importance of estate planning. The approach these statutes take is to recognize the divorce, but keep the estate documents partially in-force. Nonetheless, while Minnesota law has stepped in to ensure that your ex-spouse does not inherit your property, it has left your estate plan with a lot of question marks. If your ex-spouse is not your executor who is? That is why it is imperative to create a new set of estate documents soon after your divorce, which revokes the estate documents made while you were married.  There is a good chance that there are other people besides your ex-spouse named in the estate documents from your marriage, that you would prefer to change. Do you really want your ex-spouse’s brother handling your financial affairs? So many people delay estate planning because they don’t want to think about their death. The fact is, estate planning is more about your assets, your family and your friends. It is an opportunity to think about how you would like your assets distributed to reflect the new you and your wishes.  There is also peace-of-mind that comes from knowing you have made arrangements so that your death doesn’t cause your family any more stress than it has to.  In coming blogs, we will discuss the important aspects of estate planning in more depth, so that you can tackle the process with an appreciation of the gift this can be for your loved ones.
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185241979-african-american-businesswoman-on-white-gettyimages After choosing your process wisely, discussed in my two previous blogs part 1 and part II, the next step is to choose your attorney wisely. I believe this is something to approach with significant thought about your goals, careful consideration about the process you want to follow and your own beliefs and values. How do your goals and process choices affect the choice of an attorney? When I mention goals, I am not just talking about your goals. The goals of your spouse are just as important. It is important to remember you are not in this divorce alone, your spouse is also present. You both have anxiety, fears, and unanswered questions about how is this all going to turn out. Please do not forget that attorneys selected by each of you will have their own goals. Their goals may not necessarily be in alignment with your own. Ideally, you and your spouse are able to discuss your goals together. You both may have some shared goals although in the throes of divorce this may be the furthest thing from both of your minds. Each of you will have some different individual goals. I would suggest to the extent possible working together with your spouse to identify these goals as they relate to children if any, relationship and communication with each other and extended family during and post divorce, financial security goals, and divorce process goals. Your ability to articulate and document these goals will in the end minimize conflict, and give you a roadmap if you will toward selecting attorneys. You will want to choose attorneys who are able to help you and your spouse achieve your goals. A collaborative divorce attorney once wrote about asking some straight to the heart kinds of questions when interviewing any divorce attorney. A question like, How concerned are you about what my spouse wants out of this divorce? This is a great question to ask any potential attorney you may be considering. How the attorney answers this question will give you loads of information about how this attorney will go about representing you.   If they say I think you should go after all you can get and then promise or insist they can get it for you, they are playing on your emotions and telling you what you want to hear. This attorney is probably more interested in putting on a show that will take money from your family resources instead of allowing you and your spouse to keep more of your money in your family where it belongs. This same collaborative attorney offered yet another question to ask a potential attorney. Ask if they believe a couple in conflict, going through divorce, can negotiate settlement outcomes without the use of threats or coercion to get what they want. If the attorney insists on using threats and coercion, they are likely not that skilled in interest based negotiations. Instead, they draw lines in the sand using threats and coercion. This leads to even more conflict and increasing costs meaning less money for you and your spouse to keep in your family. A settlement-oriented attorney will answer this question by explaining the differences between position-based negotiation and interest-based negotiation. One last question to ask a potential attorney is if they handle all parts of the divorce or do they often use outside experts such as a child specialist when children are involved or a financial specialist. The attorney who says they handle everything themselves may end up costing you and your spouse the most. This attorney is saying they are experts with children, finances, and legal matters. Rarely, if ever, is this the case. A child specialist financial specialist can bring great value to your divorce process. A parenting plan, which goes far beyond who stays overnight when and a financial plan to give both you and your spouse comfort in knowing you will be making the best use of your financial resources should give you and your spouse a degree of comfort and peace of mind. Besides that the cost of one child specialist and one experienced divorce financial specialist will be considerably less than attorney costs for dealing with these same issues. As you listen to the answers potential attorneys give when asked these three questions outlined in this post ask yourself: Is this attorney able to help me, and my spouse, work through our differences using the process we chose? Will this attorney seek to find outcomes that work not just for me but also for my spouse? Will this attorney choose to do all the work himself or herself or will they utilize experts in specific fields such as children, finances, and or relationship coaches when needed or helpful? Hearing the answers to these simple questions can help you decide whom to choose as an attorney. Choose wisely by being intentional, thoughtful, and in alignment with your goals, values, and beliefs. Doing so will allow you to keep more of your money in your family.
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140196043-studio-portrait-of-young-man-contemplating-gettyimagesFor many, a significant portion of their post-divorce assets consist of a part of their former spouse’s company-sponsored retirement account. In order to split a company retirement account, the plan administrator of the pension, 401(k), 403(b) or other company retirement account requires a Qualified Domestic Relations Order (QDRO) or Domestic Relations Order (DRO). A QDRO or DRO is typically drafted by an attorney and signed by a judge. It directs the retirement plan administrator to divide the retirement account between you and your former spouse, in the manner specified by your divorce decree. Once the QDRO has been approved by the plan administrator, they will transfer your portion of the retirement account into a new account in your name, within the same plan. You will also receive information on how to cash out the account and have a check sent to you (a taxable event) or rollover the account into an Individual Retirement Plan (IRA) or another retirement plan in your name (a non-taxable event). A QDRO differs from a DRO in that it contains specific wording that is required under Internal Revenue Code and the Employee Retirement Income Security Act (ERISA) to divide a retirement account such as a 401(k) and 403(b). It is advisable to contact the plan administrator to obtain their QDRO model language before your attorney drafts the QDRO. Most company retirement plans have a template containing the language required to be included in a QDRO. DROs are more generic and do not contain the specific wording of a QDRO. Certain retirement plans (referred to as non-qualified plans), that do not fall under the ERISA jurisdiction, can be divided with a DRO. Note that a non-company IRA (e.g. Traditional IRA, Roth IRA, SEP IRA) does not require a DRO or a QDRO to be divided, but will require a letter of instruction detailing how the account is to be divided, along with a certified copy of the divorce decree. Typically, if you draw money out of a retirement account covered by ERISA early (prior to age 55 for a 401(k) or 59.5 for a 403(b)), you will be required to pay taxes AND a 10% penalty. However, in a divorce situation, if you were awarded money via a QDRO, you have the opportunity to take money out of a company retirement plan covered by ERISA, without the 10% penalty. Note that this withdrawal is considered taxable income and thus is subject to a mandatory 20% withholding for federal taxes and possibly state taxes too. It is very important to follow the process carefully when doing this; I highly suggest working closely with your financial planner or tax advisor. Lastly, keep in mind that dividing a company retirement account takes time. The QDRO model language needs to be obtained from the retirement plan administrator, forwarded to an attorney to draft the QDRO, which is then submitted to the retirement plan administrator for approval and division.
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138710659-financial-advisor-talking-to-customer-gettyimages5 quick Divorce financial tips: These five are only a starting point.
  1. Plan your cash flow and spending carefully.  Do not over exaggerate.  You and your spouse only have so much income between the two of you.  Unless you can increase income you both will need to decrease some areas of spending simply because you are going from one household to two on the same income.  Something has to give.
  2. Have a  financial specialist experienced in divorce matters suggest ways for you and your spouse to save on taxes by utilizing head of household filing status when possible and the best use of dependency exemptions when children are involved.  A financial specialist can also recommend tax saving strategies for spousal maintenance and/or child support.
  3. If existing debt is a problem consider using an accredited consumer credit counseling agency to help you set up a debt management plan.  This does not affect your credit rating since you will still be repaying all of the debt.  The agency will work to negotiate a lower interest rate with each of your creditors.  You will make one payment to the consumer credit counseling agency.  The monthly payment you make to the agency is often much less than the combination of the payments you were making before.  The agency makes payments to each of the creditors for you.  There is the potential to save a bundle in lower interest rates and in some cases no interest giving you the ability to pay off your debt earlier than you ever thought.  Two such agencies in the Minneapolis Saint Paul area are Family Means and Lutheran Social Services  and no you do not have to be Lutheran to utilize their services.  In worst-case scenarios, bankruptcy may be a consideration.  Both of these agencies provide bankruptcy counseling and are able to refer you to bankruptcy specialists if and as needed.
  4. If existing debt is a problem do not make it worse by adding to that debt.  Find other ways such as sacrificing today for a better tomorrow, increasing income, lowering expenses or some combination of all these.
  5. With retirement assets, it is common for a financial specialist trained in divorce matters to help one spouse or in some cases both spouses recommend strategies to come up with down payments for new housing purchases.  This usually involves the use of a Qualified Domestic Relations Order (QDRO).  A portion of an employer retirement plan is awarded to the lower income spouse, income taxes on the distribution are planned for, and if the distribution is incident to a divorce the spouse awarded a portion of the employer retirement plan will avoid the pre 59 ½ early distribution penalty.
Utilize an experienced divorce financial planning specialist.  They are your best resource for helping you keep more of your money in your family.
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525444317-studio-shot-of-females-hands-holding-broken-gettyimagesMarried, separated, or divorced alike, it’s hard not to feel anxious about the upcoming holiday season. Whether you love it or are dreading it, the 2015 holiday season is just around the corner. Maybe you are feeling that there is no way you are going to get through this year with your emotions in check. You are not alone. Whether you are feeling anger, sadness, grief, frustration, anxiety, etc. it is important to feel balance this time of year. How do you do that, especially if you are still grieving from your divorce? We can’t (and shouldn’t) try to banish these emotions. However, we can be intentional and generate positive emotions to help redistribute the weight of these negative emotions. So how can you do that even if you are feeling completely down this time of year? We’ve blogged previously about ways of helping others and paying it forward as ways to help ourselves emotionally, and ‘tis the season of a vast array of opportunities to help others, but here are some additional ideas for creating positive emotions in your world: Finding Nature: Nature has an amazing way of soothing us without words. Sit down and make a list of places nearby to visit nature. Maybe some are as easy as stepping out your front door and others maybe involve a little bit of a drive. Even that drive to get their can prove to be therapeutic. Nature heals and being in nature, or even viewing scenes of nature, has been shown to reduces anger, fear, and stress. Exercise: It’s no secret that exercise can help to balance your emotions – whether it’s running, walking, yoga, or even a team sport, find what you love and carve time out of your schedule to do it! When you exercise, the body releases endorphins that minimize the sensation of pain. These endorphins elevate your mood and reduce feelings of anxiety. You will also feel better when you exercise and because you are healthier, you will have more energy, and feel more balanced. Distractions: Distractions can be a positive solution for balancing emotions. Although you might be thinking that distractions will just bury your feelings to come out later on, healthy distractions provide positive emotions that will help you to release some of the negative feelings. Make a list of both healthy and unhealthy distractions that you tend to gravitate towards. While an unhealthy distraction like having drinks with friends seems like a good idea in the moment, a healthy distraction like Saturday morning coffee with a friend will prove to be better for your emotions. Focus on the Positive: Right now you might be thinking, “what positive?” At Daisy Camp we love the quote, “There is always, ALWAYS, something to be thankful for.” Maybe you’ve found journaling a helpful process for you through your divorce, which is great, but if you read through it, it may bring on raw and deep negative emotions, so start a separate gratitude journal. Make lists of what you are thankful for (past, present, and future), and try to add to that list daily. When you are feeling down – read that journal. Wishing you strength and positivity as you balance your emotions this holiday season. Remember that, “Nothing can dim the light that shines from within.” Maya Angelou. You will make it through this.
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RoadmapOften when we decide to do something of significance, like go on vacation, obtain a college degree, search for a new job, or save for a future purchase we develop a plan.  If you are serious about the task set before you, you will develop a written plan to keep you on track and measure your progress. Getting unmarried, as I now refer to divorce, should be no different. In fact, if you choose to use a collaborative divorce process, we utilize a written document called “Roadmap to Resolution.” I have found the use of this Roadmap extends beyond divorce planning.  I use it as a general problem-solving model. The Roadmap has 6 essential steps.
  1. Set Goals  The four basic sets of big picture goals include: Relationship goals between you and your soon to be ex-spouse Goals related to your children regardless of their ages Financial goals as to how you and your spouse would like your future financial lives to look so you both can have the greatest sense of financial well being with the resources you have Process goals as to how you and your spouse would like the process to work for you
  2. Gather Information and Identify Issues This includes gathering all financial documents and other relevant information that will be necessary to itemize all assets, liabilities, income, estimated reasonable and necessary living expenses, and property received as a gift, inherited, or acquired before the marriage.  All of this information is documented in your final divorce decree.  If you have children, this also includes information about your children their needs and special activities and costs associated with each one.
  3. Generate Options This step is when the collaborative team including attorneys, coach, child specialist,  financial neutral, and clients brainstorm to identify any options that come to mind regardless of how silly or unpleasant those options might sound initially.  The key is to write down as many options as possible without anyone commenting or trying to evaluate any stated options.
  4. Evaluate Options Here the clients indentify the options they would like to evaluate and consider.  It is at this stage clients can fully explore the pros and cons of each of the options listed and prioritize them.
  5. Negotiate/Make Decisions After fully evaluating any options clients are able to negotiate and make decisions they both can live with.
  6. Generate Documents Once all necessary decisions are made, the attorneys go to work to document agreements by preparing a draft decree for each spouse to review and ultimately sign.
The model flows both ways; meaning if you are in step 5 negotiate/make decisions, another option may present itself, creating a need for further evaluation and new negotiation and decision making. The “Roadmap to Resolution” model provides the framework for helping spouses work through a collaborative divorce and ultimately reach agreements on all relevant issues. By using the “Roadmap to Resolution, the collaborative team process, has literally helped thousands of couples across the country and around the world end their marriage but save their family. Choose your process wisely.
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126428878-four-frowning-male-and-female-gingerbread-gettyimagesWhether this is your first holiday season post-divorce, or you’ve been through several, it’s likely one of the hardest time of the year for you. Navigating the holidays after a divorce is much like navigating the holidays after the loss of a loved one. You likely are mourning the loss of making new memories and how the holidays “should” look like as a family. It is perfectly normal (and healthy) to have those feelings of dread and angst towards the upcoming holiday season. With the holidays comes the pressure to feel that “it’s the most wonderful time of the year,” when in fact through your grief you might be thinking that it’s the least wonderful time of the year. If this is your first holiday season post-divorce, you probably have a lot of questions going through your head. What will you do? Where will you go? How will you celebrate? How can you even thing of celebrating during this time of grief? Where will the kids be? What if you don’t want to be around people? These questions are completely normal as the holiday season presents itself with some unique challenges to navigate through. It might be difficult to consider your own needs, but now is the time to think about yourself, and what is healthy for YOU. For some that might mean jumping in neck deep into the Thanksgiving/Christmas/Hanukkah/Kwanzaa festivities and keeping yourself too busy to think, and for others booking a trip to Mexico and forgetting the holidays even exist might feel like a better option. It’s important to remember that you do not have to give into the pressure of the holidays. Give yourself permission to organize your holiday season is the best way that works for you. You might be thinking “what if I don’t know what’s best for me?” Or “what about the kids?” If you don’t have children it might be easy to skate through the holidays without decorating a tree or baking cookies, but as parents there is always extra pressure to make sure that the holidays still go on for the kids. Create new traditions. Don’t be afraid to break the mold. What may have been all they’ve ever known for the holidays does not define the holidays. All your children need is your love and attention. 20 years from now they won’t remember the year they didn’t have the annual 12 foot Christmas tree, but they will remember laughing through the woods as you tried to find the worst looking Charlie Brown tree you could find! Wishing you luck, laughter, and whatever it takes for you to steer through the holidays this season. May you find your new normal someday, but until then, simply doing what you can to get through is enough too.
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In part I of keep more of your money in your family; choosing your process wisely I wrote about the well known traditional litigated court based divorce process and mediation. In this issue, I will cover Collaborative Divorce. Collaborative divorce is an option you and your spouse should thoroughly explore before making any choice about divorce process. It is my belief that you and your spouse should first decide upon process before you ever hire an attorney. You can then match the right attorney to the right process. Just because they are, a divorce attorney does not mean they can be effective and efficient in all processes. In a collaborative divorce , a collaboratively trained attorney through the entire process represents each spouse. A financial specialist helps couples sort out their financial issues including gathering all the financial data necessary for the divorce decree and presenting it to their respective attorneys in a format that helps attorneys review the numbers more efficiently. Contrast this with you and your spouse providing each of your attorneys the financial data, the two attorneys talking together about the financial data and then going back to you their client to discuss those conversations then going back again to the other attorney to discuss. Let me ask you on just this one basic step in the financial process, do you think you would keep more of your money in your family? Do you want to be paying two attorneys to do this financial data gathering or would you prefer to pay one financial specialist? A financial specialist is the one person who is in the best position to help you keep more of your financial resources in your family throughout the divorce process. They can save you taxes, come up with some creative options, and other ideas that allow both you and your spouse to create the best financial outcome for each of you given your existing resources. In any divorce with minor children, a parenting plan is created and documented. In the collaborative divorce process, this is usually completed with a child specialist. This person helps parents articulate and document a well thought out plan to co-parent their children. The child specialist meets with the parents and often times meets with the children separately and then with everyone together. This level of attention to the family well-being is not found in other processes. You can of course work with two attorneys or a mediator to come up with a parenting time schedule and perhaps another piece or two of a well thought out plan. What you are not likely to get is a complete parenting plan that increases the likelihood of your children successfully navigating your divorce with you and your spouse. Also available in the collaborative divorce process is a neutral divorce coach. The divorce coach helps spouses communicate effectively during the divorce process and come up with a plan for post divorce communication and relationship. This can lower conflict, which can decrease costs. If emotions run high at some point during the divorce process, a coach acts to ground you in the areas that are important to you. This enables both you and your spouse, to effectively communicate your needs, interests, and concerns all necessary to produce the higher-level outcome intended to last for a long time. It is interesting to me that I often hear people say they are concerned about divorce costs when learning about collaborative divorce. Yet the collaborative divorce process minimizes attorney involvement since much of the work with the neutral financial specialist, neutral child specialist, and neutral divorce coach is completed without attorneys present. Attorneys usually are the highest paid professionals in any divorce process and most are not trained in financial issues, child and family systems, or other family relationship dynamics. What attorneys are trained in is the law. So imagine yourself utilizing a divorce process providing you with a menu of professional resources to help you and your family work with specialists in their respective fields and yet always have access to your own attorney who will be your advocate.   Of the three processes discussed in this two issue article which do you think will allow you to keep more of your money in your family, traditional litigation, mediation, or collaborative divorce? Remember to help you keep more of your money in your family choose your process wisely. In Part II of Keep More of Your Money in Your Family, I will write about choosing your attorney wisely.
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561097939-man-inserting-coin-into-piggy-bank-gettyimagesGetting married sometimes can be expensive if you let it. Getting unmarried can be even more expensive if you and or your spouse allows it to get that way. In divorce, emotions are high and often contribute to higher levels of conflict. Conflict is expensive. Many divorcing couples want to know how they can keep more of their financial resources between themselves and in their family. After all the more that goes to pay for divorce costs means less for each spouse and for their children if they have children. In this upcoming series, I will write about some tips on how to keep more of your financial resources in your family. Here is the first tip:
  1. Choose your process wisely. Study your options and know what you and your spouse want. I ask divorcing clients what would need to happen in your divorce so you could look back three years from now and say this was a successful transition for your family and you. Paint that picture for me. Be honest with yourself.
    1. If you want a knock down drag out divorce, you know the Katie bar the door kind or I will show him/her, or I will make him/her pay, a more traditional litigation process certainly fits that bill. Moreover, that bill will be very expensive. On top of that, someone else, a judge, will be making decisions for you since you and your spouse are not able to reach agreements on your own.   If you think, you are going to win and be the victor you have already lost because there are no winners in divorce. Most judges tend to think the best outcome if they have to decide your divorce is one when both spouses equally share the pain and both spouses are somewhat dissatisfied.
    2. You may consider mediation. Most people have heard about mediation. Mediation can be less expensive than a traditional court based process.   Mediators however, are not able to provide legal advice. This is true even if the mediator is an attorney. Sometimes couples choose to have their own lawyers present at mediation sessions to overcome the no legal advice dilemma. Mediators, even if they are an attorney are not able to draft/prepare final divorce decree documents. If a mediator helps you reach agreements, you, and your spouse take those agreements to an attorney to draft the final documents and that attorney can only represent one of you, not both spouses. I always encourage my divorcing clients to each have their own attorney when reviewing any final documents resulting from mediation. You may run into one or both of the attorneys encouraging you not to accept the mediated agreements or parts of the agreements. In my practice, I recommend to clients attorneys that I know and have worked with, are settlement oriented, and not inclined to escalate conflict in an already mediated agreement. That is not to say there will not be some tweaks here and there because there always are and for good reason.
In part II of Keep More of Your Money in Family, I will talk about collaborative divorce, the professionals involved, and how it can help you keep more of your money. Stay tuned more to come.
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138524804-oranges-gettyimagesWhat can an orange possibly help us with in our collaborative divorce or any divorce process for that matter? You may have heard about interest based negotiations vs. position based negotiations. When I am working as a financial neutral or mediator with divorcing couples, I use an orange to demonstrate these two different approaches. I place an orange on the table and then say to the couple; here we have one orange for the two of you. How are you going to decide who gets the orange? Most people will say cut it in half. While this certainly works, it may not be the best approach. Here is why. I then tell them each why they want the orange. One wants it to eat because they are hungry. The other wants the orange peel for baking. Now if we were to cut it in half as most people will say they both only get half of what they need. It is only when they state why the orange is important to them that an agreement can be reached. When negotiating divorce issues think of the orange and remember to talk about your interests instead of locking into a position. The quicker you get to the interests you will be that much closer to an agreement. Not only is emotion and conflict minimized you also get more of what you need/want.  Think orange.