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Divorce Alternatives

posted by Bedrock Divorce Advisors 10:00 AM
Wednesday, May 4, 2011

No two divorces are the same. Each divorce has its own twists and turns that makes it unique. However, there are several methods that a couple can choose to process the dissolution of their marriage – Do-It-Yourself (DIY), Mediation, Collaborative, and Litigation.

Today’s blog post will discuss the Do-It-Yourself (DIY) and Mediation methods.

Do-It-Yourself (DIY)

In general, the best advice I can give you about DIY, is DON’T DO IT!

Divorce is legally and financially very complicated. Mistakes can easily be made, many of them irreversible. The only scenario that I could envision a DIY divorce making any possible sense, might be in a case where the couple have been married for only 2 or 3 years, have no children, have little or no assets/debts to be divided (retirement funds such as pension plans and 401Ks are complicated to divide and should never be attempted by yourself), have comparable incomes and neither party would be paying alimony to the other. In that case, a DIY divorce could be accomplished quite quickly and inexpensively. Nevertheless, I would still highly recommend that each party have their own separate attorney review the final documents.

Mediation

In divorce mediation, a divorcing couple would work with a neutral mediator that will help them come to an agreement on all aspects of their divorce. The mediator may or may not be a lawyer, but either way they should be extremely well-versed in divorce and family law. It is critical for the mediator to be neutral and not advocate for either party. Both parties still need to consult with their own, individual attorneys during the mediation and prior to signing the divorce agreement. Here are a few pros and cons to consider before deciding if mediation will work for you:

Pros:
• May result in a better long-term relationship with your ex-husband since you will not “fight” in court.
• May be easier on the children since the divorce proceedings may be more peaceful.
• Agreements may be reached sooner.
• The cost of divorce may be less.
• You stay in control of your divorce because you will make decisions and not the court.
• Mediation is private whereas a divorce that goes through the court is public.

Cons:
• The time and money spent in mediation could be wasted if negotiations fail and the couple needs to start all over.
• If the mediator is not experienced or biased towards one of the spouses, the mediation agreement may be incomplete or unduly favorable to one of the spouses.
• There may be concerns about the enforceability of the mediation agreement, if it’s not well-drafted or too lopsided.
• If there is an issue of law it will still need to be ruled upon by the court.
• All financial information is voluntarily disclosed. There is no subpoena of records, so if your husband is hiding assets/income you may never know about it. This is a particular issue if your husband owns a business because it is easier to hide assets and income through the company.
• If one spouse is dominating and the other is submissive the final settlement may not be fair.
• May increase negative behavior of a spouse with a propensity for physical/mental abuse.
• Can lead to increased problems if the parties suffer from of drugs/alcohol abuse.

As a general rule, Mediation should not be used if a) you suspect your husband is hiding assets/income, b) your husband is dominating and you have trouble speaking up or you’re afraid to, c) there is a history or threat of domestic violence (physical and/or mental) towards you and/or your children and d) there is a history of drug/alcohol addiction.

As you can see there are several issues to consider whether a DIY or mediated divorce might work for you. Next week, I’ll be discussing the Collaborative method. Collaborative law is a relatively new concept, but it is one that is becoming more and more mainstream. Stay tuned for that blog post next week!

All content on this site/blog is for informational purposes only, 
and does not constitute legal advice. If you require legal advice, retain 
a lawyer licensed in your jurisdiction. The opinions expressed are solely 
those of the author, who is not an attorney.
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It’s Critical to Understand How Debt is Divided in Divorce

posted by Bedrock Divorce Advisors 10:00 AM
Wednesday, April 27, 2011

All joint debt acquired during the marriage will almost always be considered a joint obligation of both spouses. All debt that has both the husband and wife listed as co-signers such as car loans, mortgages, and credit card debt will also be the joint responsibility of both parties. However, if your husband has debt solely in his name, in most cases, your husband will be solely responsible for it and not you.

An exception to this is in Community Property states where both parties are typically responsible for any debt acquired during the marriage, even if that debt was incurred by just one of them. States with community property laws are Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin. Alaska is an “opt-in” community property state, which means that both spouses must agree to be jointly responsible for all debt.

Once you are separated, any new debt incurred will be the sole responsibility of the person who incurred that debt. You need to keep careful records of your credit card charges after you are separated so that you can prove which are yours and which belongs to your husband. It is important to note that separation is not legally recognized in every state and those that do recognize it have their own guidelines for defining the date of separation, so please consult with your divorce attorney.

Joint debt, just like marital property should be negotiated and divided during the divorce process. Typically, the debt should follow the asset that is associated with that debt. So the car loan should become the responsibility of whomever gets the car and the credit card charge for the wide-screen television should become the responsibility of the person getting the TV, and so on.

It is important to remember that even though your divorce settlement agreement identifies who is responsible for each debt, your creditors don’t care about your divorce settlement agreement and will consider each spouse to be 100% responsible for any joint debt. So if your husband declares bankruptcy or defaults on any joint debt, those creditors will come after you for full payment, regardless of what your divorce agreement states.

To avoid this possible scenario, you may want to consider requiring that all debts be paid off prior to finalizing the divorce if there are sufficient assets to do so. To the extent possible, all loans, credit cards and other debts that were established jointly with your husband should be frozen and/or closed as soon as you know you are heading for divorce.

If you have debts that need to be addressed in any divorce settlement agreement, I highly recommend that you work with one of our Divorce Financial Strategists™ to help you resolve those issues and to protect your current and future credit rating.

All content on this site/blog is for informational purposes only, and does not constitute legal advice. 
If you require legal advice, retain a lawyer licensed in your jurisdiction. The opinions expressed are solely those
of the author, who is not an attorney.
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Are Divorced Parents Required to Pay for their Children’s College Education?

posted by Bedrock Divorce Advisors 10:00 AM
Wednesday, April 13, 2011

Child support payments generally stop when children reach the “age of emancipation.” In most states, that age is between 18 and 21. But what obligations do parents have to pay for their children’s college education?

Whether divorced parents have a legal obligation to pay for their children’s education depends on the state in which the divorce occurred.

The following states have laws that allow courts to order the non-custodial parent to help pay for college (depending on the state, the cost of college may include, tuition, room and board, books, extracurricular activities and a monthly allowance); Alabama, Arizona, Colorado, Connecticut, District of Columbia, Florida, Georgia, Hawaii, Illinois, Indiana, Iowa, Maryland, Massachusetts, Michigan, Mississippi, Missouri, Montana, New Jersey, New York, North Dakota, Oregon, Rhode Island, South Carolina, South Dakota, Utah, Washington and West Virginia.

Alaska, Nebraska and New Hampshire currently have laws on the books that prohibit the courts from ordering college support, except in those cases where the parents had a previous agreement.

Even in the states that don’t require paying for college expenses, courts recognize the need for children to have a college education. Therefore, they can allow the issue to be included in the divorce settlement agreement, including the amount and term of alimony to be paid.

The best way to deal with this during your divorce is to negotiate a written college support agreement in addition to any other child support agreements.

A college support agreement should include:

• What percentage of college expenses each parent is responsible for
• How many semesters of support will be provided
• Any limits on yearly payments
• Whether or not there is an age limit for the child to attend
• Any restrictions on which college the child should attend
• If there should be a minimum GPA
• Exactly what expenses will be covered

Alternatively, if there are many years remaining before the children start college, it might be preferable to negotiate a lump sum payment up front assuming there are sufficient assets available to do this. Since you never know what can happen over a long period of time – your ex-husband can die or go bankrupt – a bird in hand might be just the way to go.

However, ascertaining the future costs of college can be very difficult, especially if the children are still young. Unfortunately, most divorce attorneys don’t have the training or expertise to compute complex projections of future college costs and what the present value of those future costs would be in today’s dollars. That’s just one of many reasons why you should consult with one of our Divorce Financial Strategists™.


All content on this site/blog is for informational purposes only, and does not constitute legal advice.
If you require legal advice, retain a lawyer licensed in your jurisdiction. The opinions expressed are
solely those of the author, who is not an attorney.
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Divorce and Your Grandmother’s Diamond Ring

posted by Bedrock Divorce Advisors 10:00 AM
Tuesday, April 5, 2011

During divorce there are so many things to divide with your husband that you may have forgotten all about the diamond ring your grandmother gave you many years ago. But when you finally get around to thinking about it, it hits you like a ton of bricks.

Can my husband take my grandmother’s diamond ring in our divorce?

Most likely he can’t. That’s because that diamond ring would be considered your separate property. It was a gift or inheritance given to only you by someone who is not your spouse. (For a more extensive discussion on the differences between separate and marital property, please see my Huffington Post article). The only way there might be an issue, is if you used marital funds to repair the ring, replace a missing diamond, or somehow increased the ring’s value. If marital funds were used to increase the value of the ring, it may still be considered your separate property, but the increase in value may be considered marital property. That increase in value would then be thrown into the pot with all of the other marital assets.

On the other hand, all gifts that your husband gave you after you were married (and that you gave him) for anniversaries, birthdays, etc., are considered marital property and they would also be part of that pot of assets that gets divided. I know that seems unfair, but that’s the law.

However, any gifts that you received from your husband before your marriage, including your engagement ring, would be considered, in most cases, your separate property, since you received them while you were still single.

The bottom line is that you should never commingle your separate property with marital property. Then, if you should later divorce, there would be no question about what is rightfully yours. Another way to decide what should be separate property and what should be marital property is through a prenuptial or postnuptial agreement. (For a more detailed discussion on this, please see my Huffington Post article.)

If you are getting divorced, or thinking about it, and have questions about how your family heirlooms and other assets might be affected, please contact us. One of our Divorce Financial Strategists™ will help you protect what is rightfully yours.

All content on this site/blog is for informational purposes only, and does not constitute legal
advice. If you require legal advice, retain a lawyer licensed in your jurisdiction. The opinions
expressed are solely those of the author, who is not an attorney.
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Legal Separation Agreements Should Be Carefully Drafted

posted by Bedrock Divorce Advisors 10:00 AM
Tuesday, March 29, 2011

Some couples choose to live separately before actually getting divorced. The most common reason for this is to allow the couple to live apart while they decide if they actually want to get divorced. However, there are several financial reasons why a couple may choose to separate rather than divorce right away.

They include:

• The need to remain married in order to meet the 10-year requirement for social security benefits.

• The ability to continue receiving health insurance benefits under their husband’s plan.

• The potential tax benefits of filing their taxes jointly (see our article on the risks of filing jointly).

• Retaining certain military benefits.

If you decide that you are going to live apart, you should consider a Legal Separation Agreement. A legal separation agreement is a legally binding agreement between you and your husband that resolves issues like the division of assets and debt, alimony/spousal support, child support and visitation.

In some states, a legal separation is a necessary step to file for a divorce. In others, a legal separation is not recognized. It is important to get the advice of a divorce attorney in your state to determine if this is an option for you.

Some people remain separated for months or even years, so it is very important that you protect yourself upfront and have all the necessary issues settled and agreed to in writing. It is difficult to move on with your life without getting issues like who gets what assets and who is responsible for debts resolved. Having the legal separation in place will allow you to move forward.

Being legally separated does not mean that you must ultimately divorce, but it does allow you to get an accurate picture of what life would be like if you do divorce. Also, if you do divorce, the legal separation agreement will be used as the basis for your divorce settlement agreement. Therefore, it is important to bring in a divorce financial advisor, just as you would for a divorce, to ensure that you will have a financially secure future.

All content on this site/blog is for informational purposes only, and does not constitute legal advice. 
If you require legal advice, retain a lawyer licensed in your jurisdiction. The opinions expressed are 
solely those of the author, who is not an attorney.
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Think Your Husband Is Fudging Numbers – Don’t Sign That Tax Return

posted by Bedrock Divorce Advisors 10:00 AM
Tuesday, March 22, 2011

Most people find it hard to believe that Bernie Madoff’s wife, Ruth, had no knowledge of her husband’s Ponzi scheme.  After all, she was a major beneficiary of his crimes. Whether or not she knew, most people think she was somehow involved and, at the very least, turned a blind-eye to his fraud.

Even though your husband may not be running multi-million (or billion) dollar Ponzi schemes, you could still be in for big trouble if he is fudging numbers, not reporting income, or claiming fictitious deductions on your joint tax returns.  For example, if your husband owns a business or professional practice and the profit or loss from that business is declared on your personal tax returns as is usually the case with a sole proprietorship, partnership, limited partnership, LLC, or “S” Corporation and you are not privy to the finances of his business, you could be setting yourself up for a disaster. No matter how innocent or ignorant you may be of this type of activity, if you file jointly, you are equally responsible in the eyes of the I.R.S. and your state’s taxing authority. There is a very limited and hard-to-get I.R.S. and state exception called “Innocent Spouse Relief” but it is accepted in very few cases. See this New York Times article for more details: http://www.nytimes.com/2005/02/13/business/yourtaxes/13spou.html.

However, there is a way for you to avoid falling into this dangerous trap.  You could choose to file a separate tax return.

According to the I.R.S., you can either file jointly or separately if you are married. If you choose to file separately, one spouse cannot be held responsible for the unpaid taxes of the other.  However, it is important to note that even if you choose to file separately this year, you will still be responsible for the prior years that you filed together.

If you and your husband decide to file separately, you must both choose to either take the standard deductions or to itemize deductions.  It is not possible for just one of you to itemize deductions.  Additionally, filing separately can result in a bigger tax bill since you may not be able to take full advantage of certain benefits and deductions.  However, the bigger tax bill would be nothing compared to your legal and accounting expenses if the I.R.S. comes after you.

When going through a divorce, there are many complex issues to sort through when deciding whether you should file separately or jointly.  Remember, the I.R.S. does not care if you and your husband are divorced and, if warranted, they can still come after you for joint returns that were filed years before your divorce. If you suspect that your husband has engaged in any financial shenanigans, you should definitely speak with one of our Divorce Financial Strategists™ to determine what steps you should take to protect yourself.  It could save you years of stress and lots of money!

 

All content on this site/blog is for informational purposes only, and does not constitute legal advice. If you require legal advice, retain a lawyer licensed in your jurisdiction. The opinions expressed are solely those of the author, who is not an attorney.

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I Have Been Ordered To Pay – How Long Will Alimony Last?

posted by Bedrock Divorce Advisors 10:00 AM
Tuesday, March 15, 2011

When Mary and John married the plan was for Mary to work while John completed his doctorate in literature.  The idea was that John would eventually get a job in academia.  That never happened. John was unemployed during most of the marriage.

When Mary and John decided to end the marriage, Mary thought that they would split the marital assets and that would be it.  She was surprised to find that she was considered the primary breadwinner and that John was the “economically disadvantaged”  spouse who needed help getting back on his feet. She was ordered to pay alimony for three years.

According to the Federal Bureau of Labor Statistics, women are the primary breadwinners for one-third of all marriages.  This means that more and more husbands are the recipients of alimony (also known as spousal support or maintenance).

State laws differ, but generally speaking “economically disadvantaged” (dependent) spouses are granted temporary alimony / maintenance based on the length of their marriage and whether they have the ability to financially support themselves (For more details on how alimony is determined, click here – http://bedrockdivorce.com/blog/?p=44).

So this leaves a lot of women asking, “How long will alimony last?”

In certain situations, it is possible that alimony / spousal support will be granted for a lifetime.  However, depending on the circumstances it is more likely that maintenance will be granted for a certain period of time.  Regardless, there are two situations where alimony will almost always terminate:

1.    If the receiving spouse remarries; or,
2.    If the paying or receiving spouse dies.

There are certain other circumstances that may be considered as grounds for terminating alimony such as if the receiving spouse is living with another person as if they were a married couple.  However, having alimony terminated in these situations may mean going back to court and more legal fees.

If you are a woman and the breadwinner of your family and are contemplating or facing divorce, contact one of our Divorce Financial Strategists™ who can guide you through the process so that you will have a better understanding of how much alimony, if any, you will need to pay and for how long .

All content on this site/blog is for informational purposes only, and does not constitute legal advice. If you require legal advice, retain a lawyer licensed in your jurisdiction. The opinions expressed are solely those of the author, who is not an attorney.

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Think You Can Avoid The Problems of Divorce by Just Living Together? Think again!

posted by Bedrock Divorce Advisors 10:00 AM
Tuesday, March 8, 2011

Most couples who live together do not have any agreements in place that specify legal obligations or rights to one another.  They have the misguided idea that because they are not married they can simply walk away from each other without looking back.  However, this may not be the case.

When a couple decides to live together, they often create a household with many of the same financial obligations as a married couple. They may have mortgages, cars, furniture and other jointly owned assets that can be difficult to deal with in the event they end their relationship.

There is also an issue in regard to expectations.  For example, you may believe that all of your property will remain apart and separate from your companion’s, while he or she may believe “what’s mine is yours” and vice versa.

While it is true that there are no state imposed laws or obligations that regulates what happens at the end of cohabitation, it’s also true that you don’t have the legal protections afforded married couples. This means that you can divide property in any way you wish. However, the absence of legal guidelines often creates more conflict (and lawsuits). So in the end, the problems related to dividing assets are more difficult to resolve than married couples going through divorce.

If you choose to live with your partner, it is advisable to develop a cohabitation agreement which is a legal agreement reached between a couple who have chosen to live together without marriage.  The cohabitation agreement can detail property rights, financial obligations and how debts and assets will be handled should the union break down.  This agreement is much like a prenuptial agreement that will allow a couple to determine in advance how assets and liabilities will be divided should they divorce (in fact, a well written cohabitation agreement can be drafted in such a way that it automatically converts to a prenuptial agreement if, and when, the couple gets engaged).

If you are a woman in a pre-marital relationship and would like advice on how to protect your assets (including any businesses you may own) to avoid a future financial nightmare, please contact one of our Divorce Financial Strategists™. We will help you understand all of the complex issues involved and show you how to best protect yourself.

All content on this site/blog is for informational purposes only, and does not constitute legal advice. 
If you require legal advice, retain a lawyer licensed in your jurisdiction. The opinions expressed are 
solely those of the author, who is not an attorney.
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If you are getting divorced, you may be wondering how your future social security retirement benefits may be impacted by your divorce (especially if you are over 50). Since these benefits are based on the total amount of money you’ve earned in your lifetime, you may have a legitimate concern if you have earned less than your husband and/or you have not been in the workforce for as many years. The availability of these social security benefits could have a significant impact on your post-retirement lifestyle.

You should consult with one of our Divorce Financial Strategists™ to get advice about your specific situation, but here are some general rules to keep in mind.

The most important rule is that if your marriage lasted 10 years or more, the lower earning spouse (you) could be eligible for social security retirement benefits based on the record of your husband – the higher earning spouse. (FYI – Nationally, all marriages ending in divorce last an average of 9.8 years. That means a lot of women might be ineligible to collect social security retirement benefits based on their husband’s higher earnings because they failed to wait a few extra months until their marriage crossed the 10-year mark!)

In addition, there are four key qualifications you must meet to collect social security retirement benefits based on your ex-husband’s earnings:

• You must not have remarried

• You must be 62 or older

• The benefit you would collect is higher than what you would have collected based on your own earnings history

• Your ex-husband must be entitled to social security on his own

The maximum amount of your benefit would be the higher of your own work record or 50% of what your ex-husband’s benefit would be at your full retirement age. You can start taking the benefit at age 62, but any benefit amount you take before your full retirement age will be less than the full 50% of your ex-husband’s benefit. So, the bottom line is that, if possible, you should wait until your full retirement age before collecting.

It is important to note that the benefits you might collect using your ex-husband’s earnings does not in any way reduce the benefits that he will receive.

If you do remarry, you cannot collect on your ex-husband’s earnings unless your second marriage ends by death, divorce or annulment. However, if your second marriage also ends in divorce and the second marriage was also longer than 10 years, your benefit would be the larger of 1) the amount based on your own work record, b) 50% of your first ex-husband’s entitlement, or 3) 50% of your second ex-husband’s entitlement. In this case you get to choose and most choose the largest amount.

One other thing to keep in mind – if your ex-husband is not yet receiving his retirement benefits but does qualify, you must have been divorced from him for at least two years before you can begin collecting benefits based on his earnings.

If your ex-husband dies you are still able to receive retirement benefits based on his earnings. And, you do not give up the right to base your retirement benefits on your own earnings by doing this. This is important to keep in mind if you later remarry and make more than your second husband.

If you are going through a divorce or considering it, this is just one of the many financial issues you must sort through to plan for your retirement years. I recommend that you work with one of our Divorce Financial Strategists™ to make sure that the financial decisions you make during your divorce will enable you to maintain your lifestyle both today and far into the future.

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Tax Dilemma for Divorcees – Who Gets to Claim Head of Household?

posted by Bedrock Divorce Advisors 10:00 AM
Tuesday, February 22, 2011

There are many issues that must be resolved during divorce that will impact how you file your taxes each year. In addition to several potential tax credits, it is important to understand who will be eligible to file as “Head of Household.” This is very important because filing as Head of Household will typically result in a lower tax bill than filing as Single or, if you are not yet divorced, Married Filing Separately.

Generally, the Head of Household filing status is determined by your custody arrangement. The parent who has the children more than one-half of the year can claim the Head of Household filing status. The only way that both parents can claim Head of Household is if they have more than one child and each parent has at least one different child living with them for more than one-half of the year.

People sometimes mistakenly believe that claiming a child as a dependent entitles them to file as Head of Household. This is not necessarily true. To qualify as Head of Household you must meet the following requirements:

• You must maintain a household for your child (even if you do not claim them as a dependent)

• You must be unmarried at the end of the year or living apart from your spouse for more than six months

• The household must be your home and generally must also be the main home of the qualifying dependent (i.e. they live there more than half the year)

• You must provide more than half the cost of maintaining the household

• You must be a U.S. citizen or resident alien for the entire tax year

You do not need to claim a dependent to file as Head of Household. This means that even if you allow your ex-spouse to claim your child as a dependent, you can still file as Head of Household.

If you can claim Head of Household you may also qualify for the Dependent Care Credit, the Earned Income Tax Credit (this is for lower income people), as well as other rebates that may be available for that tax year.
In some cases, if you are separated, but not divorced, and are filing separate tax returns, you may be able to file as Head of Household. You will need to meet the criteria mentioned above to do this.

Deciding the filing status and who will claim dependents can have a tremendous impact on your tax situation. You may be able to save thousands of dollars in taxes. So, it is important to work with a divorce financial specialist (such as one of our Divorce Financial Strategists™) both during the divorce process and after. You need to fully understand the impact that your filing status and tax credits may have on your bottom line before you agree to a divorce settlement.

All content on this site/blog is for informational purposes only, and does not constitute legal advice. If you require legal advice, retain a lawyer licensed in your jurisdiction. The opinions expressed are solely those of the author, who is not an attorney.

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