retirement after divorce

Retirement After Divorce: I’m 60, Still Single And Made BIG Mistakes

retirement after divorce

I wrote an article earlier about being a single mom 20 years later and how one can survive, called “15 Insights from a Veteran Single Mom” that was posted on this site in January.

I wrote it because I wasn’t seeing that kind of perspective and wanted to share with others that are new to the journey, with a message that you can indeed survive.

You can even thrive as well.

But it may cost you as it has me.

My article was mostly from an emotional perspective. But what about the business of “your life” after divorce and the kids are grown? What does the other side look like from a financial perspective?

I have seen some good articles related to financial advice on “new single mothers”. But, I have yet to find anything that speaks to single mothers who have given it all to raising a family alone and who now find themselves in a very precarious position financially; 20 years down the road.

An article on guilt would have served me well in the early days and throughout my single motherhood.

I felt guilty for being the reason my husband left. Or so I thought I was anyway.

I felt that it was my job to make sure that my children never felt left out. Never went without and always felt like all the other kids in school whose parents were together.

I live in a community where there really are very few single parents. My kids pointed that out a lot to me.

My ex-husband gave me $328.00 per child each month. That was the court allotted amount. I had a 4-week-old infant when I started this journey, and I have to say that $328 didn’t go very far towards formula and diapers alone.

So, in order to keep up with “Mr.” and “Mrs.” Jones, I sacrificed a lot financially. I sacrificed as I tried to keep up with everyone and everything which living in Southern California expected of me.

I sacrificed myself, literally. I wouldn’t realize it until many years later.

There have been many times on this journey that I vowed to change my name back to my maiden name. I hated having the same last name as the woman my ex-husband cheated with and then married. I was not proud to have that name anyway.

But my kids were really against me doing it. They didn’t want to have a different last name than me. When the time came that they were old enough and no longer cared, I started to research the process.

I was required to show my decree of divorce. My brother who is a Superior Court Judge advised me as well. Because when the divorce became final, I was in the thick of raising an 18-month-old and a 6-year-old, I was kind of busy. I couldn’t find my documents anywhere.

My brother was able to help me. In the documents package that I received from him was an additional paper that stated that I had signed off on my ex-husband’s retirement.

I almost fainted dead away when I read it. I didn’t remember ever doing this. When we sold our home and we were in the final escrow, I received a call from the escrow officer. She said that my husband would not sign the escrow papers and ran out of the office.

Panic consumed me.

I was buying a house and selling a house and escrow was scheduled to close for both properties on the same day. This was going to cause a domino effect. I called him and he said he wanted the retirement accounts.

He would not sign the escrow documents unless I signed them over.

At the time, I thought he meant the IRA’s. I said, “If I agree to this will you get out of my life forever?” He said yes. My naivete would cost me more than I could ever have imagined now that I am 60 years old.

So here I am now. Twenty years later. In reading the articles on this site, I realized how much I would have loved to have known about DivorceMoms.com much sooner into my divorce.

So, here is what I have to say to you all as I literally sit here learning in real-time.

Retirement After Divorce: How To Get Ready

Credit Cards!

I hate them and you will too! Don’t use them unless it’s an emergency. Keep two and that’s it. They are your emergency fund and should only be used as such.

Your heartstrings will tug at you and your Catholic guilt will get the best of you, so leave them home when you are at Target with the kids!

You will be a hostage to yourself! All the toys and stuff you bought them will end up at Goodwill! I promise you!

Budget, Budget, Budget!

And stick to it! Again, I found that the guilt I had made me do stupid things and spend money foolishly on toys, dinners out, and things they and I didn’t need. All done in the name of guilt and keeping up with The Jones.

You want to feel normal. You want to feel like you are in the club of intact complete families. So, you push your budget to fit in.

I’m here to tell you that you will regret it if you don’t stay inside your own lines. Who cares what everyone else is doing? They really don’t. It’s all on you and your guilt issues! So, Stop!

Get Rid of the Cape!

Get rid of your Super Woman Cape altogether. It may fit you now, but it’s when you are 60, it’s too darn tight! So, chuck it now! You are a Super Woman on your own merit by the mere fact that you are raising a family solo.

You are your own Caped Crusader and you most definitely are your kids! They love you and need you and want you all without your trying to be everything to everyone.

Just be their everything! Give the cape to the Salvation Army and don’t look back!

If I was speaking to my younger, confused self I would tell that poor girl to calm down. I would assure her that she was good enough and didn’t have to spend money on stuff that will eventually end up on the curb for pick up.

I would tell her to stop all that. I would tell her that if people really loved her, they didn’t need her to “keep up” with them. And if they did expect that, they never really did care in the first place.

And lastly, I would tell her to love herself so much by saving money, any money and put it into her retirement and teach her children that the real value in life isn’t by having things. It is by loving each other. Period.

But as I speak to myself today, I just start each day as I step further into a time of traditional retirement age and say “Breath. Just Breath.”

The post Retirement After Divorce: I’m 60, Still Single And Made BIG Mistakes appeared first on Divorced Moms.

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Divorce Is Difficult Enough Without Being Financially Blindsided

financially blindsided

 

This probably comes as no great shock, but divorce can be expensive.

There are attorney’s fees, court costs, child support, alimony, and any number of additional expenses. For the most part, these are all obvious, expected parts of the process.

You likely anticipate these expenditures and more. Still, there are a number of less apparent costs to divorce, things that can seemingly come out of nowhere and financially blindside you.

Ending your marriage can have a huge impact on your financial future and your long-term economic well-being may hang in the balance. Here are a few pitfalls to look out for and a few ways to safeguard your interests.

Divorce Is Difficult Enough Without Being Financially Blindsided

Tax Changes

Not only will your filing status change drastically after a divorce—you’re no longer married, after all, hence, you can no longer file as a couple—but there are other tax factors to take into account. The division of property can have a substantial and unexpected impact in this area.

Capital gains taxes can come into play following your divorce settlement and may show up anywhere from real estate transactions to investments and beyond. At the same time, not all property is created equal in this regard, and various assets may be treated differently.

For example, the sale of a principal residence may not necessarily be taxed depending on how much gain exists—there’s a cap gain fee for individuals as well as couples, which varies from state to state. On the other hand, if you withdraw money from a retirement fund like an IRA, 401k, or pension, you may be taxed the full rate.

Credit Surprises

Another realm that often flies under the radar in divorce is how it can impact your credit. Once your marriage is dissolved, your ex’s financial doings cease to have any impact on yours. Both parties will apply for credit cards, loans, and the like as individuals, and you will be your own economic entity. That’s fantastic, but depending on the situation, your former spouse can still influence your wallet.

Getting a divorce doesn’t automatically change any pre-existing agreements you and your ex entered into as a couple. If you have a mortgage, a car loan, or amassed any shared debt during your marriage, you’re still on the hook for that.

Ideally, these concerns will be addressed in your divorce settlement. The court may order one of you to pay a joint debt, and in a perfect world, that’s precisely what will happen. But as you’re probably well aware, we don’t live in a perfect world. If your spouse is ordered to take care of a debt with your name attached but doesn’t, it can negatively impact your credit and you may even wind up in collections.

The final agreement—whether it’s an arrangement you and your ex arrived at together or one that was handed down by the court—can include provisions for this type of situation. Your former spouse may be ordered to refinance a particular loan in his or her name alone by a specific date. Still, it never hurts to keep an eye out and make sure that this actually happens.

Changes In Living Situation

This probably sounds obvious, but you may be surprised how often people fail to account for the expense of finding a new place to sleep. Odds are very good that, by the time your divorce is finalized, you’ll already be living apart. Frequently these accommodations are transitory in nature and acquired in haste.

Moving forward, you may well want to set down more permanent roots, which can incur costs. This will vary depending on if you rent or buy, but there are deposits, down payments, and a bevy of other outlays to consider. Buying furniture and a new set of kitchenware can be pricey.

Even if you remain in the marital home, you may be faced with covering all of the bills from a single paycheck for the first time. If a suitable agreement can’t be reached, you may wind up selling a shared house. In these situations, assets may be sold quickly and with a mind for convenience rather than for optimal value.

Gaps In Health Insurance

Health insurance is not only important, you know, for your continued health and well-being in the face of illness and injury, but as it is now mandatory, you can incur substantial tax penalties if you are uncovered. If you were previously shielded under your spouse’s plan, after divorce you may be open to fines, or have to pay out of pocket for any medical care.

If you don’t have coverage through an employer, it’s possible to continue hanging onto your ex’s plan through COBRA for up to 36 months, though that can be expensive. You can also look into getting less expensive health insurance through the Affordable Care Act in your state. If this is your situation and you know that it’s coming, you may want to examine your options ahead of time and get everything sorted out by the time the final agreement is signed.

Guard Against Surprise Expenses

While these and other costs may blindside you during and after the divorce process, there are ways to safeguard your pocketbook and ensure you start the next phase of your life on sound financial footing.

One of the biggest missteps many people make in divorce is not budgeting. It’s way too easy to lose track of your expenses as they mount, and far too few people take the time and effort to set out a specific plan. And then you have to stick to this roadmap, which is a whole other hurdle.

Overestimating what you have and underestimating what you spend are common problems. When you pay for an attorney, shell out for court costs, cover the upkeep on your home, or even pay child and spousal support, it adds up quickly. Setting and adhering to a budget may be a pain initially, but it will serve you well in the long run.

You may also be leaving valuable assets on the table during the division of property. While some resources are easy to put a price tag on, like bank accounts or loan debt, others can be trickier. A car or house may be worth a specific dollar amount on paper, but when it comes to liquidating them, you may not always be able to get that much.

People also overvalue items that have emotional significance. How important these possessions are to us may not reflect a real-world value, and you run a couple of risks in these situations. First, you may spend a great amount of time arguing back and forth over an asset with relatively little monetary value. Second, you may agree to a less optimal settlement that doesn’t provide as much financial stability.

Before you sign any documents, take a step back, look at everything, and determine how much it’s all worth to you and where you’re willing to compromise.

Shared assets are divided up between the two spouses, but the court can only allocate what they know about. Hopefully, both parties are honest and trustworthy enough to be upfront when it comes to declaring property, but that may not always be the case. Remember what we said earlier about this being an imperfect world.

If hidden assets are not divulged, it can impact the settlement, but there are ways to search for clandestine holdings. You can check recent tax records for inconsistencies, look at bank accounts for expenditures you didn’t know about, examine brokerage statements for stocks and bonds, and more.

Make sure your financial records are up to date and organized. Know what you have, what your spouse has, where money is owed, and gather as much information as you can. Not only will this streamline your side of the equation, but it will also make it easier to spot any irregularities from your spouse.

These are just a few possible pitfalls that can swallow up your finances and put a serious hurting on your financial status as you move forward with your life. Divorce is difficult, and it is an emotional time where you juggle any number of issues. Things can fall through the cracks if you’re not paying attention, and it will be in your best interest to be as focused and detail-oriented as possible. Your financial future may depend on your vigilance.

The post Divorce Is Difficult Enough Without Being Financially Blindsided appeared first on Divorced Moms.

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Is Your Husband’s Professional Degree Marital Property?

husband's professional degree marital property

 

In many marriages, one spouse may decide to earn an advanced professional degree to start a new career path or further an existing career. The degree might be for medicine, law, accounting, or another similar path, and earning an advanced degree is necessary to obtain a license to practice in many different professions.

The problem is that professional degree programs can be lengthy and rigorous, so it is imperative to have the support of a spouse while someone is pursuing this type of educational program.

Is Your Husband’s Professional Degree Marital Property?

How Wives Might Contribute to Professional Degrees

There are many ways that a wife can contribute to a professional degree for her husband. First, it can be difficult for a husband to work while pursuing a degree, so the wife may accept the full bread-winning responsibilities while her husband is in school. Her income might cover all of the household expenses, as well as educational expenses. After the degree is earned, a wife’s income might go toward paying off student loans and other educational costs.

An advanced degree and professional license can increase a husband’s income once he is done with school, which can improve the standard of living of both spouses moving forward. However, what happens if a divorce occurs? Does the husband get to solely enjoy the future benefits of his degree? Does a wife get reimbursed for her contributions to the professional degree?

How Degrees are Treated in Divorce

How a degree will be treated in your divorce will depend on the specific jurisdiction overseeing your case. Different jurisdictions have their own approaches regarding how degrees are treated in divorce. For example, for decades, the State of New York considered a degree to be marital property, and the value of the degree would be divided between divorcing spouses. However, New York reversed this policy as of 2016, and a degree is no longer treated as marital property.

That a degree is not marital property is the majority view of courts throughout the United States and Canada. Most states in the U.S. follow this principle, and the precedent in Ontario and other Canadian provinces is the same. Generally speaking, a degree or license cannot be sold or transferred like property, and the degree itself has no guaranteed future value without the choices and acts of the degree-holder to earn a living based on the degree.

However, this does not mean that a wife should get nothing in return for her contributions to a husband earning a degree. There are different ways courts handle this situation, depending on the specific circumstances at hand and the jurisdiction.

Options for Wives Regarding Professional Degrees

Courts can take different approaches to ensure that wives are fairly compensated for their sacrifices and contributions to a husband’s success. A couple of examples of how this matter might be addressed by a divorce court are as follows.

Reimbursement Approach

This approach acknowledges that a wife used marital assets to pay for the educational program, and requires the professional spouse to replace marital assets a wife lost as a result. While a wife does not necessarily have the right to a degree as property, she might have a right to reimbursement for her investments, from which she received no lasting benefits. This could be in the form of a larger property distribution, a lump-sum payment, or an alimony award.

Alimony as Compensation

In many situations, a husband’s professional degree will give him a higher earning potential for the future. On the other hand, a wife may have put her career aspirations on hold to support the household and husband while he earned the degree and professional license. When a divorce arises, the two spouses may have a discrepancy in their earning abilities.

A wife should not have a lower standard of living than her spouse after contributing to his professional degree and making sacrifices regarding her own career for the good of the marriage. In this situation, a court may award the wife alimony to accomplish one or more of the following:

  • Compensate her for her contributions
  • Help her enjoy the standard of living she had in the marriage if she cannot afford it based on her current earning power
  • Allow her to obtain her own education or training needed to boost her career and earning potential

Overall, the law in most jurisdictions generally supports the fact that spouses have the duty to support one another, including to help them obtain professional degrees and meet other goals. For this reason, a degree is generally not considered to be marital property, though there are other ways that wives can be reimbursed for their selfless contributions to a spouse’s professional future.

When you and your spouse are discussing property division and possible alimony awards in your divorce case, it is important to know your rights in your jurisdiction. This can help avoid agreeing to a property division resolution that fails to properly compensate you for your contributions and sacrifices. It is always a wise idea to discuss the complicated property and financial issues, such as professional degrees and income discrepancies, with an experienced divorce lawyer who can advocate for your rights.

The post Is Your Husband’s Professional Degree Marital Property? appeared first on Divorced Moms.

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Can Your Husband Seek Spousal Support?

husband seek spousal support

 

There are several concerns in divorce cases, depending on your circumstances. These can include child custody arrangements, child support, the division of your marital property, and spousal maintenance – also known as alimony.

While a spousal maintenance award is never a given and the issue doesn’t come into play in every case, there are divorces in which maintenance plays an important role.

Whether your husband can seek spousal support or not will depend on a variety of variables. Understanding the basics as they relate to spousal maintenance can help you make decisions that protect your rights throughout the divorce process.

Can Your Husband Seek Spousal Support?

Maintenance Awards

Spousal maintenance is generally predicated on financial disparity. If, for example, you are the primary breadwinner and your husband was the primary caregiver for your children throughout your marriage, he might be able to successfully seek alimony until he is able to begin working and supporting himself. There are, however, a number of considerations to take into account. Generally, the longer you were married and the greater the difference in earning ability and assets between the two of you, the greater the chance that your husband will be eligible to seek spousal support.

Will Your Husband Be Awarded Alimony?

Every divorce comes with its own highly specific financial circumstances, but the general rule is that if your husband lacks the means to provide for himself and is incapable of attaining appropriate employment right away, he might be awarded maintenance.

This means that if your spouse is unemployed or simply doesn’t earn enough, if his portion of the marital assets aren’t sufficient to make up the difference, and if he doesn’t have the education, skills, or experience to obtain a job that would provide him with the necessary means to support himself – the court might look to you to help him move forward post-divorce with financial support.

It’s important to recognize, however, that alimony is very rarely a permanent proposition. Instead, alimony is a stopgap measure that will be used to help your ex find his financial footing after the divorce. Generally, the longer your marriage and the greater the financial disparity, the longer the alimony period.

Determining Spousal Maintenance

Every determination regarding alimony is specific to the individual situation, but there are some basics that almost universally apply. The court will take a variety of factors into careful consideration in determining whether alimony is appropriate and, if so, what its duration should be. These factors can include:

  • The duration of your marriage (having been married for ten years or more can play an important role)
  • The age and health status of both you and your husband
  • How your marital property was divided (each of your post-divorce assets)
  • The level of education each of you has (including your level of education now as compared to your level of education when you married)
  • Your earning capacity in relation to your husband’s earning capacity
  • The tax consequences related to your divorce
  • The contents of any premarital or postmarital contractual agreements (a prenup, for example)
  • The amount of time it will likely be necessary for your husband to become self-supporting at a level that’s comparable to the one you maintained as a married couple
  • Any contribution that your husband made to your education or to further your career during the course of your marriage
  • Any other circumstances that the court deems relevant

if the court determines that your husband is entitled to maintenance, it will then go about calculating the appropriate amount and duration, which will be predicated on your ability to pay while still satisfactorily supporting yourself.

What Does Maintenance Cover?

Maintenance can be a mechanism for making property division more equitable, a means of short-term support to help your ex-husband become financially self-sufficient, or a permanent support strategy for a spouse who has a limited ability to earn that cannot be rectified or who is outright unemployable (because of a disability, for example). Permanent maintenance is far less common than temporary maintenance.

When it comes to the division of marital property, there are instances when maintenance can help make the distribution more equitable. For example, if you own and manage a business that supported your family throughout your marriage, it can be very difficult to value and/or divide the business for divorce purposes.

If you keep the business, the court may award your ex-husband maintenance to help smooth out any disparity in the property division. Further, if your husband didn’t work or was underemployed during the course of your marriage, the court may award him temporary maintenance while he finds his way back into the work world and begins earning a sufficient salary.

Mitigating Circumstances

In most situations, there simply is no guarantee of maintenance. If the judge finds, for example, that your ex was taking advantage of your generosity by not working throughout the marriage, he or she could deny maintenance.

Further, if your husband’s marital misconduct – such as overly lavish spending or an extramarital affair – brought about the dissolution of your marriage, the judge can take that into consideration in determining whether maintenance is appropriate or not.

Perhaps more than any other divorce issues, the question of maintenance is highly specific to the situation at hand and often hotly contested. If you have maintenance concerns, you need the professional legal counsel of an experienced divorce attorney on your side.

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financial stability after divorce

5 Steps To Achieving Financial Stability After Divorce

financial stability after divorce

 

Many of us tend to focus on the emotional damage that can accompany divorce. It is important to keep in mind that divorce can have a significant financial toll as well. Women tend to fare worse than men economically after divorce, with one government study finding that a woman’s household income might fall an astounding 41 percent after divorce – almost twice as much as the reduction generally experienced by men.

There are real and significant costs associated with ending a marriage, finalizing a divorce case, and establishing separate households. Fortunately, there are steps that you can take to establish financial independence and stability after divorce. The following are some of the most important.

Steps To Achieving Financial Stability After Divorce

1. Establish Separate Accounts

Moving forward after divorce means establishing a completely separate financial life. As a result, you should close any joint bank or investment accounts that you and your ex may have together, make sure that any joint credit accounts that you and your ex had been closed or the appropriate user is removed from the account, obtain a credit card in your name only, and make a list of your individual assets and debts.

When you open your own accounts, be sure to set up a savings, money market, or investment account where you can begin building emergency funds and achieving other savings goals.

2. Set a New Budget

Once your divorce is final and the dust has settled, it is time to set a new budget, which might look substantially different from your prior budget during the marriage. In order to do so, you should first determine your post-divorce income.

If you are working, find out exactly how much you will be making every paycheck, and do not forget to include income from alimony (maintenance) or child support. Next, determine how much you need to maintain the lifestyle you would like and see if the numbers work out.

You may find yourself pleasantly surprised with your post-divorce income or realize that you may need to find another job or cut financial corners in certain areas. For example, keep in mind that as a single person, you probably do not need as much space as you did while you were married.

You may be able to significantly reduce your housing payment and utility bills by moving into a smaller apartment or house. Once you have a budget that works, try to stick to it as closely as possible. It might seem easy to pay for things outside your budget with credit cards, but the balances will add up quicker than you might imagine, and you might not have room in your budget to add in credit card payments.

3. Avoid Crisis Spending

The time immediately after your divorce is over can be an extremely difficult time emotionally. For this reason, you should avoid making big financial decisions during this period. While it may be tempting to purchase that new car you have always wanted, move to a new city, or take an expensive vacation, you should hold off on these and other large purchases until you are in a more emotionally stable place.

One of the best ways to prevent yourself from engaging in crisis spending is to limit your purchases to things that are going to meet your basic needs – your food, shelter, clothing, and transportation.

4. Build Your Credit

Divorce can wreak havoc on your credit, and it’s important to start building your own credit profile so that you can truly live independently and finance large purchases like homes or vehicles. Start with being sure to pay your bills on time every month. As soon as you feel like you are comfortable with your new financial situation, open a credit card in your name and make sure that you pay it off each month.

Avoid applying for too much credit in a short period of time, however, as this can negatively affect your score. Finally, regularly check your credit score on a free site. Make sure that all of the information in your credit report is up to date and that debts are marked closed as you pay them off.

5. Seek Help from a Financial Advisor

As a newly divorced woman, you should certainly seek help from a trusted financial advisor who understands your situation. Even if you had a financial planner during your marriage, it might be a good idea to find a new one who does not know your ex-spouse.

You should start working on your retirement plans on your own immediately, and a qualified advisor will certainly have some options for you. In the event that there were retirement accounts that were split up at the time of your divorce, you should certainly look into a Qualified Domestic Relations Order (QDRO) that can allow you to move money out of retirement accounts without any tax consequences.

An advisor can help you start a new investment portfolio with a lump-sum payment or periodic payments you received as part of the divorce order.

Finally, if you have any questions about your legal or financial obligations or rights as part of your divorce, you should speak to a family law attorney in your area.

The post 5 Steps To Achieving Financial Stability After Divorce appeared first on Divorced Moms.

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divorce is like buying a house

How Divorce is like Buying a House

divorce is like buying a house

 

Many people going through a divorce think they just need an attorney to split up their assets and debts, figure out support and draw up the paperwork.

The problem with this line of thinking is a divorce is most likely the biggest financial transaction of someone’s life and an attorney is not a financial professional.

A divorce has a bigger impact than buying a home does in the long run.

When you buy a house, you have a team of professionals to make sure the deal is done right. If you need to get rid of the house after the purchase, it’s fairly easy to sell it and move on.

When going through a divorce, you need just as many people surrounding you to make sure the deal is done right because when it’s all said and done, you can’t go back and change the deal.

Let’s go through what your home buying team looks like and how that compares to what your divorce team should look like.

How Divorce is like Buying a House

Your Home Buying Team

Realtor

You will want a realtor to help you find the perfect home to fit your needs and to give you the inside scoop on the community. Your realtor is the backbone of your team. You trust that they are picking out the very best homes based on your needs for you. They are with you from start to finish and possibly many years later when buying a larger or smaller home.

Mortgage Lender / Banker

Most of us aren’t in a position to be buying a house without a little financial help from the bank in the form of a mortgage. Maybe your realtor refers you to a few lenders. That lender is going to figure out and let you know based on your assets, debts and income how much you can afford and the best type of mortgage for you.

Home Inspector

An inspector should look at the house before the sale is confirmed to ensure the foundation is sound and living conditions are safe. You certainly wouldn’t want any surprises after you have bought the home. Not knowing whether the house is up to code can result in large unplanned costs.

Attorney

Finally, you will need an attorney to draw up all the paperwork to ensure money goes to all the right places and the deal is legal.

This is your core home buying team. You will most likely need more professionals depending on your situation, but this just about covers your basis.

Your Divorce Team

Attorney

An attorney is the most well-known professional for divorce, but they can’t do everything. They are excellent for drawing up documents and advocating for what you are legally entitled to. However, they aren’t licensed or certified to advise you on the long-lasting effects of splitting up property, retirement assets and businesses. Most attorneys will help you put together your Statement of Net Worth, tell you how to divide assets and debts and figure out calculations for spousal and child support.

They can certainly split up your finances, but they cannot educate you on investments, taxes and insurance along the way or what the effect of splitting everything up is going to have in 2, 5, and 10 years. Hourly rates range from $300 – $800/hour.

Certified Divorce Financial Analyst (CDFA)

Most people want to understand what is happening in the divorce process; especially with their money. There are many ways to split up assets and debts in a divorce, knowing what way is going to benefit you the most in the future will save tens of thousands of dollars, if not hundreds of thousands of dollars. This is what a certified divorce financial analyst does day in and day out. Most CDFA’s will complete your statement of net worth for you or with you and educate you along the way.

They will also propose how your assets and debts can be distributed so that nothing is overlooked, taxes are saved, penalties are avoided and what you are left with is in line with what your future needs are. As for child support and spousal support, they do those calculations as well; ensuring items aren’t forgotten like cash from a business that’s not reported. Hourly Rates range from $150-$400/hour.

Mediator

Some couples use a mediator instead of attorneys to divorce. They are a neutral third-party who helps you come to an agreement on how to split up custody, support, etc. Many states do not have any requirements for someone to be a mediator so be sure to do your homework. Find one that is experienced and concentrates on divorce. Mediators are wonderful when it’s an amicable divorce. Be sure to still get some legal advice from an attorney and have them draw up the final documents for you.

Mental Health Therapist

Divorce is one of the most stressful, uneasy times of your life. It’s a good idea to talk with a professional so you can be the best possible mom, aunt, daughter, co-worker, and friend. Taking steps to be the best you during a divorce means the world when entering the next chapter of your life.

You may have more professionals, but this should be your core divorce team.

If you have a team for your house, have a team for your divorce. 

Between splitting properties, bank accounts, retirement funds, debt and finding new living arrangements all while transitioning to just one income, a divorce is going to be the biggest financial change of your life. Make sure to have a team of professionals around you to help you. You deserve to have a financial advocate, an experienced mediator and/or legal counsel and a mental health counselor. Invest in yourself and your new future now so that you don’t have regrets or “surprises” once your divorce is complete.

By building a core divorce team just like you would when buying a house you will have peace of mind when you sign on that dotted line.

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10 Steps For a Money Smart Divorce

money smart divorce

 

When your marriage is ending, you have a lot on your mind including the past and the present. If you plan to make smart money decisions during your divorce, you will need to be focusing on your future as well.

Focusing on your future can really help when you are divorcing. Many couples learn the hard way and don’t examine their financial resources and assets to secure a financial future because they are too emotionally connected to the act of the divorce. Think of your divorce as a business deal and put the emotions aside so you can concentrate on the numbers.

10 Steps for a Money Smart Divorce

Get a Copy of Your Credit Report

The best idea to examine your credit is to get a copy of your credit report before the divorce so that anything in dispute on it can be resolved in advance of the finalization of your divorce. Contact the big three including Experian, TransUnion, and Equifax so you can get a copy of your report from each one.

This is the quickest manner to get all the information you need in one spot about outstanding loan balances, mortgage debt, and credit card debt that you and your spouse will need to divide in the divorce proceedings.

Open Individual Accounts in Your Name

This is another item on your to-do list before your divorce is official. It’s easier to get a credit card and a bank account solely in your name while you are still married because you share joint assets and debt on your credit cards, mortgages, and loans with your spouse.

This is of the utmost importance if you are a woman and have never established credit before. As people age and they don’t have credit, then it is almost impossible to get credit because they are seen as having no background with credit to be considered for a credit card and thus will be denied just because of no credit background.

Close all Your Joint Accounts

Divorces can be a long-drawn-out process that can take a lot of time. You want to close out all your joint accounts with your spouse to avoid acquiring more joint debt or losing shared bank assets during the process.

Cancel the accounts in writing and make certain to request that each creditor report the account as “closed by customer” to the credit bureaus so it does not reflect badly on your individual credit reports. Even though you close out all of the accounts, you will still be jointly responsible with your spouse to pay off the balance on each closed account.

Keep Property Separated

The assets that you acquired before the marriage and brought into the marriage, such as vehicles, real estate, an inheritance, gifts of any kind and money you had before the marriage are your separate property and they are yours after the divorce. You need to make sure and keep these separated in order to be awarded them.

For example, if you had a monetary inheritance and the money went into a joint bank account after you got married, then the court will consider this joint property and they can divide it according to the property laws of the state in which you reside. Keep in mind that your separate debt also travels with you. If you had a student loan and your spouse was jointly helping to pay the payments on it, you carry the balance out of the marriage with you.

Consider Selling the House

Women divorcees often want to keep the marital home at any cost because of emotional ties to it and the family. You should look at this issue and set aside your emotions. If you may not be able to afford the payments, then you can lose the home in the future.

You might consider selling the marital home and using the money to purchase a smaller home that you can easily afford with money left over as a financial cushion in the case that you would need it. This is especially important in an economy where we have no clue what the future will hold.

Change Your Beneficiaries

Most married couples name their spouse as their beneficiary on wills, trusts, IRAs, life insurance, and pension plans so that if one dies, the other will have the money to take care of the children. You really don’t want your ex to have a windfall of money in the case that you have an untimely demise. You can also examine each of these documents when you make changes to them and change your marital status on them at the same time.

Reclaim Your Maiden Name

Many women want to reclaim their maiden name to sever the ties of the relationship after a divorce. You will be required to have proof of the divorce decree in order to do this. You have a long list of to do’s here. You need to get a new driver’s license and report your name change to your employer, doctors, human resources department, your children’s teachers and schools, your landlord, mail person, health insurer and your pharmacist.

You will need to redo your W-4, other tax forms and report the name change to the Social Security Administration. You could lose valuable credits on your social security if there is a mix up with the names.

Check into Your Retirement

If you are pretty close to retirement age, you should check into your Social Security benefits. If you are 62 or older, were married for 10 years or more and have been divorced more than two years, without remarrying and you don’t qualify for an equal or higher Social Security benefits on your own, you can receive benefits that are based on your ex-spouse’s Social Security record even if your ex has not applied for benefits that they are eligible to receive. If you remarry, those benefits will end.

If you are raising a child that is under the age of 16 from the marriage you may be able to receive benefits on your ex-spouse’s record even if your marriage didn’t last 10 years. Usually, you can expect the same amount you would have gotten if you had remained married and sometimes all of it if your ex-spouse dies. The benefits you draw on your ex-spouse’s account do not affect amounts that are due to your ex-spouse’s current spouse.

Keep Your Health Coverage If at all Possible

If you are divorcing, try to keep health coverage if at all possible. One uncovered medical emergency can cripple you financially for the rest of your life. The COBRA program ensures that you are guaranteed 18 months of health coverage. It’s best to pay the much higher fees but remains with health coverage until you can find a lesser expensive alternative.

Get Up and Get Going

It’s recommended to get your credit report again about three months after your divorce is finalized. This will enable you to clean up any loose ends and to see all of your debts and assets in one area. If you received a lump sum payout in the divorce, you may want to consult a financial planner to ensure that it is well taken care of and don’t buy that fancy new sports car that you’ve always wanted.

Remember that you can live well no matter what your net worth is or what your marital status is.

These items on your to-do list will help you to remain financially sound after a divorce when you will need to handle all of your own finances. It’s a hard task, but the more you can put aside emotions, the better off you will be on your own.

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divorce and life insurance

Getting Divorced? Don’t Forget about Life Insurance

divorce and life insurance

 

If you’re a divorced woman, chances are you’ve got a lot on your plate right now. The chaotic and difficult process of getting divorced means you’ll spend lots of time weeding through the marital assets, separating finances, and sorting out vital things like custody of children. Getting financially stable after a divorce is no easy feat, and there are lots to manage.

One area many divorcing couples overlook is life insurance. As a divorced woman, the challenges addressed by securing life insurance are two-fold. First and foremost, any existing policies will need to be adjusted to change beneficiaries and ensure the protection of child support or alimony payments. Secondly, you’ll need to consider the best kind of life insurance policy for your situation and how much coverage you’ll need moving forward.

Here are a few items to add to your to-do list as a divorcee to ensure you and any dependents are financially protected, both in the short term and the foreseeable future.

Getting Divorced? Don’t Forget about Life Insurance

Changing Beneficiaries

When you were married, your spouse was probably listed as the primary beneficiary on your life insurance policy. After all, the entire point of life insurance is to shelter your family and loved ones if your income is lost through a tragic death. A life insurance policy is a crucial contingency plan for meeting financial obligations like mortgages, car payments, and putting food on the table.

After a divorce, much of that calculus changes. If you are divorced without children, chances are you’re not keen to see your spouse benefit on the event of your demise. No matter your marital status, life insurance companies don’t dispute who receives payouts on a policy. For the company, it’s a simple contract between the insurance carrier and the policyholder. The beneficiary is whomever you documented when you took out the policy, and that won’t change unless you file a specific request with the company.

Changing beneficiaries is usually a straightforward process of contacting your life insurance carrier. Unless you have a policy with irrevocable beneficiaries, you can specify someone new to receive the payout upon your death with minimal paperwork and fuss. Some insurance carriers provide ways to accomplish this online, while others require going through a broker or submitting notarized documentation.

And remember, life insurance isn’t the only thing you’ll need to update. Remember to switch over other insurance policies, including health, home, and auto insurance. It’s also essential to change the beneficiaries in any legal documentation that might survive you, like a will and a power of attorney.

Policies with Cash Value

Some permanent life insurance policies, such as whole life or universal life policies, accumulate cash value. As you pay premiums, a portion of the money goes into an investment fund that can expand as the stocks rise. If you’ve had such a policy and recently divorced, you probably discovered the balance in that fund is considered part of the marital assets. You’ll typically have two options—keep the policy and continue paying premiums or cash out and divide the spoils.

For typical term life insurance policies, no payout is made until death occurs or the policy period expires. However, for whole and universal life insurance policies, you can choose to decline any potential death benefit in lieu of taking the current cash value of the policy. Therefore, these kinds of permanent life insurance policies are considered part of your net worth as a couple and get divided as assets during the divorce settlement accordingly.

You may also want to speak to a financial advisor in addition to your divorce attorney before making any critical decisions about dissolving or dividing assets. Financial experts can give you advice about how to handle transitioning not only insurance policies but also other assets like 401(k) and retirement plans in a way that’s equitable for both spouses and avoids tax penalties.

Protect Your Income

When you get divorced, life insurance isn’t solely about covering your lost income for the dependents you leave behind. It’s also about replacing any potential child support or alimony payments if you or your former spouse should die. For the parent who retains primary custody after a divorce, a life insurance policy is a crucial safety net that can cover the costs associated with raising children, including future financial necessities like supporting them through college.

There are several ways to handle securing life insurance coverage on your former spouse. Some couples choose to make the stipulations about the policy and premiums part of the divorce decree. The court may even order the head of the household to take out a life insurance policy as part of the settlement. In cases where the court requires a spouse to maintain a life insurance policy after divorce, the coverage and duration mandated usually reflect the obligation. For example, if the life insurance is intended to cover a significant loss of income and child support for the custodial parent, the policy term will usually need to extend until the dependents are 18 or 21.

Financial Security for Children

If you carried a life insurance policy during the marriage to provide for your children in the event of a death, that need still exists. Plus, in an acrimonious divorce, things don’t always work out according to plan. If you have concerns about whether your former spouse will follow-through on making payments, take control of the life insurance policy yourself and pay the premiums to avoid any risk of coverage lapse. Even if the coverage was specified as part of your divorce decree, it may take time and significant hassle to get follow through on those stipulations enforced by the court. In the interim, you want the assurance that your policy is paid up and your coverage current.

When you’re raising children as a single parent, protecting your own income becomes doubly important after a divorce. In the event of your death, while arrangements may be made for someone you trust to care for your children, you’ll still want them to enjoy financial security through a generous life insurance benefit. The simplest way to calculate how much life insurance coverage you’ll need is to take the number of years until your child turns 18 or 21, then multiply it by your annual income. That amount is the bare minimum of insurance coverage you should be securing per child.

You can name your child as a beneficiary, but be aware that policies typically don’t pay out to a dependent under the age of majority. Instead, the court will appoint a custodian, usually the surviving parent, to supervise holding the funds in an account until your child is of age. If you don’t want your former spouse to be appointed by the court, specify a custodian as part of the policy.

A Word of Warning

If you’re still in the process of finalizing a divorce or in the beginning stages of filing for one, consult with your divorce attorney before taking any action. In most cases, assets are frozen during the process of a divorce and both parties are required to be fully transparent about any financial obligations, including insurance policies. Changing beneficiaries or coverage during divorce proceedings could raise red flags and unnecessarily prolong and complicate your settlement.

You should, however, do your research and be prepared to suggest any policy changes or premiums you want specified as part of the divorce decree. While divorce can be a painful process, it’s also an opportunity to take charge of your financial future and secure stability for both yourself and your dependents.

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Complexities of a High Net Worth Divorce

The Complexities of a High Net Worth Divorce

Complexities of a High Net Worth Divorce

 

[The following excerpt comes from Jacqueline Newman’s book “Soon-to-Be Ex: A Woman’s Guide to Her Perfect Divorce and Relaunch.”]

When it comes to money issues in divorce, the laws are drafted to target those with simple financial lives and make it cost efficient so they do not have to spend tons of money litigating in Court. However, a high-net-worth divorce can present many issues that differ from divorces involving fewer financial assets.

The greater concern for those with significant incomes is that there are less “rules” for courts to follow. Therefore, judges have a huge amount of discretion in deciding how to interpret these laws to apply to high-net-worth cases.

It is like squeezing a square peg into a round hole. While it may seem like a high-net-worth divorce could be easier to settle because it is apparent that no one is going to go hungry, you must also remember that when there is more to divide there is more to fight about!

Complexities of a High Net Worth Divorce

At The Mercy Of A Judge

An example of how high-net-worth cases do not fit into the current statutory paradigm is as follows. In New York, the statute that governs child support is currently only set to consider the parties’ combined parental income up to $143,000 when applying the stated formula.

If the combined parental income exceeds $143,000, then the court looks to numerous subjective factors to determine the appropriate amount of child support. When a client earns income in the millions, I feel that the statute is of little use to a court.

The obvious thought was that most people in the whole state of New York probably do not earn much more than $143,000 per year so the formula should be easy to apply to those with lower incomes and thus the needs to spend money on litigation is less.

However, for those who live on the upper east side of New York City, those income levels speak to their part-time nannies, so these statutes are of little use.

If I am advising clients who fall in these income levels on what his or her child support obligation may be, it is very challenging because a judge has a lot of latitude in going above the cap.

Once a judge determines that the $143,000 is not appropriate, then the court will look to the child’s “needs” to determine child support, and that is when the games begin. Does that child “need” to keep the fourth vacation home in Aruba? Does the child “need” a private yacht? Maybe yes—maybe no.

Of course, there are some cases that have been previously decided by other judges that deal with high-net-worth cases.

Here, there are a few guidelines to follow. The problem with attempting to apply case law is that most high-net-worth divorces settle out of court and even those that are litigated to reach a decision often do not involve publicly-broadcast terms. Therefore, there are inadequate amounts of legal guidance and precedent for clients to consult.

The biggest child support awards I have heard of are Eddie Murphy, who had to pay almost $60,000 per month for one child, Russell Simmons who allegedly paid $40,000 per month for two children, Sean P. Diddy Combs paid almost $42,000 per month for two children, billionaire Francois-Henri Pinault paid $46,000 per month in child support for one child, and Charlie Sheen originally paid $55,000 per month in child support to each of his wives (but has since had it lowered to $25,000 per month per wife).

Most of these cases were ultimately settled, so this is based on tabloid reporting but when it comes to real courtroom decisions when dealing with significant incomes and extraordinary lifestyles, judges can basically do whatever they want.

Complexity Of Assets

The other possible challenge for high-net-worth cases has to do with the complexity of the assets that are being divided. There are some people who have millions of dollars in cash sitting in a bank account (or filling a mattress)—but those are very rare.

Typically, those that fall in the high-net-worth space hold complex assets, whether it be brokerage accounts, private equity investments, real estate, or business interests.

There could be an entirely separate book written dealing with the variances that exist when valuing and dividing complex assets, which we discussed a little bit in Chapter Eleven on Asset Distribution.

The problem with many high-net-worth cases is that many of the assets are typically illiquid (except for those with the fluffy mattresses), so some assets cannot be split and therefore there are numerous valuations involved, which are also subjective, and involve creative methods of pay-outs. Many of these assets are embedded with capital gains or have other cost consequences if they were to be liquidated.

It is not a simple “you take half of the checking account and I will take the other half” situation.

The other issue that comes into play in high-net-worth cases has to do with the way that these complex assets are divided. Many states (like New York) are equitable states, not equal states.

This means that you are not looking at an automatic 50/50 split of assets. Even in some of the cases that claim to do an equal division of assets, there may be different ways of valuing certain assets that do not make the split as easy as cutting it down the middle.

For example, in New York, business interests are rarely divided equally even if the rest of the assets are. The level of asset division can be different based on the nature of the asset.

Even issues such as who pays for counsel fees can be different in high-net-worth cases. Typically, the monied-spouse would be responsible for the majority of the counsel fees. However, when the non-monied spouse is receiving $20 million in assets, a court may very well say that the spouse can afford to pay his or her own legal fees.

In many high-net-worth cases, you need to also consider outside factors beyond the income and assets to be divided. Many people who fall into the high-net-worth space have great concerns about information being leaked about their businesses and also may be in the public eye with an image to protect.

When dealing with celebrity clients, this becomes a huge factor in a divorce negotiation. It is even worse when you have one person who is a household name and the other who is not, but who obviously wants to be and is willing to use the details of the parties’ divorce to get there.

If you are representing CEOs of public companies, it is often imperative that the public not know that his or her marriage is in trouble, the combination of a gossip-hungry public and a juicy divorce could cause the stock to plummet. That is when you need to factor in confidentiality agreements and manage how the media is provided its information. And if you need to file a gag order – be ready.

The Right Attorney

The abovementioned factors are why it imperative that the attorney selected in a high-net-worth divorce has knowledge of operating within the high-net-worth space so that their experience allows them to predict how a judge may rule and what pitfalls they need to avoid.

You need someone who is fully familiar with the variations of complex financial assets, compensation packages, knows the appropriate valuations that need to be done and has creativity when dividing up illiquid assets.

On a positive note, high incomes matter very little when it comes to child custody. The law is the same whether you earn $10,000 per year or $10,000,000 per year. Custody standards remain as the “best interest of the child”, which we discuss more in Chapter 15.

This dictates that the court will consider the same factors regardless of income levels or assets when determining who shall be awarded custody of the children.

Before going to court in a high-net-worth divorce, I always ask my client, “How much do you like to gamble?” Remember, anytime you enter a courtroom you are gambling on the actions of a judge.

There is an inherent risk (albeit an educated risk if you have a savvy attorney) and the outcomes can be as unpredictable as rolling the dice in a game of craps. You may get a judge who does not believe that having the fourth home in Aruba is a necessity for your daughter in an effort to retain her lifestyle.

On the other hand, you may encounter a judge who feels that if this is what the child is used to having, then it should be continued. I remind clients that litigation is often a luxury few can afford because no matter how wealthy you may be, you do not want to spend hundreds of thousands of dollars—sometimes even millions—on endless and uncertain litigation regarding your financial future.

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financial advice for new single mothers

9 Pieces of Important Financial Advice For New Single Mothers

financial advice for new single mothers

 

Life is different now. You have recently been through a divorce and are now the single head of a household, which is a huge personal – and financial – responsibility. While you may still be doing many of the same things as before, you now are 100 percent responsible. There is no one to share the myriad responsibilities and decision-making.

This may be all new to you. It is also likely that you are still riding an emotional rollercoaster. Now is a good time to step back and take a deep breath. While many financial challenges lie ahead, understand that you can do this.

Financial Advice For New Single Mothers

What do single mothers have to do differently financially? To achieve financial success, newly single mothers should heed the following advice.

Just say no to credit card debt

Don’t live beyond your means and rack up high-interest credit card debt. This is one of the worst debts to have due to high-interest rates. Credit card debt should be paid off first when prioritizing bills.

Prioritize what is most important.

Take a moment (or longer) to assess your new financial life. Your family needs you to clearly understand how you can make everything work, without sacrificing too many of “the good times.” Review your lifestyle and analyze what changes and/or adaptations need to be made. Prioritize and differentiate between your needs and wants, and those of your family. Make notes. Create lists. Write things down.

Ultimately, let this “prioritization” process guide your budget. Focus on just a few practical lifestyle/financial priorities and learn to make concessions with others.

Get real with what you can afford.

Create a realistic budget. Track your spending over a specific time to see where your money goes. The goal is not to set up an austerity program that is so severe that everyone is unhappy; rather you just need to accurately understand your spending habits so you can manage and track your flow of money in an honest manner. For example, if yoga makes you happy and less stressed overall, look a reasonably-priced studio in your area or do an at-home workout.

Not spending money on yourself (within reason) can be detrimental in the long run. It is fine to put some of the focus on you. Every mom has been told that she needs to take care of herself first, so she has the energy and resources to take care of others. This applies to finances too.

Don’t try to keep up with everyone else.

Even if your lifestyle had been different previously, now is not the time to try to keep up with your neighbors and friends. As we said earlier, your life is different now. The financial decisions you make going forward will be based on a different set of circumstances.

For example, prioritize making mortgage payments and saving for (or taking) one annual family vacation, rather than putting yourself into debt to drive a more expensive car.  Even if it seems that’s what everyone else is doing, prioritizing driving the Mercedes instead of keeping up with your everyday bills will only hurt you in the long run.

Manage risk smartly.

Having only one income means it is just that much more important to protect. Obtain life and disability insurance to protect you and your family in the event the unforeseen should happen … because it can. Unfortunately, I have worked with clients who depended exclusively on one income and that person became sick and was out of work for several months.

It was both unfortunate and sad. Purchasing a cost-effective disability policy is a prudent way to safeguard against a potential loss of income.

Develop a plan B.

Planning for the future is an important component of ongoing financial awareness. Many people have asked me what is necessary for an estate plan when you have young children. At the very least set up a will. Should something happen to you, you want to have a say in who will care for your kids and where your assets will go. You do not want to be in a situation where the state determines who the guardian of your children should be – what if that is not aligned with your intent? Get it in writing.

A full estate plan is recommended (including health care proxy and power of attorney), but creating a will is a good, productive first step.

Pay yourself first.

With only one income, it may seem harder to save for retirement, especially if you envision having college educations to pay for, but it is critical to do so. Children can receive financial aid, scholarships, and loans to help pay for school, but those alternatives do not exist for retirement. Put away as much as you can into your retirement savings on a pre-tax basis and make sure to contribute at least as much as your employer matches (it’s free money!).

Don’t try to do everything on your own.

Not having a knowledgeable team of resources on your side can be the biggest disservice possible to yourself. A smart parent – especially a single parent – is aware of what they don’t know and asks for help when she needs it. This includes seeking help with your finances. Work with an advisor who places your interests first to help you make sense of the various aspects of your financial life and empower you to become educated on these topics.

Get referrals for accountants, estate planners, etc., from trusted friends or colleagues who you know have been in a similar situation to what you are facing. Building a support system will make managing finances as a single parent much less overwhelming.

Proactive Approach

Taking a realistic, proactive financial approach as a single mother is essential to your well-being and that of your family. Following the advice in this article can help you avoid unnecessary anxiety and keep your financial options open as a single parent.

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