DIVORCE BASICS: Planning When the Unplanned Happens.
No one likes to think about divorce. That it happens means that
a very important part of one's life did not go as planned. When
it does happen, however, there is absolute and immediate need
for a plan--divorce financial planning. While divorce is never
an easy process, effective divorce planning can mitigate some of
the pain and confusion involved that may affect you for the long
term.
Divorce proceedings and Marital Settlement Agreements (MSAs) are
often complicated. Drafting your MSA--the document that will
identify and divide affected property and outline provisions for
custody and child support--is a key step in any divorce, one
that many couples execute poorly. The repercussions from doing
so can affect you for the rest of your life. There are basic
steps, terms, and intermediaries that can help make your divorce
planning less stressful:
1. Self-help guides Some financial situations render legal help
unaffordable. There is plenty of literature available devoted to
divorce planning. Remember though, an MSA is probably the
largest financial transaction of your life--consulting someone
with education and expertise is advisable. 2. Paralegals While
they can file your divorce papers with a court, they CANNOT give
legal advice. 3. Mediators Attorneys, judges, or other qualified
professionals that work with couples seeking an out-of-court
settlement. Mediators do not go to court or handle litigated
matters. Check with your local Bar Association for a list of
Family Law Specialists and Mediators: a majority offers free
consultations (usually lasting 30 minutes). 4. Litigation
Attorneys Litigation attorneys help couples that can't reach an
amicable settlement by preparing their case for a hearing before
a judge. 5. Certified Family Law Specialist An attorney who has
specialized education and expertise in family law--in many cases
such specialists are best when taking your case to trial. 6.
Certified Divorce Planners CDPs mediate the financial aspects of
an equitable divorce settlement, generally working in
conjunction with a Family Law Attorney. 7. Collaborative Law
Involves a team approach where two attorneys (one for each
party), two mental health coaches, and one financial advisor
assist in determining a settlement. All members of the team sign
a statement agreeing to work together in keeping proceedings out
of court and preparing an MSA that is fair for all involved.
MEDIATING * Mediated cases generally cost 10% that of litigated
cases * Mediated divorces are settled as quickly as an agreement
is established * In many states, divorces are final after a six
month separation period
vs.
LITIGATING * Litigated divorces usually require a starting
retainer of $10,000 * Eventual fees drive costs up by tens of
thousands of dollars * In-court divorce proceedings can carry on
for more than two years
Dividing assets is tricky territory as regulations vary from
state to state. Some states treat income earned during a
marriage as community property--regardless of who earned it.
Anything purchased with community property funds is owned by the
parties equally. In the event of a marriage dissolution, assets
are divided between the parties. The division that you should
seek should be the best one for both spouses--you may decide on
something other than a strict 50-50 distribution if it is better
for the family as a whole.
Retirement accounts can be kept by whomever's name appears on
the account. If a couple prefers to divide a pension, a court
order called a Qualified Domestic Relations Order (QDRO) is
required to do so. Banks can transfer IRA account funds without
a QDRO.
The final, most stressful divorce issue involves the
determination of child support. Remember these primary
considerations:
* Spouse income * Percentage of time spent with children * State
and Federal taxes for each child * Health insurance costs for
each child
Child support is not tax deductible to the payer or taxable to
the recipient. California has a child support guideline that can
be determined by using any certified support calculation
software program. Computer calculations do not provide a ready
answer for spousal support or alimony. Alimony is based on the
needs of the supported party and the other party's ability to
pay. Alimony is tax deductible to the payer and must be included
as taxable income on the recipient's tax return. A combined
payment known as family support is treated the same as spousal
support. Obtaining a life insurance policy for both spouses (to
insure continuing support should a parent die prior to
completion of his or her support obligation) is also an
advisable step.
Never underestimate the decisions made while planning and
proceeding with your divorce--they will affect all aspects of
your life for years to come. Do what you can to make those
ramifications positive. There is so much to divorce than signing
papers and dividing assets. If "happily ever after" is not your
ending, a comprehensive understanding of your rights and
obligations can at least make it "happy after the fact."
Education and awareness is key to making the most out a
divorce's unfortunate circumstances.