Bedrock Divorce Advisors
Posts Tagged ‘divorce proceedings’
Five Best Financial Tips for Women Divorcing in 2021
Now that 2020 is in the rear-view mirror (thank goodness!!), it’s time to focus on 2021.
If you have put off filing for divorce because of the pandemic, you are not alone!
According to a recent article on Bloomberg.com, “the number of Americans getting divorced plummeted last year…” “The data contradict early predictions that Covid and the stresses of quarantine would cause divorce rates to surge.”
If you are now planning to divorce in 2021, here are the five best things you can do now that will make the process go more smoothly once it formally begins:
- Gather financial documents.
Along with holiday greetings, this month’s mail and/or emails brings year-end statements from banks, brokerages, credit card companies and the like. Make copies of these. Go through our Financial Information Checklist to see what other financial and legal documents you should gather and copy as well. Secure the copies with a trusted friend or family member or use a safe deposit box that your husband can’t access.
Having important documents on hand early in the divorce process means you avoid any possible unpleasantness (not to mention time and expense) trying to get copies of them later.
- Assess your credit.
Request a copy of your credit report and correct any misinformation it contains. Good credit is the foundation of your financial future, so watch it carefully! Without credit it can be near impossible to obtain loans for any purpose, or even to manage the expenses of running your household.
Keep an especially close eye on credit card statements. If your husband used your joint credit cards to buy his girlfriend gifts this holiday season, you’ll want to be able to document that.
- Open accounts in your own name.
As a single woman, you will need your own bank accounts and credit cards. It is not too soon to set these up. Use a different bank than where you currently have joint accounts, and open both savings and checking accounts in your name alone.
- Begin to assemble a professional divorce team.
Gone are the days when, if you or your husband wanted a divorce, the only thing to do was for each of you to retain lawyers who would then work through all the legal matters. Today, financial portfolios –and the regulations that govern them –are much more complex, and many women find they need multiple layers of professional help to navigate all the legal and financial details.
If you’ll be divorcing in 2021, it’s a good idea to begin researching divorce professionals who can steer the process. I recommend you start with a matrimonial/family law attorney, a divorce financial planner and a therapist/counselor. Gather and compare information and schedule interviews with the best candidates for January. Then, you can relax a bit, knowing that, as the New Year unfolds, your divorce will be in expert hands.
- Be watchful.
As your focus turns from being married in 2020 to getting divorced in 2021, there are some important things to watch out for. It is still very common for husbands to hide assets and/or income during divorce –even though that’s underhanded, unethical and illegal. The tactics run the gamut from stashing cash in safety deposit boxes, to underreporting income and overreporting expenses, to unloading property to family and friends with the understanding he’ll get it back after the divorce settlement is final. I’ve written before about specific signs that your husband might be hiding assets. Be vigilant.
Moreover, if you have any reason to suspect there is something amiss financially, you may want to seriously rethink filing a joint tax return for 2020. In most cases, the IRS is likely to find you are equally liable for any misdeeds, no matter how innocent or ignorant of them you are. (There is a very limited and hard-to-get I.R.S. and state exception called “Innocent Spouse Relief,” but it is rarely accepted.)
In closing, I’d like to tell you about my new company, Next Act Properties, Inc., (https://nextactproperties.com/) which provides one-stop real estate solutions for divorcing couples (Bedrock Divorce continues to exclusively work with women on the financial aspects of their divorce).
Here is a brief description of how we can help you:
One of the biggest issues people face when going through a divorce is what to do with the marital house, which is frequently the couple’s largest asset.
Often one spouse, typically the wife (especially if there are minor children), wants to remain in the house for a certain period-of-time, such as when the youngest child graduates from high school.
If this is the case, the first step would be to see if the spouse who wants to keep the house can 1) buy-out the other spouse’s share of the equity in the house and 2) Refinance the mortgage so that the new mortgage is only in the name of the spouse who will remain in the house.
We can help with both these issues.
Having worked since 2010 with hundreds of women around the country on the financial aspects of their divorce, we can work with the divorcing couple and their divorce attorneys to see if there are sufficient assets for one spouse to buy-out the interest in the house from the other spouse.
If a buy-out is possible, we would then help that spouse refinance the house in his or her name (the other soon-to-be ex-spouse will want their name off of the current mortgage) through our nationwide network of divorce mortgage experts, most of whom are Certified Divorce Lending Professionals (CDLP™ designation) and/or have many years of experience dealing with divorcing couples and their mortgage financing/refinancing needs.
Unfortunately, sometimes it’s just not possible for the spouse who wants to remain in the house to do so. He or she may not be able to buy-out the other spouse and/or refinance the mortgage.
If the spouse who wants to remain in the house was unable to buy-out the other spouse and refinance the mortgage, then we have a new and unique solution that will still allow the spouse to remain in the home.
Next Act Properties, Inc. will purchase the house for cash from the divorcing couple and lease the house back to the spouse who wants to remain in the house (sale-leaseback) for a period of several years (typically 3 – 5 years, although it could be longer or shorter).
And finally, should none of the above solutions work out, we can, through our real estate brokerage subsidiary, Next Act Realty, LLC, help the divorcing couple sell their home through our nationwide network of divorce real estate experts, most of whom have specialized training in the unique financial, legal and tax aspects of selling real estate in the context of divorce and/or have many years of experience helping divorcing couples sell their marital home.
Should I Keep the House?
Many women start divorce proceedings unprepared for the emotional rollercoaster surrounding the marital home.
Often, it starts as an internal struggle. After all, most women fully expect to keep their house. To them, it represents a place of comfort that will provide solace during, and after, a time of great uncertainty.
But at times, the marital house can be just the opposite. It can serve as a painful reminder of all that went wrong with the marriage.
Mix in the feelings (and opinions) of a husband and children (not to mention the fact that the marital residence is typically a couple’s largest asset), and it’s easy to understand how a single piece of real estate can ignite a contentious tug-of-war.
Despite all these emotions, however, every woman must answer the question “Should I keep the house?” based on practical financial reasons. Part of our job at Bedrock Divorce Advisors is to complete the financial analyses and projections needed to help a woman understand if she can afford to do so, and if so, for how long.
Are you trying to decide whether or not you should keep your marital residence? If so, here are four key questions you need to consider:
1. Is your marital home a good fit for the new “single” you? Perhaps the house you’re living in now was purchased with the needs of others in mind. Did you choose the location because it was convenient for your husband’s business and travel? Or did you seek out certain accoutrements largely because they were conducive to entertaining his business associates? If you did, maybe those accessories now seem frivolous and unnecessary. Are the children you raised in the home grown and living on their own? This could be the right time to downsize and find a place that better suits your life now. It’s important to sort through and separate what you needed from a home in the past vs. what you need now and in the future.
2. What is the current value of the house? Because the marital home is often one of a couple’s largest assets, an unbiased third party real estate appraiser can be an integral member of your divorce team. An appraiser will calculate the market value of the house by comparing it to homes recently sold and those that are currently on the market. Ideally, these comparable houses are in close proximity to your home and have similar square footage, acreage and amenities. Using this information, the appraiser will present an accurate selling price in the current competitive market. The appraiser’s report could feature prominently in divorce negotiations whether or not you decide to keep the house.
3. What is the cost of keeping the house? Along with mortgage payments, you’ll also have to pay for taxes, utilities, seasonal maintenance, monthly service contracts and perhaps even additional staff to manage the property. Costs like these can add up to become a significant addition to your monthly expenses. You’ll also have to consider looming repairs and renovations. While projects like these may add value to the home, they could also prove to be a further financial drain on your resources.
4. What will you have to give up in order to keep the house? Often keeping the marital residence is a tradeoff, rather than an exchange of cash. In other words, your spouse will keep something that is presented to be of equal value in exchange for the house. If you are concerned about hidden income/assets/liabilities, the possible dissipation of marital assets and/or the value of any item that’s under negotiation, you may need to add a forensic accountant and/or a valuation expert to your divorce team. They can determine the true worth of a business, professional practice or other asset with a keen eye for any misrepresentations that could skew that figure. The valuation expert can also establish the value of stock options (and/or restricted stock, etc.) and intangibles such as an advanced degree or training to help ensure that you do not unwittingly give up something of inequitable current or future value in exchange for the house.
Choosing whether or not to keep your marital residence may be one of the most difficult decisions you have to make during your divorce. Give yourself the time to think it through carefully, and remember: Think Financially, Not Emotionally®. You need to strategically manage your assets and develop a sound, comprehensive plan for financial stability and security in the 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.
How Are Appreciated Assets Divided in a Divorce?
In an earlier blog post, I explained the difference between separate and marital property.
Now, it’s time to delve a bit deeper and discuss some of the financial nuances you may encounter as the division of separate and marital property proceeds during your divorce. For example, it’s likely your case will involve assets that have appreciated in value during the course of your marriage. Here’s the issue:
In many states, if your separately owned property increases in value during the marriage, that increase in value may be considered marital property. What’s more, the division of this particular subset of marital property can be further complicated by the differentiation between active and passive appreciation of the assets.
Let’s take this step-by-step.
First, understand that an asset can increase in value in one of two ways. An asset can either
- Actively appreciate –as a result of actions by the owner of the asset . . . or it can
- Passively appreciate –as a result of changes in the market.
While there are many complex rules that govern division of property and asset appreciation, here are a few fundamentals, in very general terms:
In community property states, where both spouses are typically considered equal owners of all marital property, the division of appreciated assets is often computed based on a series of formulas. The calculations can prove enormously complex, but here’s a short summary of the most salient points by David M. Wildstein, Esq. in his brief, Allocating Active and Passive Appreciation of a Separate Business Asset for Equitable Distribution:
“If the increase in a separate asset is passive, it is not a part of the community estate as long as no community resources were used for the asset. If the asset increases due to the effort of either party, it is part of the community. The time, toil and talent of each spouse is perceived to be a community asset. To reach a fair result, community property law created the doctrine of reimbursement: ‘The fundamental purpose of the doctrine is to bring back into the community estate value which was created by community contributions, but which took the form of appreciation in the value of a separate asset.’”
In equitable distribution states, it’s not as “straightforward” because none of the equitable distribution states use a formulaic approach as described above for community property states. In equitable distribution states, passive appreciation on separate property remains separate property. But, active appreciation on separate property can be considered marital property.
What can qualify as active appreciation on separate property? That’s a very good question, and courts often struggle to make this determination. Typically, the judge will use a three-pronged test to evaluate active appreciation in separate property. The judge must find that:
1. The separate property did, indeed, appreciate during the marriage.
2. The parties directly or indirectly contributed to the appreciation.
3. The appreciation was caused, at least in part, by the contributions.
Of course, as with other aspects of divorce proceedings, the rules governing the determination of asset appreciation can vary from state to state. In some states the burden of proof is on the spouse who claims the appreciation is passive. In other states, it’s the reverse –the burden of proof rests on the spouse who claims the appreciation is active.
Clearly, asset appreciation is a complicated topic that demands thorough and thoughtful consideration. It’s essential that you seek guidance from a qualified divorce team concerning the particular circumstances of your individual case.
All articles/blog posts are for informational purposes only, and do 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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