Bedrock Divorce Advisors
Posts Tagged ‘divorce’
It’s Critical to Understand How Debt is Divided in Divorce
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.
Are Divorced Parents Required to Pay for their Children’s College Education?
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.
Tax Dilemma for Divorcees – Who Gets to Claim Head of Household?
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.
Protect Your Credit Score During Your Divorce
If you are going through a divorce, you should immediately begin taking steps to protect your credit score. Your financial future depends on a good credit rating. Here are some tips for handling your finances during and after your divorce so that your credit score is protected.
Handling Joint Credit Cards and Other Debts
You should immediately order your credit report and find out exactly what debts you have. In your credit report you will see all debts that belong to you and your spouse as well as the accounts that belong solely to you. You should closely monitor debts that your spouse has access to, such as credit cards, bank loans, mortgages and home equity lines of credit. If you are concerned that your soon-to-be ex-spouse might borrow money in your name, you might want to sign up for a credit monitoring service. These services will notify you anytime there is a change to your credit history.
It is important to note that even if your divorce settlement stipulates that your ex-husband is responsible for payment of certain debts, if he does not pay them or declares bankruptcy the creditors will come after you for payment! The creditors don’t know and don’t care what your divorce settlement says. Because this was a debt that you both entered into, you’ll need to pay it if he can’t. Therefore, you may want to include remedies in your divorce settlement to cover situations like this. One way might be to make sure that joint assets are used to pay off all joint debt or have the property that is going to your ex-husband be placed in escrow until all debts are paid.
Close Joint Accounts If Possible
If possible, close all joint accounts. Most likely, you will only be able to close accounts that have a zero balance. But, you should call all credit card companies, banks or other creditors to request that the account be closed. Make it clear that you will not be responsible for any charges. You should also follow up with a letter stating that you want the account closed. Keep a copy of the letter as well as detailed notes of your phone conversations. In both the phone conversation and the letter, ask that the lender report to the credit bureaus that the account was closed at your request.
Stay Current on All Joint Accounts
It is very important to make payments to all joint accounts on time even though you are going through a divorce. Unfortunately divorce negotiations can go on for a long time and not making payments or paying late can really hurt your credit score. Your credit rating will go down if a payment is late or missed entirely, even if your spouse is assuming the debt.
Freeze Accounts that Can’t Be Closed
If you find that you are not able to close an account due to an outstanding balance, request that a freeze be placed on your account. This will prevent any further charges. You will still be jointly responsible for the balance, but no further debt can be added to the account. Remember to document all details related to this call and write and mail a letter. (Talk to your divorce attorney if your husband is using joint credit cards or other marital assets to travel with and/or buy gifts for his mistress. There is something called dissipation of marital assets and if this is something that your husband is doing, your divorce attorney will need to make that part of any discussions/negotiations).
Close Joint Bank Accounts
Most couples have a joint checking and savings accounts. These need to be closed as soon as possible, however you should talk to your lawyer before withdrawing money or closing your account since each state has rules about this. You will want to open a new account for yourself as soon as possible.
If you have questions about how you can protect your finances and credit, please feel free to contact one of our Divorce Financial Strategists™ here at Bedrock Divorce Advisors.
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 to Make Sure You Receive Your Alimony and Child Support Payments – No Matter What!
One of the issues that often gets overlooked during your divorce is securing your divorce settlement payments, like alimony and child support, should something happen to your ex-husband. The death of an ex-spouse, and subsequent loss of that income, could be financially devastating.
The Divorce Financial Strategists™ here at Bedrock Divorce Advisors™ bring up this issue with all of our clients because we’ve seen what losing this income can do to families. Our recommendation is that a life insurance policy be set up in such a way that you will receive a tax-free, lump-sum payment of what you would have received over time from your alimony, child support and/or other divorce-related payments.
It is important to set up this life insurance policy before your divorce has been finalized. This is because your husband could refuse to cooperate after the divorce in getting the required medical exam. Or, you may find that he is uninsurable. Either way, you need to know this before the divorce is finalized so that, if necessary, you can find alternate ways of securing your divorce settlement payments.
It is also critically important that you become the owner or irrevocable beneficiary of the policy. If you are not, your ex-spouse could stop making payments and you would never know about it until it was too late. However, if you are the owner or irrevocable beneficiary of the policy, you would be notified of non-payment of the premium and could take action before the policy lapsed.
Using life insurance to ensure divorce settlement payments can be very complex. The laws and regulations differ from state to state. Therefore, it is very important that you consult with someone who is knowledgeable and experienced in using life insurance and other methods to secure divorce settlement payments.
You might also consider setting up a disability insurance policy. Statistically there is a higher chance that your ex-husband would become disabled rather than actually passing away. If something happens to him and he is no longer able to work, he might seek a reduction in his alimony and child support payments. Unfortunately, unlike life insurance, the ex-wife cannot own a policy on her former husband. So you would need to put a mechanism in place to make sure that the disability policy payments are made.
If you have any questions about how to secure your alimony, child support and other divorce settlement payments, please contact one of our Divorce Financial Strategists™ here at Bedrock Divorce Advisors and we’ll make sure that you take the right steps.
Separated, But Not Divorced, Mother Might Have To Give Half of Lottery Winnings to Abusive Husband – A Lesson for Women Who Are Thinking About Divorce
Talk about an emotional roller coaster!
I can’t imagine what it felt like for Holly Lahti, 29, of Rathdrum Idaho, who had the winning numbers to the 2nd largest lottery jackpot in the U.S. earlier last month. And, I can’t imagine that she was terribly disappointed when she found out she had one of the two winning tickets. After all, that still leaves her $90 million – after taxes.
However, there is a blow that I am sure she never saw coming when she purchased that lottery ticket. Although Holly and her abusive husband have been separated for many years (it’s unclear if they were legally separated and that could possibly make a big difference), they never did get a divorce. Because of that, her ex-con husband may now be entitled to a substantial portion of her winnings.
The media has reported this story over and over – it appears that Mr. Lahti is a real loser. He’s been convicted of domestic battery, drug possession, and purchasing alcohol for a minor. It is reported that he has been arrested at least 15 times! There’s even an unnerving photo being circulated showing Mrs. Lahti with a black eye allegedly resulting from a blow from her husband.
Idaho is a community property state. This means that anything acquired during the marriage is considered community property. Community property is defined as all property and debt that was acquired from the date of the marriage until the marital cut-off date. If the couple is unable to agree to how to settle debts and assets (as is most likely the case here!) the court will decide for them. In Idaho, the court is allowed some discretion in deciding how the jackpot will be split. But, it will probably be a long, ugly and expensive legal battle!
You may not be a mega-lottery winner, but there is still a lesson to be taken from this happy, and yet very sad story. If you are considering divorce, you should immediately take steps to boost your chances of coming through your divorce financially secure and in control of your financial future. If you have questions about how to protect your hard-earned assets and property, please feel free to contact us to discuss your specific situation.
ABC News wants to interview wo…
ABC News wants to interview women who’ve experienced divorce. Would you like to share your story? http://abcn.ws/fK3p1L
How to Determine Alimony (also known as Maintenance in some states)
Professional business women who are the primary bread-winners in the home often wonder if they will need to pay alimony to their husband and if so, how much they will be required to pay.
That is a tough question because the laws vary greatly from state to state. In some states, there are very explicit guidelines that judges must use to determine the amount and duration of alimony. In others, they simply list “factors” that a judge should take into consideration when determining alimony. Also, be aware that some states will consider the fault of the party when determining alimony. For example, if the couple is divorcing because one of them has committed adultery, the court may consider that when determining whether alimony should be paid. That is one very good reason that you need to speak to a good divorce attorney if you plan to have sexual relations with someone other than your spouse before your divorce is finalized (this can possibly affect both alimony and child custody).
Here are some of the factors a judge might use to decide whether your spouse is eligible for alimony:
1. The standard of living established during the marriage (One of the primary purposes of alimony is to help the receiving spouse maintain a lifestyle after their divorce that is relatively comparable to their lifestyle before their divorce.)
2. Property awarded to each spouse (Alimony is usually determined after the property division has been decided.)
3. The duration of the marriage
4. The income and property of each spouse
5. The ability of the person to become self-supporting
6. Present and future earning potential of both spouses
7. Whether there are children living in the home
8. If there was lost or reduced earning capacity of the person who is asking for alimony/maintenance that resulted from delaying his or her career during the marriage
9. Tax consequences
10. Contributions and services of the spouse who is asking for alimony or maintenance
11. Whether either spouse has wasted marital assets
12. Actions taken by a spouse in contemplation of the divorce
13. Any other factor the Court determines is relevant
There is also something called Rehabilitative Alimony, which is often awarded in short-term marriages.
This type of alimony is usually awarded for only a few years and its purpose is to allow the receiving spouse to go back to school or to get job training so that they will quickly be able to support themselves financially.
It is really not possible to know whether you will be required to pay alimony until you consult with an experienced family law attorney and a qualified divorce financial analyst. If you are contemplating divorce, please call us at 917-602-6977 for a free, 20-minute, no-obligation consultation 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.
I am now an official contribut…
I am now an official contributor for the Divorce section of the HuffingtonPost!!
Here’s the link to my first articl…http://lnkd.in/NdTX4m
January is the Busiest Month According to Divorce Professionals – Are You Ready?
January is the busiest month for divorce professionals. I have not seen official statistics proving this, but I can tell you that we, along with our divorce professional colleagues, all notice increased activity in January.
Many say this is due to families trying to “stick it out” through the holidays for the sake of their children, and others say that people make this decision as one of their New Year’s resolutions. No matter what the reason, if you find yourself at the beginning of the divorce process you should organize as much as possible to make the process go more smoothly.
Below you will find a partial list showing you what financial information you should begin gathering:
1. Income Tax Returns. Completed personal, corporate, partnership, joint venture, or other income tax returns (federal, state and local), including W-2, 1099, and K-1 forms, in your possession or control for the last 5 years, including all amended tax returns. Do you expect any tax refunds?
1A. Business Financial Statements.
– Net worth statement – balance sheet or list of assets and liabilities
– Income statement – cash flow or income and expense statement
2. Income Information. Current income information, including payroll stubs and all other evidence of income (investment property, rental/lease agreements, dividends, interest, royalties, lottery winnings, etc.) since the filing of your last tax return.
3. Personal Property Tax Returns filed in this state or anywhere else from the start of the marriage.
4. Banking Information. All monthly bank statements, passbooks, check registers, deposit slips, canceled checks, and bank charge notices on personal and business accounts, certificates of deposit, and money market and retirement accounts from banks, savings and loan institutions, credit unions, or other institutions in which you or your spouse has an interest.
5. Financial Statements submitted to banks, lending institutions, or any other persons or entities, which were prepared by you or your spouse at any time during the last five (5) years.
(To download the full list of 29 items, please go to our Bedrock Divorce Facebook Fan Page here.)
We would greatly appreciate it if you could “Like” our fan page while you are there.
If you are a woman contemplating divorce and you don’t have easy access to all of this information, do not worry! Oftentimes we can help you find easy ways to obtain the information you need. Just begin gathering as many items as you can, and then make an appointment with a Divorce Financial Strategist™ or divorce financial analyst. They will help you (and your divorce attorney) make sense of your current financial situation along with the future financial and tax implications of your various divorce settlement options. The sooner you start gathering this information, the less likely you will still be dealing with your divorce next January!
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