Kansas Family and Divorce

Top Financial Mistakes in Divorce

Divorces can be complicated and messy, both from a personal and a financial standpoint.' Forbes' published an article a couple of years ago which listed financial mistakes that everyone should try to avoid.' Here is their list, with my comments about each point listed afterward:

Credit Tips

Here are some credit tips to help you through a divorce:

• Close joint accounts before you separate or divorce to prevent your former spouse from running up charges and leaving you responsible for the balance. Closing accounts is the lesser of the two evils in this situation. Closing accounts before you separate will make it easier since your spouse is more likely to cooperate with you. Some financial institutions will require the primary account holder to close the account. If that's not you, then you're going to need the help of your soon to be ex-spouse.

• Establish separate accounts, such as credit cards, gas cards and retail cards. This ensures that both parties are individually responsible for their own accounts, which is valuable in a divorce. The crown jewel out of this is you won't have to worry about re-establishing credit on your own...because you will already have it.

• Arrange new individual lines of credit with the same lenders to replace each joint account and transfer agreed upon balances to those new accounts. You want to avoid paying any new charges your ex-spouse makes.

• Some creditors will require you to pay off the account before they put it in an individual name. If you cannot pay off the balance, at least try to close the account to prevent any new charge.

• It may be wise to have an attorney involved if creditors refuse to cooperate with you. The first thing your attorney will need is a copy of the agreement you signed with the creditor. There are several legal service plans that are cost-effective for this sort of thing.

• Try settling the account with the creditor directly by paying a smaller amount than what is owed. The threat of bankruptcy could help your plea. Just be sure you get promises in writing from the creditor. Also make sure they will not report or try to collect on the deficiency balance.

• Pay the jointly held bills yourself--then go after your spouse for the money owed.

Source for Post: American Chronicle

The Seven Most Costly Financial Mistakes in Divorce

William Donaldson, CFP, CDFA and Adam Westphalen, CFP, CDFA wrote an article, 'Divorce and Your Finances - The 7 Most Costly Mistakes,' for WomansDivorce.com which outlines some major areas to consider in your divorce settlement.' They listed these seven mistakes as:

1. Not Knowing the Liquidity of Assets
2. Failure to Consider the Impact of Taxes
3. Not Understanding the Rules of Retirement Accounts
4. Overlooking Debt and Credit Rating Issues
5. Not Maintaining Control Over Insurance Policies
6. Failure to Budget
7. Failure to Identify Hidden Assets

You can read the full text of their article by clicking HERE.

Thanks to Janet Langjahr of the Florida Divorce Law blog for her post on this article.

Thanks to the South Carolina Family Law Blog for the heads up on this one.

Social Security - Divorced Woman's Guide

You can receive benefits on your ex-husband's Social Security record if he is receiving Social Security benefits (or is deceased) and:

• your marriage lasted 10 years or longer;

• you are presently unmarried;

• you are age 62 or older (if he is deceased, you can collect benefits at age 60 or age 50 if you become disabled); and

• you are not entitled to an increased benefit on your own record which exceeds one- half of your ex-husband's unreduced benefits.

If your ex-husband has not applied for benefits, but can qualify for them and is age 62 or older, you can receive benefits on his record if you have been divorced from him for at least two years and meet the requirements listed above.

Help for Divorced Parents in Planning for College Expenses

I only wish more and more divorced parents could put their differences aside and do exactly what is suggested below. It would certainly be easier on both the parents and the children if they would all work together in the planning of the children's college.

This just in from Ben Stevens and his South Carolina Family Law Blog. Thanks Ben for the heads up.

Sharyn T. Sooho, co-founder of Divorcenet.com and Massachusetts family law attorney recently discussed with Financial-Planning.com how financial planners can help divorced parents deal with the challenges of paying for college:

1. In what ways is paying for college more difficult when divorced?

   It differs from state to state. In Pennsylvania, Massachusetts, Hawaii, New Jersey and New York, courts can order divorced parents to pay for college. In Massachusetts, for example, if two parents go to court, and one would like to send the child to Stanford and the other to community college-because that's all he or she can afford-the judge can say, 'You're going to Stanford.' It's an interesting contrast to the lack of legislation governing parents who are married.

2. What are some of the common financial mistakes people make when negotiating a divorce?

   When parents have younger children, they may say they'll address college when the children are in high school. It's a very open-ended situation. These disputes, when they do come up, are sometimes more bitterly fought than the original divorce.

3. Are there any other laws that people should be aware of when they're divorcing?

   People need to understand that the term 'domicile' is open enough to allow students to live at school and still be considered legally residing with a parent. That's why support flows into the custodial parent's home. Support may not be reduced significantly if a child is living away from home. That comes as a surprise to most people. This of course only applies to states where courts can order support for children over 18. In Georgia and some other states, when the child turns 18 there's no obligation to provide support.

4. How can financial advisers help clients going through a divorce?

   Financial advisers are helpful to the clients' attorneys because they use a different language. Attorneys use a specific vocabulary about rights and responsibilities, alimony and division of assets. Financial advisers come in with a more nuanced discussion of finances. They tend to bring in charts, which lawyers don't often do.

5. How can advisers help their clients avoid some of these hardships?

   The earlier off they can start clients saving for their children's college education, the better, and that is one less stress for a divorce.

Source: '5 Questions: Sharyn Sooho' by Elizabeth O'Brien published at Financial-Planning.com.

10 useful tax tips when filing your return

From the Rosen Law Firm, 10 useful tax tips when filing your returns if you are recently separated or divorced.

If you've recently divorced or separated from your spouse, here are things you should know for the upcoming tax season:

1. What is my filing status?

2. Should my spouse and I file as married, filing separate or married, filing joint?

3. Are my divorce cost deductible?

4. is child support taxable?

5. Are there any tax benefits if I am paying alimony?

6. Is alimony taxable?

7. Who claims the Child Tax credit and the Household and Dependent Care credit?

8. Who gets the mortgage interest deduction and other itemized deductions?

9. Who gets to claim the dependency exemption for the children?

10. My spouse and I are using the married, filing separate filing status. Can I use the standard deductions, itemized?

You should visit with your own accountant or tax service provider, if you have further questions about this.

Source for Post: Newswire.com

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Online Tax Resource for newly divorced people

Divorcenet.com, a leading online divorce resource, today announced a new online tax resource for newly divorced people. The new online resource, Divorce and Taxes, is designed to give newly divorced people easy access to information and forms that can help them navigate tax season as a single person and make better-informed decisions about in-progress divorce settlements.

In addition, Divorcenet.com has also identified the top 5 tax issues relative to divorce. They are:

• Do I file a joint, separate, or no return?

• Can my children be claimed as dependents if they don't live with me?

• What is innocent spouse relief?

• What are the tax consequences of property transfers or the sale of the marital home?

• How are pensions and retirement funds divided?

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Debt and Divorce

Michael Sherman of the Alabama Family Law Blog has a great post about Debt and Divorce.

As Michael states:

A recurring issue in my divorce practice is how to address joint indebtedness. Often the parties will agree that one party or the other will pay and be solely responsible for a debt that is in the parties' joint names.

However, what most of my clients do not realize is that even if their spouse if agreeing in the divorce to pay the debt, they still have financial exposure. They often do not realize that the Divorce Decree's provisions about who is responsible for the debt does not and cannot alter the underlying debt. The credit card company, bank, or other creditor is not bound by your Divorce Decree.

He also came across an article that explains this issue well and I am also providing it for you at the link below.

Download the article Credit and Divorce

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Divorce, Divorce and Finances, Bankruptcy, Finances, Debt, Credit

When I get married, will my wife gain ownership rights to my house?

QUESTION:

My fiancée has asked about putting her name on the deed to my house after we get married. I don't want to do that in case things don't work out and we divorce. But I've heard that when I marry all of my assets automatically become half hers, anyway. I should say that I will be the only one paying for the mortgage and home improvements. What does the law say, and will a premarital agreement remedy the situation?

Premarital Agreement Issues Checklist

This is a great post from Legal Help Online. Long with some great information.

There are many details to think about when you’re planning your wedding; however, a prenuptial agreement (also known as a premarital agreement) shouldn’t be left to the last minute. Here’s a list of issues to think about before you speak to your fiancé and your lawyer regarding a premarital agreement. If often helps to know your own feelings about these issues before decide to talk to your fiancé about them:

Premarital Assets and Debts:

You’ll want to make an exhaustive list of your assets and debts that are currently in your name. It’s required for your prenuptial agreement, and it’s also good practice about being up front and straightforward about financial issues with your new marital partner. Below are some questions to think about when thinking about premarital assets and debts:

• Once you’ve made your list, how will you handle premarital assets and debts in the event of a divorce?
• Will the assets and debts remain separate property, meaning that they will go back to the person who accumulated them before the marriage?
• Or will your separate property be inter-mingled with your marital property?
• What if one person’s pre-marital property is used to pay off the other person’s pre-marital debts(i.e. school loans)?
• Will the paying party need to be reimbursed, or is it a gift?
• What if you use premarital property to buy a home you’ll own together?
• Will the paying party need to be reimbursed, or is it a gift?