Tag: divorce plan

Strategy if Your Spouse Files for Divorce

There is some strategy for you to consider if your spouse asks you for a divorce. MSN discusses some things you could do immediately to protect your personal and financial interests. Obviously, it is difficult to focus on money when your marriage is ending, but you need to make sure that you reach a fair and equitable divorce settlement too.

divorce strategy

A Few Good Moves

You wouldn’t end a business partnership without first determining that all assets were divided fairly. The same holds true for dissolving a marriage. Focus on the following things immediately if you learn that your spouse is planning to end your union.

Hire a good attorney

According to MSN, hiring a lawyer is crucial. Your goal: Find an experienced advocate who will put your personal and financial interests first. Never share the lawyer with your spouse. Make sure you feel comfortable with the attorney.

Get referrals for attorneys from your trusted friends, family members and business associates, but keep in mind you want a lawyer who specializes in family law and divorce, preferably someone board certified as a specialist by your state’s Bar Association, and who is very involved in the legal community.

Monitor your credit reports

Protect yourself by preventing your spouse from running up large or unnecessary bills at this time. For now, at least, you may be responsible for half of any joint expenses.

“You know your spouse better than anyone else. If you know they’re not trustworthy, or they have a gambling problem, or you both are in a lot of debt, that tells you there are financial warning signs.”

Monitoring your credit score and credit reports before, during and after a divorce will ensure that your credit is safe and that no one else is using your name to borrow.

Florida Divorce

The official term for divorce in Florida is “dissolution of marriage”, and you don’t need fault as a ground for divorce. Florida abolished fault as a ground for divorce.  I’ve written about divorce before. In order to divorce in Florida, you need to file a petition for dissolution of marriage in the family court.

The no-fault concept in Florida means you no longer have to prove a reason for the divorce. Instead, you just need to state under oath that your marriage is “irretrievably broken.”

Before the no-fault divorce era, people who wanted to get divorce either had to reach agreement in advance with the other spouse that the marriage was over or throw mud at each other and prove wrongdoing like adultery or abuse.

No-fault laws were the result of trying to change the way divorces played out in court. No fault laws have reduced the number of feuding couples who felt the need to resort to distorted facts, lies, and the need to focus the trial on who did what to whom.

But there is some additional strategy to protect yourself.

Consider Closing joint accounts

To protect your credit rating, you may want to consider closing credit accounts that your spouse has access to. The idea is to prevent your spouse from incurring large debts before the divorce is final.

With joint credit cards, you are liable for any debts taken on by your spouse, says Sarah Carlson, a certified financial planner in Spokane, Washington.

If your spouse can’t pay the debts he or she runs up on your joint accounts, you may be held responsible.

Determine how much money you’re entitled to

When people divorce, many financial issues are tied to the size of the marital estate. To help you determine which assets you’ll be entitled to in a divorce, you’ll need to understand how much you and your spouse are worth, separately.

“For example, identification of an income-producing asset may be helpful for determination of child support and maintenance issues, while also affecting the division of the marital estate”.

Your job: Find out which assets are in your name and which belong to your spouse.

Protect your savings

It is easy to use up your cash quickly in a divorce. Safeguard your joint assets by asking your financial institutions to require two signatures for withdrawals.

“We generally don’t advise doing this with a regular joint checking account that is continuing to be used for household expenses, because that can become cumbersome. But we do advise dual signatures for any savings or investment accounts.”

Keep things as friendly as possible

Starting your divorce on an amicable note will make the proceedings easier and less time-consuming. From the beginning, work to keep things civil.

When you spend time bickering over minor issues, the only people who benefit are attorneys billing you by the hour.

“If ever there was a time to pick your battles, this is it. If you fight over every detail of your divorce, the fights will be never-ending, and that will impact your emotional state and your wallet.”

Talk with your children

The needs of children sometimes can be overlooked when parents divorce.

The best way to break the news of a divorce to children is for both parents to explain that their relationship is changing, making it clear that both parents love the children and the parents respect each other, says David T. Pisarra, a family law attorney in Santa Monica, California.

The Mayo Clinic advises parents to spend time explaining to children what is happening. Let them know that the separation isn’t their fault and that you will continue to care for them.

The MSN article is here.

 

This is your Medicaid Divorce

Sometimes more income isn’t good news. People suffering from major illness worry they could lose their Medicaid eligibility because of changes to Medicaid rules. More and more people are discussing the “Medicaid divorce” as a planning tool, but is it something to consider?

Medicaid Divorce

To Your Health!

Medicaid provides health coverage to millions of Americans, including eligible low-income adults, children, pregnant women, elderly adults and people with disabilities. Medicaid is administered by states, according to federal requirements. The program is funded jointly by states and the federal government.

According to online media company Ozy, Susan was diagnosed with rheumatoid arthritis at age 4, and has lived with chronic pain. She didn’t have private insurance at the time of her diagnosis, so Medicaid was critical to manage her disability.

Susan’s husband’s seasonal income fluctuated, leaving Susan hovering near the Medicaid eligibility cap. She had briefly lost coverage during their marriage because her eligibility was based on household income.

Since Susan’s husband’s pay increase Susan worried she could lose Medicaid eligibility again, just when her medical bills were about to skyrocket. Divorce, they decided, would eliminate the month-to-month possibility of losing coverage — and the fear that came with it.

Florida Divorce

I’ve written about divorce planning before. For example, there is a marriage penalty which people have planned for to avoid the situation where a married couple pays higher income taxes than they would pay if they were un-married and filed individual tax returns.

Medicaid divorces are similar but a rarely talked about type of divorce planning. Some people are forced to think about divorcing when the medical costs for their spouse can lead a couple to deplete their assets, leaving the healthy spouse impoverished.

Medicaid is a federal needs-based assistance program and your eligibility is determined by the total income and assets of you and your spouse which are pooled and totaled and may require that assets are spent down to qualify for Medicaid.

In a Medicaid divorce the goal is to transfer assets to the healthy spouse to minimize the spend-down requirement, maintain the quality of life while qualifying the Medicaid spouse for assistance so that the couple’s assets won’t be depleted.

The Risky Medicaid Divorce

There are huge risks involved in divorce planning for taxes and Medicaid issues. First, there is the impact on your relationship. There is no fake divorce. Once the court signs the final judgment of divorce, you are divorced.

Florida, like all no-fault states, have minimum requirements for getting a divorce. In Florida, for instance, we require that at a minimum your marriage be irretrievably broken before you can get a divorce.

Be aware that the divorce itself could have an impact on other benefits that you or an individual spouse may already be receiving or expect to receive in the future.

Divorce can impact the amount of supplemental security income, Social Security retirement benefits and survivor’s benefits and veteran’s benefits.

Before you even consider a Medicaid Divorce, if you are dealing with a sick spouse, know that there are many planning strategies to help spouses get their loved ones onto Medicaid that do not include divorce.

Susan recalls listening to a doctor tell her parents when she was 15 that she’d never marry or give them grandchildren. She knows that her partner’s income and assets mean she could lose Medicaid and SSI, but her health had felt manageable back then. Cancer, however, changed the equation,

The Ozy article is here.

 

Set Up a Divorce Plan

USA Today reports that few people marry and then plan for divorce or death. But based on recent statistics, that is precisely what we should do. What are some things you should do to set up a divorce plan?

Set Up a Divorce Plan

The Statistics

Consider this: The average age of a widow in the U.S. is 59 and women divorce for the first time at age 30 (on average). Add to those statistics the fact that men tend to die five years before their spouses (76 for men versus 81 for women).

Most people have heard the statistic that “50 percent of marriages end in divorce.” That statistic seems to have originated in the 1980’s. Today, it is thought approximately 42-45% of marriages in the United States end in divorce (this does not include legal separations).

But when you break that down by number of marriages, you get some interesting additional facts. For example, while 42-45% percent of first marriages end in divorce, for second marriages around 60% end in divorce. Third marriages? Roughly 73% of third marriages end in divorce.

Planning

I’ve written about things to consider when planning for divorce before. The divorce statistics mentioned above really call for you to set up a divorce plan. A divorce plan should reflect goals, and the USA Today article has some excellent things to consider.

Get a planner

While most people run to a marriage counselor, what you may really need is a financial planner. Research shows that when the “money spouse” dies (typically the male partner), the “non-money spouse” ends up firing her investment manager over two-thirds of the time.

Review your Documents

Review your trust agreement every few years; if you don’t have a trust, get one. You may quickly realize your trust is outdated and go through a costly revision at just the time when you don’t need the added headache and hassle.

Keep 401(k) and IRA beneficiary forms. The bank may lose your beneficiary forms through the passage of time and through mergers and acquisitions.

Use a virtual binder

Consolidate your financial life on an aggregator.  Think of an aggregator as a virtual binder with a vault. All of your assets and liabilities feed into this software, and you have a real-time picture of your net worth and income from all sources.

Get a Postnup

These days, the postnup has become more important than ever. People are marrying when they are older, and better informed about the implications of marriage. Many people have married before. Because the divorce statistics for second and third marriages shown above are so high, more people are looking to sign postnuptial agreements.

The USA Today article on how to set up a divorce plan is here.

 

The 2018 Divorce Rush?

Experts predict a surge in divorce cases this year. Why is this year different from all other years? Because in all other years, alimony is deductible to the spouse paying alimony, and next year that deduction will be eliminated.

What’s Happening to Alimony?

Currently, there is a tax deduction for people paying alimony. The tax deduction can substantially reduce the cost of alimony payments. So, for people in some tax brackets, every dollar you pay in alimony to your former spouse really could only cost you a little more than 60 cents.

The alimony deduction has been in the tax code since 1942. But, because of the new tax law, people paying alimony may not be able to deduct their alimony payments, and anyone receiving alimony will no longer report it as income.

According to the ABA, lawyers are advising you divorce now, before the 76-year-old deduction for alimony payments is wiped out in 2019 under the Tax Cuts and Jobs Act.

If you’re going to get a divorce, get it now. Potential divorcees have all of 2018 to use the alimony deduction as a bargaining chip in their negotiations with estranged spouses.

Divorce and Taxes

The new tax code changes will impact your divorce, but it isn’t the only tax which causes people to make the decision to divorce. I’ve written about the area of divorce and taxes before.

For example, the 2012 American Taxpayer Relief Act raised taxes on couples making more than $450,000, and individuals making more than $400,000. As it turns out, some couples found out they could save over $25,000 a year if they divorced.

The New Tax Law

Many divorce lawyers criticize the new law to end the alimony deduction, saying it will make divorces worse.

People won’t be willing to pay as much in alimony, which will disproportionately hurt women who tend to earn less and are more likely to be on the receiving end of alimony payments.

Conversely, the alimony deduction has also been criticized. For example, the government argues the deduction is a burden on the IRS because, if the alimony amounts ex-spouses report paying and receiving don’t match, it can force the agency to audit two people who may already be feuding.

Why it Matters

Spouses negotiating alimony payments may try to pay less when the change takes effect because there will be no tax savings.

In many cases, women are more likely to be hurt by the change as they negotiate divorce terms. U.S. Census Bureau statistics showing that 98 percent of the 243,000 people who received alimony payments last year were women.

The deduction is a big deal to couples negotiating their divorce because if someone who earns, say, $250,000 agrees to pay $4,000 per month in alimony, it really costs the person about $3,000 after taking the deduction into account.

Without the break, many people will agree to pay only what would have been their after-tax amount. It is feared that more couples will end up fighting in court because they won’t be able to agree on alimony.

2019 Deadline

The alimony deduction repeal doesn’t take effect immediately and won’t kick in until 2019. That is why lawyers are advising clients to file for divorce now.

However, meeting the 2019 deadline won’t be easy.

Some states have mandatory “cooling-off” periods, others states have residency requirements. So, you can’t just file for a divorce today, and expect that you’re going to be divorced tomorrow.

The ABA article is here.