Tag: Essential Divorce TIps

Divorce Financial Mistakes

Avoid making costly divorce financial mistakes because money matters are often at the heart of divorce disputes, for better or worse. Since divorce is on the rise during the pandemic, be aware that aside from the cost of divorce, other parts of the process can end up costing you.

Divorce Mistake

No Mistake About It

For starters, some assets appear as if they have equal values. But, once you start to factor in the tax impacts, the assets can look very different. For example:

A hundred dollars in cash is different from shares of GameStop valued (at the time) at $100. Holding onto that stock can lead to appreciation (or depreciation) and selling the stock can have a tax impact.

Basically, the profit made on any given assets — the difference between the cost basis (generally, what you paid) and the sale price — ends up getting taxed as either a long-term or short-term capital gain once sold, depending on whether the asset was held for under or over a year.

Even if two assets have the same value right now, the cost basis for them may be different, and one will have more or less taxes than the other. Subtract those taxes from the value if you’re really going to do an equitable division.

So if the asset in question is, say, a traditional 401(k) account, withdrawals will be taxed at ordinary income tax rates.

Florida Divorce Mistakes

I’ve written on divorce issues and divorce planning. In Florida, a divorce is called a “dissolution of marriage.” Florida is one of the many states that have abolished fault as a ground for dissolution of marriage.

The only requirement to dissolve a marriage is for one of the parties to prove that the marriage is “irretrievably broken.” Either spouse can file for the dissolution of marriage.

You must prove that a marriage exists, one party has been a Florida resident for six months immediately preceding the filing of the petition, and the marriage is irretrievably broken.

The reason for the irretrievable breakdown, however, may be considered under certain limited circumstances in the determination of alimony, equitable distribution of marital assets and debts, and the development of the parenting plan.

The divorce process can be very emotional and traumatic for couples as well as their kids. Spouses often do not know their legal rights and obligations. Court clerks and judges can answer some basic questions but cannot give legal advice.

Everybody Makes Mistakes

If you have a 401(k) or other retirement account and your soon-to-be-ex is entitled to a percentage of the distribution, be careful how you arrange the split. If you take the money out of you 401(k) and then give it to your soon to be ex, there will be a 20% tax withholding. Additionally, if the account holder is younger than age 59½, a 10% penalty for early withdrawal could apply.

Instead, you may need an a qualified domestic relations order, or QDRO. This is a separate order from the divorce agreement which gets approved by the court and sent to the plan administrator – who also must approve it.

Sometimes, divorcing couples sell the family home and divide the proceeds as dictated in their agreement. Other times, one of the spouses remains in the house. In this situation, depending on the specifics, there are a few things to watch for.

For starters, assuming your ex will no longer be a joint owner or responsible for any mortgage on the home, you would need to refinance the loan and qualify for it on your own. Otherwise the ex spouse would still be liable for the unsatisfied mortgage.

The CNBC article is here.

 

Chris Rock’s Divorce Tips

Chris Rock has headed out on his newest “Total Blackout Tour” in February, marking his first full-scale world tour in nine years. He also recently divorced his ex-wife, Malaak Compton-Rock in 2016. What Chris has said about his divorce experience may surprise you.

Chris gave an interview to Rolling Stone magazine recently, and though he jokingly calls his latest tour his “alimony tour,” he gets serious when talking about life after divorce.

“Getting divorced, you have to f–king start over,” he said. “You get to reset. It’s not a breakdown, but something in your life broke down.”

Communication between Ex-Spouses

However, instead of blaming his ex-wife – like he used to in some of his older comedy shows – he claims now that he has changed his mentality.

There are several reasons Rock has toned down the negativity when it comes to discussing his divorce and ex-wife.

For one, he said, “I asked myself, ‘Do I want to be angry for a year?’ It’s not a cool place to be. It’s not healthy.”

Secondly, he claims it’s not fair that he can go out and bash his ex, but that his ex doesn’t have a platform to defend herself. “It’s not fair”. “I have a mic, she doesn’t. God forbid people are bugging her in the supermarket. That’s not cool. I’m going to have to see her at weddings and graduations.”

Custody Battles

Rock, like other fathers going through divorce, had a rough time dealing with custody issues. Not just the battles with his ex-wife, but with himself and the children too.

For example, he spoke candidly about his emotions, that he cried once, “during the custody battle” over  his two daughters, Zahra and Lola Rock.

In order to be a more involved father, he moved closer to his children.

“All my friends assume I moved into the city after my divorce, away from my girls. When I say I bought a house around the corner, it blows their minds.”

Rock also spoke about the angry feelings his children express. In fact, at one point in the Rolling Stone interview, rock got candid and admitted: “My own daughter has blocked me on Instagram. They grow up so quick.”

I’ve written about Chris Rock’s divorce before, because his comments on his divorce have been both funny and surprising. For example, while his divorce was a custody battle (he claimed that his ex-wife had “repeatedly refused to permit him normal and usual access to the children) he also said:

“When you see me on ‘Dancing With the Stars’ . . . I’m not on crack, that’s just alimony!”

The Rolling Stone article is here.

 

Five Essential Tips Before Divorcing

On behalf of Ronald H. Kauffman, P.A. posted in Divorce on Saturday, February 9, 2013.

When you are thinking about divorce for the first time, your head may be swimming with questions: are you certain you want to your marriage to end? Can it be saved? What will happen to me? Can I afford this? When you decide it’s time to see a divorce lawyer, there are five essential things you should do.

Know What Assets You Have. Before you come in to see me, have a good idea of you and your spouse’s net worth. Know what investments and other assets there are; including any businesses and real estate, cars, boats, collectibles and jewelry. Divorce settlements should equitably distribute these assets. But, until you know how big the pie is, you won’t know how to fairly cut it.

Understand your Debts. Your house may be worth $1 million if you sold it today, but if your mortgage balance is $900,000, and your home equity credit line is another $100,000, your home’s real net worth is zero. A divorce settlement divides both debts and assets, and that could leave you with less than you’ve imagined. A good way to understand your liabilities is to list your family’s debts on a spreadsheet.

Learn your and your spouse’s current earnings. Increasing how much money you earn now may help you decide whether to walk away from your marriage without worrying about how you’ll pay your bills. Higher income can also allow you to hire legal and financial specialists to maximize your settlement.

Secure important papers and accounts. Make copies of your tax returns, paystubs, insurance policies, retirement account statements, passports, bank and investment account statements, deeds, and mortgage documents. Copy those papers, and store the originals in a secure place, such as a safe-deposit box. Secure your email, cell phone, your individual online banking and investment accounts by changing the passwords. You’ll want privacy from here on in, so create your own accounts where necessary, and change the passwords on existing accounts in your own name.

Check your credit. This is not a good time to be late with paying bills. You may need to borrow money to cover living expenses, or pay for lawyers and experts, and you may need to rely on your good credit. Also, a high credit score will help you make the transition to single life.

These five tips don’t mean you are going to file for divorce. They are just sound home finance practices. If you decide to reconcile, understanding your financial position will help you build a better marriage. If you divorce, following these tips could help make the transition to being single.