Financial Basics in Surviving Your Divorce
So you have now decided to divorce. You know it will be painful & scary, but you believe the time is right to have a single life. Financial vulnerability and risks are inevitable.
Every year, approximately three million men and women head down the emotional and financial path of divorce. Following a divorce the cost is usually 25-50% more to maintain your pre-divorce lifestyle. A single household becomes twice as expensive as each spouse losses the benefit of the other spouses income. Economic discrimination due to gender gaps place additional financial burdens on women. A woman’s standard of living may drop 27% while a man’s standard of living may increase 10%!
Now start with the financial basics in surviving your divorce! What are the basics?
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A secure place to live
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Create little or no debt
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Protect retirement assets or income
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Use of liquid money or assets
The most important of these basics is Liquid money! You will need money to find a place to live and hire an attorney. You will also need money to pay your expenses during your divorce. Liquidity will definitely come in handy and enhance your position in the proceedings.
What about Debts? If possible pay off your debts now. The uses of savings or assets you can liquidate are the cleanest methods. Many divorced people find themselves responsible for their EX’s portion of debt since the exiting spouse refuses to pay. Legally, you may be responsible if your ex-spouse does not pay. Try to start your new life free of debt and with a new sense of self confidence!
What about Cash Issues and Retirement Assets in a Divorce? If you and your spouse have retirement savings, each of you will probably be entitled to a one-half share or a portion based on a fixed ration of the number of years married and number of years of investing. This money could be kept for retirement or used to repay other current expenses or debts. Make sure you examine prospective tax treatment to avoid the 10% penalty on early withdrawal by the IRS.
Some tax questions to know about:
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Are spousal maintenance payments tax deductible?
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Who will be able to claim Head of Household status?
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Who gets the tax exemption for the kids?
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Is child support non-deductible?
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Which Attorney fees are tax deductible?
Always remember to “Look at the big picture”. Keep your focus on finances and parenting. If you need help from smart professions, as your attorney, accountant, or mental-health professional, get it now! They will help you and your family with focus, objectivity and a long-term vision that is very difficult for you during this tumultuous time in your life. Now you need to be able to articulate you needs and goals for the future.
Do not forget! This time too shall pass and you may be, with planning, better than ever in the future!
Financial Checklist for Divorce
Preparing for a Texas Divorce: Assets
Going through a Divorce is painful no matter what the circumstances. Before you get into the Texas Divorce Process, reduce expense, stress and conflict by making sure you are financially prepared. Planning ahead helps you in making sound decisions, start preparing for post-divorce life, and avoid many post-divorce pitfalls. Below is a list of items you need to gather before counseling with an attorney. Financial Documents are a must to show what your true assets and liabilities are in the marriage.
Documents:
- Tax Returns (at least three years) or Tax Liens and all IRS related documents
- Wills and Trusts with all attachments reflecting corpus and trust holdings
- Listing of all liabilities (including mortgages, credit card debt, personal loans, automobile loans, etc.):
- Name of entity, address and telephone number
- Account number
- Amount owed
- Monthly payment
- Property securing payment (if any)
- Most current statements and account status of lenders
- A Listing of all Real Property, address and location, including (includes time-shares and vacation properties):
- Deeds of Trust
- Notes including equity loans and second liens
- Legal Descriptions
- Mortgage Companies and Loan Servicers (Name, Address, Telephone Number, Account Number, Balance of Note, Monthly Payments)
- Current fair market value
- Appraisals
- Motor Vehicles (including mobile homes, boats, trailers, motorcycles, recreational vehicles; exclude company owned):
- Year
- Make
- Model
- Value
- Name on title
- VIN Number
- Fair Market Value
- Name of creditor (if any), address and telephone
- Persons listed on debt
- Account number
- Balance of any loan and monthly payment
- Net Equity in vehicle
- Cash and accounts with financial institutions (checking, savings, commercial bank accounts, credit union funds, IRA’s, CD’s, 401K’s, pension plans and any other form of retirement accounts):
- Name of institution, address and telephone number
- Amount in institution on date of marriage
- Amount in institution currently
- Account Number
- Names on Account
- Company loans and documents related to benefits
- A listing of separate property (property owned prior to marriage, family heir looms, property gifted, inherited property):
- Records that trace your separate property. These assets will remain yours if properly documented
- Retirement Benefits:
- Exact name of plan
- Address of plan administrator
- Employer
- Employee
- Starting date of contributions
- Amount currently in account
- Balance of any loan against plan
- Documents
- Publicly traded stock, bonds and other securities (include securities not in a brokerage, mutual fund, or retirement account):
- Number of shares
- Type of securities
- Certificate numbers
- In possession of
- Name of exchange which listed
- Pledged as collateral?
- Date acquired
- Tax basis
- Current market value
- If stock (date option granted, number of shares and value per share)
- Stock options plans and related documents
- Insurance and Annuities Policies and Inventory:
- Name of insurance company
- Policy Number
- Insured
- Type of insurance (whole/term/universal)
- Amount of monthly premiums
- Date of Issue
- Face amount
- Cash surrender value
- Current surrender value
- Designated beneficiary
- Other policies and amendments
- Closely held business interests:
- Name of business
- Address
- Type of business
- % of ownership
- Number of shares owned if applicable
- Value of shares
- Balance of accounts receivables
- Cash flow reports
- Balance of liabilities
- List of company assets
- Possible hobbies or side businesses that generate income
- Mineral Interests (include any property in which you own the mineral estate, separate and apart from the surface estate, such as oil and gas leases; also include royalty interests, work interests, and producing and non-producing oil and gas wells:
- Name of mineral interest
- Type of interest
- County of location
- Legal description
- Name of producer/operator
- Current market value
- needs leases or production documents related to the asset
- Money owed by spouse (including any expected federal or state income tax refund but not including receivables connected with any business)
- Household furniture, furnishings and Fixtures
- photos
- purchase documents
- Electronics and computers including software and hard drive
- Antiques, artwork and collectibles (including works of art, paintings, tapestry, rugs, crystal, coin or stamp collections) Other large collections need to be appraised! (Guns, quilts, action figures, books)
- Miscellaneous sporting goods and firearms
- Jewelry including appraisals
- Animals and livestock
- Farming equipment
- Club Memberships
- Safe deposit box items
- Burial plots including documents of ownership
- Items in any storage facility
- Travel Awards Benefits (including frequent flyer miles)
Warning Signs of a Parental Alienation Syndrome Child
Parental Alienation Syndrome is the systematic denigration by one parent with the intent of alienating the child against the target parent. In most cases, the purpose of the alienation is to gain custody of the child and exclude involvement by the target parent. In other cases the alienator wants the target parent out of the way to start a new life, or the alienating parent wants more of the marital money and assets than he/she is entitled to and uses the child as a pawn. The alienating parent hates the target parent and the children become false weapons. These are just a few reasons Parental Alienation occurs in domestic disputes.
Parental Alienation Syndrome is common because it is an effective device for gaining custody of a child. Through systematic alienation, one parent may slowly brainwash a child against the other parent. The parent involved in such alienation behavior then may gain the misplaced loyalty of the child.
In a recent survey, one in five parents stated that their primary objective during the divorce was to make the experience as unpleasant as possible for the former spouse; despite the effects such attitudes and behavior have on the children.
Parental Alienation Syndrome is a form of emotional child abuse. Parents in hostile separations may suffer depression, anger and anxiety or aggression. The expression of these feelings results in withdrawing of love and communication which may extend to the children through the alienating parent. When the mother is the alienator, it is a mechanism employed to stop the father from having contact with his children; and can be described as the mother holding the children “hostages.” The children usually are afraid of the mother and obey her as a means of survival. The child may also be instilled with false memories of the father, coached and/or brainwashed. Parental Alienation Syndrome is recognized by the courts but is very difficult to define and in most cases requires bringing in County Social Services, Child Protective Services, and/or other professionals. Anyone claiming Parental Alienation Syndrome should look for family therapy as a constructive way forward. Other forms of abuse are physical, sexual, and neglect which are much easier to identify.
If the parental alienation has been successful and has influenced the child against the target parent, the observer will see symptoms of parental alienation syndrome. Many children appear healthy until asked about the target parent.
Warning signs of a Parental Alienation Syndrome Child:
- The child is a “parrot” of the alienating parent with the same delusional and irrational beliefs and consistently sides with this parent.
- The child develops serious hatred for the target parent and rejects a relationship with the target parent without any legitimate justification. The child sees nothing “good” about this parent and only wants to destroy the relationship.
- The child refuses to visit or spend time with the target parent.
- The child’s reasons for not wanting a relationship with the target parent are primarily based on what the alienating parent tells the child.
- The child feels no guilt about his/her behavior toward the target parent and will not forgive past indiscretions.
- The child’s hatred extends to the target parent’s extended family without any guilt or remorse.
Children having some of these symptoms may be experiencing Parental Alienation by one of his/her parents. Please contact an attorney and discuss your options on how to help this child. Formulate a plan to move forward. Do not give up your parental rights! Your child desperately needs and is entitled to your help!
What About Texas Spousal Support Laws ?
In September 1, 2011, Texas House Bill 901 ( Texas HB 901 ) revised the spousal maintenance law in the Texas Family Code effective for divorce cases filed on or after September 1, 2011. The bill revised the conditions that establish eligibility for spousal maintenance, commonly referred to as alimony, and changes the factors required to be considered by a court in determining the nature, amount, duration, and manner of periodic payments for a spouse who is eligible to receive maintenance.
Eligibility for spousal maintenance still requires that the spouse seeking maintenance lacks sufficient property to provide for the spouse’s minimum reasonable needs.
The law provides potentially increased relief to spouses who have been out of the work force, are disabled, are victims of family violence or are the primary custodians of a disabled child.
Some of the major items in the Texas Spousal Support Law are:
1. The maximum amount of spousal support that courts may award increased from $2,500 to $5,000.00 per month, although it is still limited to 20 percent of the payer’s average gross monthly income.
2. The duration of spousal support in Texas is a maximum of 5, 7 or 10 years, generally depending on the length of the marriage.
3. The law clarifies if a person has primary care for a disabled child, the custodial parent may be prevented because of the child’s disability from earning sufficient income to meet the custodial parent’s minimum reasonable needs.
4. The law also clarifies a person may not be held in contempt for failing to pay spousal support which is in an agreed order and extends beyond the period of time provided under the law.
In order to receive “maintenance,” (which is the statutory term for spousal support), the spouse seeking support must lack sufficient property to provide for the spouse’s “minimum reasonable needs”, AND one of the following:
(1) The recipient must be unable to earn sufficient income to provide for his or her minimum reasonable needs because of an incapacitating mental or physical disability;
(2) The marriage lasted for 10 years or longer and the recipient lacks the ability to earn sufficient income to provide for his or her minimum reasonable needs;
(3) The recipient is the custodian of a child of the marriage of any age who requires substantial care and personal supervision because of a physical or mental disability that prevents the spouse from earning sufficient income to provide for the spouse’s minimum reasonable needs; OR
(4) The person ordered to pay support was convicted of or received deferred jurisdiction for an act of family violence during the pendency of the suit or within two years of the date the suit is filed.
The court can order maintenance to continue for:
(1) 5 years if the parties were married less than 10 years and the maintenance is awarded due to family violence;
(2) 5 years if the parties were married more than 10 years, but less than 20 years.
(3) 7 years if the parties were married more than 20 years, but less than 30 years;
(4) 10 years if the parties were married for more than 30 years.
In cases where the maintenance is awarded due to the mental or physical disability of the spouse or a child of the marriage, the court may order that the maintenance continue as long as the disability continues.
However, in all circumstances, the law provides that the Court shall order maintenance for the shortest reasonable period that allows the recipient to earn sufficient income to meet his or her reasonable needs.
What about Termination?
a. The obligation to pay future maintenance terminates on the death of either party or on the remarriage of the oblige.
b. After a hearing, the court shall order the termination of the maintenance obligation if the court finds that the obligee cohabits with another person with whom the obligee has a dating or romantic relationship in a permanent place of abode on a continuing basis.
c. Termination of the maintenance obligation does not terminate the obligation to pay any maintenance that accrued before the date of termination, whether as a result of death or remarriage
If you are contemplating dissolving your marriage and have questions concerning your financial future, seek competent legal counsel to help you determine whether you could be eligible for spousal support the provisions of the law.
