Continue to own the house jointly for a few years, usually 3-5, at which point you either sell or refinance and split the proceeds. – Continue to own the house jointly for a few years, usually 3-5, but the spouse not living there would receive other assets in lieu of his/her share of the equity.
Divorce can be a painful experience, so much so that it tends to use the language of war. But it doesn’t need to be hurtful. Here are five ways to avoid harming your soon-to-be ex, yourself, and your children and move toward a collaborative divorce.
Divorce and money are ultimately tied together, not just during the divorce, but in surviving afterwards. Make sure that you make smart financial decisions.
If you don’t update your will, trust, and beneficiary designations, your ex could inherit. If you’re going through the emotional and financial turmoil of a divorce, estate planning may be the last thing on your mind. But after a divorce, you need to take steps to update your estate plan.
By Suzanne Riss and her ex-husband knew going into their divorce that they needed to consult a financial expert. Divorce, even a simple one, still involves a decent amount of complexity when dividing assets, including retirement savings.
Frequently asked questions about dealing with California community property at divorce. California law defines community property as any asset acquired or income earned by a married person while living with a spouse. Separate property is defined as anything acquired by a spouse before the marriage, during the marriage by gift, devise, or bequest, and after the parties separate.
How to avoid regretting your divorce settlement There are nearly one million divorces in the United States each year. Unfortunately, many divorcing spouses are financially devastated as a result. One reason is that too often, divorcing spouses accept unfair settlements, and find that a few years later they’re experiencing serious financial challenges.
I recently got a call from a woman in the midst of a divorce who very wisely began asking a lot of questions about the pension she would be receiving payments from when her soon-to-be ex-spouse retired. We called the pension office together to review the language of the marriage settlement agreement (MSA) and draft Qualified Domestic Relations Order (QDRO) to find out what would happen if her ex-spouse passed away. We determined the language needed modification to prevent her pension payments from ending on his death. That would have been a serious surprise with significant impact of her lifestyle.
It’s very easy to think, “OK, we will split the marital portion of the pension in half, have someone create a QDRO to split the pension and go along our merry way.” Sounds good, but maybe not so easy. QDRO’s for pensions are not something you should try to do yourself, and truly a Pension QDRO should be written by a QDRO expert. QDRO’s require precise detailed legal language specific to the pension you are dividing. And they don’t happen automagically!
To start, it is not very exciting reading, but someone needs to read the pension documents and evaluate what is and is not possible. That probably should not be you, and probably not your attorney either. A Certified Divorce Financial Analyst (CDFA) is a good option for this role. A CDFA receives training in identifying pension related issues. Better yet, they can explain how they work, including the various options relevant to your situation.
Reading the pension document’s fine print can determine IF the pension is divisible. That fine print will also describe what happens when the pensioner or ex-spouse passes away and other similar pitfalls such as will the pension still pay the surviving party? And what about heirs? Another variable of the pension can be what happens if the pensioner gets remarried. Recognizing these possible pitfalls ahead of time allows for additional planning to prevent future unwelcome surprises.
As a CDFA, I was able to help my client project her future income streams and look at the various options to smooth out her income throughout the remainder of her life. To do this we looked at the pension options, her social security income, the social security income she will be eligible to receive from her spouse, and other income sources. She now has peace in knowing what her financial future looks like.
Before getting to the financial aspect, let’s start with the word mediation.
Mediation is a terrific conflict resolution strategy. It uses a neutral third party to facilitate the process of resolving the dispute. Typically, the neutral party provides a structured process that defines the issue(s), breaks the issue(s) into components, and creates a cooperative solution or plan to move forward.
Mediation is a process that attempts to introduce creative solutions towards finding a resolution that best meet the needs of all parties.
Like the old saying “You can lead a horse to water, but you can’t make them drink,” mediation is a voluntary process – even when compelled by the courts. It is not a process where a third party makes decisions for you.
Mediation focuses on the underlying circumstances and solving the issue. It is not a process for defining fault, or focusing on who is right or wrong.
The Divorce Mediation process works best when it includes consultations with relevant experts, such as real estate appraisers or business valuators. Divorce Mediation does not include the legal aspects of your divorce; for that, mediators suggest consultation with an attorney.
Financial mediation follows a structured process to define and address financial issues. In the divorce process, it is a means to work together on identifying and agreeing on budgets; assets; division of expenses; property divisions including the house, the business, retirement funds, support; and more.
Non-attorney financial mediation is not a process for developing parenting plans, or filing paperwork in the courts.
Financial mediation is not a source of legal or tax advice.
It is a wonderful option to consider for keeping costs down and preserving relationships.
Yes, the California Courts require full financial disclosure of all income, assets, and expenses. Honestly, I think this is an important requirement even though it can be difficult. It is unfortunate that many of us do not know much about our finances. That can be for many reasons, but truthfully, managing money is not usually something we look forward to doing as a “fun” joint activity with our spouse. And if money is tight, or even if it isn’t, it can be a significant source of conflict. So like typical human beings, we take the easy way out and one person takes a primary role of managing the finances.
So in divorce we typically set up two different households, and each person in the couple will now be handling their own income, expenses, bank accounts, and investments. For the person who has been doing this all along, it is generally not a big deal. Yet, for the person who has not been involved much in the past, taking on money management can be a big change. Don’t worry if that is you, I can absolutely tell you that this is very common, and there is no shame in it. Look at it as an opportunity.
Back to the financial disclosures…
It is time to divide all the income, assets, and expenses you previously had together. I have yet to see one household magically divided into two with the same income without significant spending changes.
The process of developing a good budget provides great insight into what you have actually been making and spending. While it is much easier to just spend, I find that many people can easily adjust some of their spending habits by just looking at where the money is actually going. Understanding where the money goes also supports making purchasing decisions based more on your goals for your future than on your current emotional state.
An inventory of your assets: house, cars, savings, retirement funds, investments, art, jewelry, and toys along with any debt you might have is important to making decisions about how to divide your property when you divorce. Even if you are congenially working together, making separate lists increases the likelihood of including everything on the list. And yes, everything includes assets you had before the marriage, or received as a gift or inheritance during the marriage. In California, it is not typically required to divide separate property, but you must include it on your disclosures. If you end up in court, judges do not look kindly on hidden assets.
The disclosure of assets to the courts requires that you list them and value them. Sometimes it is not completely obvious how to value items like pensions, antiques, or tools and equipment. Divorce professionals help people do this all the time, and if they don’t know how to do it, most likely they know someone who does.
So, completing financial disclosures is certainly not something anyone gets excited about, but it is critical information to smooth the divorce process and ensure you know how to provide for your future.