Good Financial Manners

In every divorce, there is disappointment.  Often, one or both parties don't like rulings or even some agreements that are reached.  They feel like they were treated unfairly or they may feel stuck in a situation that no longer works financially.  Circumstances may have changed and a difficult situation has become impossible. 

Sometimes, people decide to be a little passive-aggressive and mess around with the finances just to irritate their ex- or soon-to-be-ex spouse.  There are some bad ideas that will not help in the long term, that could get you into trouble.

Here are some simple steps you can take to keep the financial peace and stay on better terms with your former significant other.

1.  Pay the correct amount.  If you are ordered to pay $623.57, please pay that amount.  Cutting back a little bit is not allowed.  Do what you are ordered to do.  Judges don't appreciate failures to comply with their orders.

2.  Be on time.  If the payment is due on the 1st or 15th or any other specific date, make the payment on or before that date.  You might end up paying interest or attorney fees for some late payments.

3.  Don't make changes without an agreement or order.  You cannot just decide to adjust an obligation on your own.  You will likely end up in court on the wrong side of an enforcement action.  If you want to make changes, it's best to get an agreement and put it in a new order that is signed by the Judge.

4.  Don't threaten to withhold money.  It will produce an angry response and nothing helpful.  It's better to address pending issues directly, rather than indirectly by threats.  If you withhold payments that are due, that will probably get you in trouble with the Judge.

5.  Don't write insults on a check or letter for payment.  Those look particularly bad when presented in court.  You may momentarily feel good about getting revenge, but it makes you look petty and childish in court.  It's a bad idea, but I still see it occasionally.  It never works well.

If you will follow the advice above, you should have a less contentious time in court and you can save yourself time, money and aggravation.  Good luck!

How to Avoid Financial Mistakes in Divorce

If you are facing a divorce and are worried about how you will come out financially, you are not alone!  Most people who think about their future want to make sure that the divorce process works to protect them from being taken advantage of and from missing out on something they are entitled to have.

Karen Covy has an excellent blog and website  that discuss various aspects of getting divorced. In a recent post, she wrote about "10 Financial Mistakes in Divorce You Don't Want to Make".  She listed 10 important issues and it turns out that  Collaborative Law is an effective process to address each of them.  Here are her issues:


1.  "Not taking the time to do an accurate post-divorce budget BEFORE you settle!"  We normally use a neutral financial professional for both parties and one of the standard steps is to prepare a budget for each party for after the divorce.  That helps everyone address the needs of each party as we work out a financial agreement.

2.  "Not insisting on getting all of your (and your spouse's) financial documents."  In Collaborative cases, we start with getting the current statements for all financial accounts and then get any other prior statements that are really needed.  We don't request statements just to request them.

3.  "Not getting assets valued."  If an asset, like a house, business or painting (or anything else) needs to be valued, we get a neutral expert for both parties to do the valuation.  If it doesn't matter or if the parties agree on the value, we don't spend the money to get a valuation.

4.  "Not looking at (and understanding!) all of your financial documents."  One of the great benefits of Collaborative Law is having the neutral financial professional who gathers, studies and organizes the financial records.  Either party can discuss the finances and get help understanding them.  The finances are also discussed extensively in joint sessions.

5.  "Relying on your lawyer to do everything."  In Collaborative cases, we make sure the parties are very active and participating in the preparation and in the discussions at joint meetings.  Most often, we have the parties meeting, without the lawyers present, with the mental health professional on children's issues and with the financial professional on financial issues.  There is a lot of work done without the lawyers being present.

6.  "Not understanding how taxes will affect your support and settlement."  We also discuss taxes and can arrange for a neutral tax expert if specialized knowledge is necessary. When we discuss alimony and property division, taxes are always a consideration.

7."Forgetting about the long term."  Collaborative professionals are very aware of the long-term implications of the negotiations and we can do projections into the financial future.  Considerations for retirement income are always very important.

8.  "Not thinking about insurance."  We look at insurance as an asset and also as a safeguard.  Insurance can be considered in the context of a long-term plan, but it's also the back-up for financial obligations that may continue after the death of a party.

9.  "Sacrificing your own financial security for your children." We try to be as realistic as possible in working out agreements.  There are many different ways to pay for the children's expenses and Collaborative Law provides more flexibility than Litigation does.  It is possible to protect your own financial needs while making sure the kids are provided for.

10. "Making settlement decisions out of exhaustion."  In Collaborative cases, we have a series of meetings, usually an hour and a half to two hours long.  In mediation in Litigation cases, the sessions are usually a half day or a whole day, which can be exhausting.  In court, you are likely to spend a half day to several days or a week.  Collaborative Law provides a safe, measured process without the pressure to get everything done at once.

Bottom Line:  If you have serious financial concerns, be sure to investigate Collaborative Law.  Talk with an experienced Collaborative lawyer.  You should get a second opinion if an attorney mentions Collaborative Law on a web site, but then spends the consultation time trying to talk you out of using the process.  With a lawyer like that, be sure to ask how many Collaborative cases the attorney has actually handled.  Before you decide, talk with a real Collaborative attorney.

Tuesday Tips: Help Your Attorney Help You!

In every divorce, there are financial issues.  They may be about a home, investments, a business or businesses, retirement assets, bank accounts, employment benefits, debts or taxes, among other things.  Dividing assets and liabilities is at the heart of every divorce.  Some cases are more or less complicated than others, but finances are always involved.

In addition, when there are children, child support is often a consideration and that brings up the income of each party.  You will need pay stubs, tax returns and a monthly budget.

All of that means when you are getting divorced, plan on gathering and producing financial records for your attorney.  Those records are generally going to be shared with the other side, either voluntarily or in response to formal Discovery.  You will need bank and credit card statements, retirement account statements, mortgage statements, investment records and probably many other records.  Your attorney can tell what will be needed.

The sooner you provide financial information to your attorney, the sooner your attorney can understand the marital estate and start helping you meet your needs and interests.

Remember, there's no 50-50 rule in Texas for dividing assets.  You need to think ahead and decide what you want to end up with.  Your attorney can try to help you achieve you goals if the attorney knows your goals and needs and if you have provided the information the attorney needs.

Sometimes you may not have access to all or some of the financial information.  Your attorney can request that information from the other side, but you need to give your attorney some information to know what to look for and ask for.

Be an active partner in your own divorce.  Help your attorney by providing financial information as soon as possible!

Divorce Over 50: Checklist of Financial Issues

For various reasons, many Baby Boomers seem to be facing divorces even after long marriages.  Sometimes both parties reach the point where they want to end their marriage.  Other times, it's one spouse or the other who takes the lead in deciding to divorce.  Even if just one spouse wants the divorce, in Texas the divorce will ultimately be granted if that spouse persists.

Whether divorce represents welcome relief or a distasteful experience that can't be avoided, both parties need to prepare.  The following is a list of financial issues that come up in most divorces after long-term or later-in-life marriages.

1.  Planning for Retirement.  While not everyone has a retirement plan or assets set aside for retirement, it should be a concern for everyone over 40.  The degree of urgency may vary, depending on how far away from retirement each party is.  The tax aspects must also be considered for each type of asset.  Preparing a future budget and working with a financial advisor will be helpful.

2.  Planning for Transition.  This is the transition from being married to single and also may include the transition from working to retirement.  Very often, one spouse has stayed home to take care of children.  That spouse may need some time to get back in the job market and get hired, and may need some education.  Our economy is not yet back to full speed, so finding a job is not as simple as it was a few years ago.  That means that support may need to be a component of the settlement.

3.  Dealing with Health Issues.  Being part of an older age group naturally means that there will be health concerns.  Additionally, health insurance will have to be provided for.  Health issues can affect whether one or both spouses are able to be employed.

4.  Making Living Arrangements.  The divorce may be coming at a time when the parties might have been downsizing anyway, but selling a house is often part of the discussion.  One or both parties may have to find suitable and affordable housing.

5.  Taking Care of Children.  Depending on the children's ages, there may be private school, tutors, college or other education-related expenses.  Then  there's extra-curricular activities.  They have to be coordinated and paid for.  If the children are young, child support and visitation will have to be resolved.

6.  Separating Credit.  Often, one spouse has a better credit record or more income and the credit purchases have been made primarily in that spouse's name.  Joint credit cards need to be separated.  Some debts might be paid off, or they may be allocated in the property division.  A spouse might need to set up some new separate credit cards or accounts while they are still married and there is joint credit to qualify for the accounts.

7.  Managing Debt.  The  parties both need to prepare budgets for the interim while they get divorced and for their post-divorce lives.  Splitting debt 50-50 doesn't make sense if one person has very little earning potential and the other one has high earnings.  The parties need to be realistic.

8.  Allocating Investments.  Each party will probably want or need some investments, if there are some.  They should carefully evaluate the level of risk with each investment.  The parties also need to consider whether the investments promise short-term income or long-term value, and try to fit the investments with each party's needs.  Another factor to consider is how capable each party is to manage the assets.

9.  Updating Financial Planning.  Everyone should have a will and the wills have to be revised after divorce.  Other instruments, such as trusts, insurance, retirement assets, stocks and bonds, real estate and other investments will need to be revised or reconsidered.  You should work with a financial planner who helps people going through divorces.

10.  Providing for Legal Fees.  Since you will be going through a divorce, you will need a divorce lawyer.  Unfortunately, sometimes one party will try to prevent their spouse from hiring a lawyer.  Even in the most agreeable divorces, each side should have their own attorney to review the situation and advise the client.  One way or another, there's usually money available in assets, bank accounts or credit cards that can be used to hire an attorney.  Don't let your spouse talk you out of it.

Most people do a little research and think about the issues before they go see a lawyer about  a divorce.  This list will give you a starting point.  There are probably some issues not covered that may come up in your case.  Be prepared to discuss these and other issues with your lawyer at your first meeting.  Good luck!

If You Need to Wait Because You Can't Afford to Divorce...

There is a lot of discussion going on about whether the number of divorces being filed is decreasing. Many observers say that is true because of the economy, and it makes some sense. As bad as a family situation may be, many people begin to feel that they can't afford to get divorced.

• Some people are experiencing the mortgage crisis in their lives. Home values are plunging in many areas, although not as much in North Texas. Tarrant County home values, so far, are still doing pretty well and houses are selling, but who knows for how long. Even so, it is harder to get mortgages now.

• Many people are losing their jobs. Again, although Tarrant County seems to be stronger than many other areas, unemployment has greatly increased. Everyone is eventually affected by what is happening everywhere else.

• The stock market fall has badly damaged many retirement accounts and investment portfolios. The values are down by a third to a half, sometimes more.

• With prices rising, even for those people lucky enough to hang onto their jobs, it is hard to pay for food, fuel, utilities and other necessities.

• Insurance costs are going up and coverage is falling. Health care costs are increasing. Anyone with health issues now certainly faces greater difficulty in paying for necessary services.

Given those circumstances, it's no wonder that people may be deciding to wait on a divorce until they can better afford it.

For people choosing to wait, here are some other options:

1. Get a post-nuptial agreement. Many people are familiar to some extent with pre-nuptial agreements. I have written about them before. A post-nup is like a pre-nup, only later. Texas law allows a married couple to sign a partition agreement to divide their assets and liabilities. It can also provide for how present and future income will be managed. While it is not cheap, a post-nuptial partition agreement is probably much less expensive than a divorce and it will accomplish about the same thing as a divorce as far as property division. An attorney would be needed for each side. I would suggest using Collaborative Law to work out the agreement on the best possible terms for both parties, so you would be best served by contacting Collaborative lawyers.

2. Do financial planning. This is a less dramatic step than doing a partition agreement. The couple could meet with a financial planner to brainstorm ideas to find the best way to manage their finances during the downturn and into the future. A lot of the stress people are experiencing is from uncertainty about survival now and in the future. Getting qualified help to plan a strategy may resolve the concerns and leave the parties in a better frame of mind. A certified divorce financial planner or a regular financial planner can probably help you with this.

3. Take steps to enhance your marriage. Getting counseling is a common suggestion, but it makes sense. If you feel like you can't afford a divorce, but one or both of you is miserable in the relationship, then maybe you should try to make the relationship more bearable. Sometimes a marriage retreat can be helpful. There may be some groups around that you could join. Or, you could go to individual and couples counseling. Things around the house might really improve if you and your spouse follow through with counseling. Even if your marriage doesn't survive, at least the divorce later on might be more civilized. First, contact a marriage and family therapist and give it a try.

If you are haveing serious problems at home with your spouse, but you think you can't afford a divorce, you should consider the suggestions above.

Is the Economy Affecting Divorces?

One of my favorite blogs is James J. Gross's Maryland Divorce Legal Crier. James can make a point very succinctly and his posts are usually both entertaining and enlightening. His post today certainly fits that description. I have heard the question over and over about whether the economic downturn/recession/or worse has an effect on divorces. Here is his response.

“'Are divorces going down in these hard times?' The question came from a woman at one of the holiday parties upon learning I was a divorce lawyer.

"I allowed as how many couples are opting to ride out a bad marriage because they can’t sell the house, or they can’t afford the lawyer fees, or their income won’t cover two households.

"'But others,' I said, 'find that now is just the right time to get rid of an unwanted spouse.'

“'What others?' she inquired of me.

“'Why wealthy husbands, for one, with businesses, stock, options and pensions down about 50%, may find this a good time to buy out their spouse for cash at these lower prices, expecting an eventual recovery.'

“'And trophy wives, in the face of layoffs and rumors of layoffs, may decide the right time to leave is while their husbands are still employed.'

“'I never thought of that,' she nodded, and wandered off to get some more punch."

That all fits with the observation about how some people see problems and others see opportunities.

Will You Marry Me? I Have Health Insurance

Charles Jamieson, a Palm Beach, Florida attorney recently pointed out a subtle trend with families in an excellent post about the role of health insurance in family life. He wrote the following in his Palm Beach County Family Law Blog:

"Getting married for money or for wealth dates back to genesis or even earlier. Divorce attorneys and most other people are aware of this dynamic and probably know people who have married for this reason. However, getting married for health insurance coverage is not so well known. This lesser known behavior should not be surprising, given the difficulty people have in today's society finding and affording reasonably priced health insurance. Consequently, for some modern couples, the words: 'In Sickness or in Health' have taken on an actuarial meaning. These couples may not be marrying for 'richer or for poorer'. Instead, they may be getting married for affordable co-pays and deductibles. These couples weigh any marital doubts that they may have against the medical needs that they do have. For the same reasons, a spouse may prolong an unhappy marriage so that they can maintain affordable health insurance coverage. With either scenario, the psychological pressures can be immense. A recent article in The New York Times profiled a number of couples, who have dealt with the motivation of obtaining health insurance in terms of becoming married or divorced. To review this article, please click here."

Charles points out how economic and/or medical conditions can directly affect one's marital status, both encouraging some to marry and encouraging some to stay married. With medical expenses being one of the leading contributors to price increases, the situation is likely to become more common.

Another way to deal with the situation is to use a prenuptial or post-nuptial agreement. Those agreements can be used for estate planning purposes as well as controlling the impact of debt and medical expenses. Parties can technically remain married, which can keep insurance in effect, but have all of their assets and debts divided by a binding agreement. Likewise, an older couple might marry to maximize some retirement or insurance benefits, but operate under a prenuptial or post-nuptial agreement for tax or family (keeping peace with their children) reasons.

Sometimes attorneys are able to help people come up with creative solutions for emotional and financial difficulties. The best advice: Look (go see an attorney) before you leap. Find an attorney with the experience, expertise and willingness to be creative. Solutions are available if you look in the right places.

Managing Your Finances after Divorce

One of the best websites I have found on family law issues is Rosen.com, which is from North Carolina. While there are some differences in law between North Carolina and Texas, the web site is still an excellent all-around resource with current news and common sense information about family law topics, so I recommend it as a resource. Connected to the web site is a blog called "Kramer Vs". Most of you can figure out the clever name. A recent post there dealt with finances for people going through divorce. They reprinted an article that originally appeared at divorce360.com, which is another good resource. The post raised some important points about financial matters and I have taken their main points and added my comments below. You can see the original post at divorce360 here. The original post was titled: "Finances: Tips to Protect You and Your Assets after the Divorce is Final".

"Divorce is as much about starting a new life as it is about ending a relationship. One of the most important things you can and must do for yourself when starting new is to make good decisions about your finances. Whether or not you handled the finances in your marriage, now that the divorce is finalized the decisions are all yours to make. Here are some expert opinions about what to do and what not to do when it comes to your financial future.

1. Know what you have: “One of the most immediate things is to get a good handle on your assets, your income and your expenses,” says Craig Hyldahl, Financial Advisor with AXA Advisors and a Certified Divorce Financial Anaylst. “It’s easy to figure out income, what’s a little more difficult to figure out are expenses. You have to understand you’re not going to have the same lifestyle as prior to the divorce and things are going to keep changing. What may make sense today might change drastically over time, so keep meticulous track of your expenses.” In the process of your divorce, hopefully you began keeping photocopied records of all your bank statements, credit card accounts, tax returns and other financial information. It’s important to hold onto all these records and stay in the habit of keeping meticulous financial records so you know how much you spend, how much you owe and how much you make at any given time."

In most divorces with significant assets, we prepare a detailed, sworn inventory of the assets and liabilities of the two parties. You should come out of the divorce with good knowledge of your financial situation. It takes a lot of work by you (gathering information) and your attorney (organizing the information) to get the inventory, but it is a valuable document for the future.

2. Think about where you're going. "If your divorce was just finalized, you may want to get a jumpstart on your financial decisions, but this isn’t necessarily the best approach. 'Rushing is one of the worst things you can do,' says Hyldahl. 'Oftentimes rushing means making decisions one at a time, when actually you shouldn’t make isolated decisions when it comes to your finances. There are so many intertwined areas it makes more sense to take your time and then take action all at once.' Hyldahl also advises taking your time when hiring a financial advisor, since doing your finances is more personal than just numbers. 'You really need to trust your advisor, so interview several before making a decision to go with one.'"

It is important from the outset to assess your needs and goals. This is really emphasized in Collaborative divorces, but it's also true in litigated divorces as well. When you are proposing a property division plan, it helps to know what you need and to decide what you want to be able to do once the divorce is over.

3. Keep track of your credit rating. "Another important financial tip is to stay informed about your credit rating. 'Do a credit check both during and after your divorce to make sure there are no surprises,' says Barbara Shapiro, co-owner of HMS Financial and a Certified Divorce Financial Analyst. 'Also, be sure to change your beneficiaries, update your will and always keep your divorce decree close at hand as you will refer to it regularly over time (especially if you have kids).'"

Checking your credit records is helpful in discovering what credit cards and loans might be in your name which you are unaware of or which you have forgotten about. You can also look for mistakes. One's credit rating is becoming more and more important in many different ways.

4. Save something every month. "Co-author of 'On My Own Two Feet: A Modern Girl’s Guide to Personal Finance,' Manisha Thakor says anyone going through a divorce should remember that good personal finance does not have to be difficult. 'When you boil it all down, every single piece of personal finance advice falls into one of three buckets (1) save, (2) invest, (3) protect.' Try not to become overwhelmed. Remember to keep putting something into savings each month, try and invest 15 percent of your income in simple, stable funds and protect yourself with adequate insurance."

Actually, most people coming out of a divorce are not in position to be adding to savings right away. It is great if you're able to, but usually for a while, the parties are still learning to stretch a limited income over greater expenses. They are also sometimes dealing with debt and some refinancing. For those able to save, it is helpful to start a habit of regular saving, even if it is a smaller amount for a while.

5. Close all joint accounts. I didn't really agree with the original article's explanation of this point. I do agree that joint accounts should be closed, but that really should happen (by agreement or court order) during the divorce. The original article mentioned selling off some assets, but that should be done only if it does not violate a court order or legal responsibility; in other words, check with your lawyer before doing that. A prudent person would also check with a financial advisor to consider tax consequences of the sales.

6. Educate yourself about money. " Remember that managing your finances is an ongoing process. Another useful tip from Barbara Shapiro is to 'empower yourself by reading, taking classes and talking to your financial advisor, especially if you weren’t the one managing your finances before the divorce.' Craig Hyldahl agrees that there must be 'ongoing monitoring and constant contact between clients and financial advisors.' By keeping track of how your expenses, income and investments grow or change over time, you’ll be in a better position to make financial decisions."

This is good advice. There are lots of free resources on the Internet which can be helpful, but using a local financial professional will be a good investment.

7. Don't panic. "Probably the most important thing to keep in mind is don’t panic. 'You’re probably dealing with the largest lump sum you’re going to get along with the most stressful time in your life,' says Hyldahl, so avoid the tendency to feel overwhelmed. Take your time; make sure you have all the financial records you need; don’t hire a financial advisor until you’ve asked a lot of questions and established mutual goals and trust. Try not to spend more than you need to until you’ve got a firm financial plan in place."

The comment about a lump sum only applies in a limited number of cases. Whatever your situation, the advice to not panic is still important. Take your time. Take a deep breath. Think before you act. Get professional help. You need to come up with a comprehensive financial plan, but keep in mind that it will change over time, so be flexible.

"And finally, it’s important to remember you’re not alone. 'While it's natural to fear whether you'll be able to take care of yourself financially speaking, don't for a minute think you are alone in that concern,' writes Manisha Thakor. 'A whopping 70 percent of Americans live paycheck-to-paycheck and that cuts across income spectrums.' As you begin your new life, stay informed, positive and proactive when it comes to your finances and your situation will most likely continue to improve."