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By Carroll Strauss
Literally hundreds of thousands of people get married every year – most are happy when they decide to wed, and many are convinced they are going to be happier. The wedding business Is HUGE. Thousands are spent to create a much needed (if over-glitzed) rite of passage – and couples vow their commitment to being “us.” They stop being individuals and become “a couple.” This don’t really know what they have committed to, or that it is… irrevocable. And then, after a while, many not are getting the bliss they thought awaited them. Misunderstandings set in. The person they wake up to is not the person they imagined themselves getting old with. Somehow, this Is a surprise. Depending on age bracket, education and income, 40-50% decode to this marriage away and go look w for a new one. More surprises await them! Many couples have children in the years between “I do” and “I don’t.” “Us” is now a family. And yet, when divorce looms, there is no game plan, no budget, no insurance, and no easy solution. Chaos reigns. Misery is the result.
This should be seen as a national problem, but it’s not. If this were a disease, the NIH would be putting warnings out everywhere! But because it is so commonplace, it’s not seen as an unacceptable situation in desperate need of serious reform. Why does divorce seem to be hovering near the 50% mark? (and why are so many unwed couples with kids also in the legal system?) Maybe because, despite the numbers, most people still expect the dream to come true, and maybe they want kids to love them, and are shocked when It’s even harder after the kids come. Who knows? No one seems willing to look beneath the surface to find out. But we do know and can show that all cross America, hundreds of thousands of dollars are being spent on divorces and (somewhat less so) on paternity cases. Just the simple cases, where the legal battle theoretically ends with Judgment cost many thousands. (Many paternity cases are done by people with no lawyers and these are a hidden problem with significant effect on the children. the costs on these will come due in the future.) The ugly cases can literally bankrupt one parent, and destroy lives and families. (Few seem to realize that the case actually continues until there are no more minor children. When you have kids, after divorce, you are under a “life sentence”– a court order– Big Brother is watching you!) However, some people keep fighting after the judgment. This is how “case law” is made, sometimes even making news. (Think Barry Bonds.) In each of these cases that make new law (i.e. when grandparents can be denied visitation, when parents can or can’t move away, when same sex couples are both parents and when one is not, when child support is enough—the list goes on….) hundreds of thousands of dollars are spent. College tuition amounts are squandered. All of this is the result of disputes about what happens to the family. But what scares me MOST is that this is all based on a delusion—that any judge (with hundreds of cases and tunnel vision) can possibly know what’s best for YOUR child! Economic paradoxes end up with men feeling cheated– and women in poverty. men pay money to women they no longer have any “quid pro quo” from, and women remain dependent on men they no longer respect– or may even loath. The irrevocable vows of the marriage are not so easily ended, and such exchanges have a steep psycho-spiritual cost. Alas, even in cases where income potentials are roughly equal, families are torn apart– and children are invariably the innocent bystanders. This is clear– yet the system is blind. The effects on children range from life-long abandonment issues, to “learning” that adult relationships are temporary. And few children ever see conflict resolved in any healthy way. Many people accept that people going through divorce are angry, hostile, and in a “divorce trance.” Lawyers in particular point to the ugliness seen in court cases (and lawyers’ offices) as proof. Sadly, the folks who vow to stay far away from that don’t get any press, nor do they spread the word about their quiet successes. (But see “Breaking Apart, a Memoir of Divorce” by Wendy Swallow for an exception.)
NEW FLASH! Divorce does NOT equal all of the above. There are new options! The truth is that the ugliness of most divorce cases is caused by a system that presupposes it, then amplifies it and always utterly ignores the family unit. Litigation assumes that truth will emerge from the clash of opposing viewpoints. This may work in assessing past events– but marriage, and it’s ending, are not about past events. they are about the future of the family, an entity that is not ending in most divorces. Is there a solution? Yes!! The way to stay out of the battle is to use “ADR” – “Appropriate Dispute Resolution.” It could be mediation, which it great for couples in full agreement on how they want their family to be after divorce, but who need expert help with the “how.” But for many, if not most, couples, who need help with many aspects of the family reorganization– financial, emotional AND legal. This Is only be possible in “Collaborative Divorce”, or, sometimes, in private judging. (The “Hollywood” model.) Collaborative Law, the newest and most sophisticated “ADR” option has been on the Today Show and Los Angeles’ Talk of the City. Recently collaboration has begun to receive media attention, thanks to a few brave souls who were willing to “go public”. Most Family Law judges are enthusiastic about it, and some courts are sending letters recommending couples seek “ADR” and mentioning Collaborative Practice. (Of course it is usually too late by the time someone has filed in court, so the letters are probably useless– but they do show a growing realization that court does not fit all.) What’s the bottom line? Couples need to know that their divorce from each other should not, nor does it have to, mean they divorce their kids, and lose their family. ADR works for families, and it works for divorce professionals who have watched in horror as the legal system trashed lives and families. Ask about “Collaborative Divorce.” Ask about “private judging.” Get all the facts, read books. Research on line. Don’t take no for an answer. Your quality of life depends on it!
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How a Qualified Domestic Relations Order (QDRO) Can Protect Your Rights
Even while you’re going through the difficulty of a divorce, you need to make informed financial decisions regarding the division of the property that you and your spouse have accumulated during your marriage. Retirement savings are one of the largest assets many people own, and therefore are an important issue in divorce proceedings.
If you’re planning to get a separation or divorce and your spouse has an employer-sponsored retirement plan such as a 401(k) or pension plan, you’re legally entitled to part of the balance. But how do you protect your share? What’s to stop your spouse’s employer from paying out the benefits to your spouse or ex-spouse, leaving you with little or nothing?
A Qualified Domestic Relations Order (QDRO, pronounced “quad row”) can protect your interests. A QDRO is a court order, judgment, or decree related to child support, alimony, or property rights, that instructs your spouse’s pension plan on how to pay you your share of plan benefits.
QDROs only apply to plans that are IRS tax-qualified and covered by the Employee Retirement Income Security Act (ERISA). They do not apply to military or government pensions, which are governed by other laws.
A QDRO gives you protection that a marital settlement agreement does not, so don’t assume you’re covered just because your divorce decree states that you have a right to part of your spouse’s retirement funds.
A Domestic Relations Order is not considered Qualified unless it’s been approved by the retirement plan’s Plan Administrator and the court. Retirement plans often have standard QDRO forms that your lawyer can use to draft the wording of the QDRO. Sometimes these are adequate, but if your share of your spouse’s retirement account is substantial, you should consider using an attorney who specializes in QDROs to ensure that all of the related issues in your marital settlement agreement are incorporated into the QDRO and that your rights are fully protected in a way that a generic QDRO form can’t provide.
If your attorney is not experienced in QDROs it will take him or her longer to do the research and paperwork, which will cost you more in legal fees. There’s also the chance that he or she could miss something important that could end up costing you money.
Defined contribution plan assets are easier to calculate than defined benefit plan assets because defined benefit plan payments are based on complex actuarial calculations and factors such as years of employment. If your spouse has this type of plan, your lawyer will probably have to hire an actuary to calculate your share of the plan assets.
Your lawyer should read the plan’s summary plan description and other plan documents because the QDRO’s terms must agree with the terms of the plan. The issues related to defined contribution plans are different than those related to defined benefit plans, another reason it helps to use a specialist.
If your spouse is covered by a defined contribution plan, like a 401(k) plan, the timing of your payment depends on that particular plan. Some plans make an immediate lump sum pay out and others pay a lump sum in the future or make periodic payments.
If your spouse is covered by a defined benefit plan like a company pension plan, you would receive monthly payments starting at your normal retirement age.
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“10 Steps to a Money-Smart Divorce”
Author: Jay MacDonald
No matter how intense your emotions, it’s important to remember that ending a marriage is in fact a business deal. Here are moves to make sure you don’t get taken.
When your marriage breaks up, the last thing you feel like doing is crunching numbers. You’re hurt, perhaps angry, and possibly overwhelmed with anxiety, fear and despair. You’re focused on the past and present, not the future.
But as many divorced couples learn the hard way, this is precisely the time you need to get a grip and pay close attention to your assets and your financial future, lest both slip away in the flood of emotion.
“First and foremost, it’s a business deal,” says Gayle Rosenwald Smith, a Philadelphia family lawyer and author of “Divorce and Money: Everything You Need to Know.” “That means you’ve got to get rid of your emotion any way you need to, whether through therapy or going to a gym. Because your divorce should be based on one thing: your property settlement. It’s a matter of numbers, that’s all it is.”
Financial educator Ruth Hayden, author of “For Richer, Not Poorer: The Money Book for Couples,” agrees, but admits that’s easier said than done.
“At least 80% of money is about self-management, about emotions, and 20% is about quantifying and computing,” she says. “The counting part is easy; it’s the emotional part that’s hard.”
Clear the decks and set sail. Since money is the No. 1 cause of divorce, it’s safe to assume that splitting the financial sheets won’t be easy. Here are 10 steps to help you cast off, steady your financial ship and set sail for the solo voyage ahead.
1. Pull your credit report.
2. Open individual bank, credit card and brokerage accounts.
3. Close all joint accounts.
4. Keep separate property separate.
5. Consider selling the house.
6. Change those beneficiaries.
7. Reclaim your name.
8. Check your retirement.
9. Guard your health coverage.
10. Dust yourself off and start living.
Pull your credit report. “Pull your credit report before the divorce so that anything in dispute can be resolved before the divorce is final,” says Hayden. There are three major credit reporting agencies: Experian, TransUnion and Equifax. Be sure to get a copy of your report from each of them. The reports are the quickest and easiest way to get an overview of the outstanding loan balances, mortgages and credit card debt that you and your spouse will eventually divvy up.
Open individual bank, credit card and brokerage accounts. You also need to do this before the breakup is official. It will be easier to get a credit card and bank account in your own name while you are still married and share joint assets and debt on credit cards, mortgages and loans. Hayden says this is especially important for a woman who has never established credit in her own name. “It’s easier for a 15-year-old to get a credit card than it is for a 50-year-old divorced woman. She just gets deleted,” Hayden says. (For more, read “4 steps to building great credit.”)
Close all joint accounts. A divorce can take time. To avoid acquiring additional joint debt (or suddenly losing shared bank assets) during the legal process, close your joint credit card and bank accounts. You will, however, still be jointly responsible for paying off the balance of the closed accounts. Cancel the accounts in writing and be sure to request that they report each account as “closed by customer” to the credit bureaus.
Closing shared accounts is a critical step and one that is too often overlooked, says Smith. The more you remain connected to your ex-spouse financially, the more you are at risk. If possible, pay off joint credit card balances by check from your individual bank accounts or through balance transfers to your individual credit card accounts.
“In a property-settlement agreement, couples often split their debt. One person takes the MasterCard and another, the American Express. Well, that’s an agreement between the two of you, not between you and the credit card company,” says Smith. “What will happen is, one person declares bankruptcy down the road and the credit card companies come after the other. You might be better off each borrowing in your own name and each paying off the credit cards so that you come out of the marriage without any joint debt.”
Keep separate property separate. Assets you brought to the marriage separately (real estate, vehicles, an inheritance, gifts, money you acquired before marriage, etc.) are yours to take away from the marriage. You drive in with an SUV, you drive out with an SUV. But if you put any separate assets into a joint account, they may be considered joint property.
“If you’re going to take separate money and give it to the marriage, then either decide to kiss it goodbye or do some loan documentation, because if you don’t, you’re going to lose it,” says Smith.
Separate debt also travels with you. For example, if you brought a student loan into the marriage, you carry it out with you, even if your spouse was helping to pay it off.
Consider selling the house. Traditionally, women try to keep the family home at all costs. Unfortunately, it’s often an emotional decision that makes poor financial sense.
“Studies say that women will keep the house and give up the retirement money,” says Hayden. “It is one of the biggest mistakes women make. The problem with that is, many times she’s not going to be able to afford to stay in this house anyway, and if they’ve been in the house for a long time, she could stand to lose a good share of her capital gains exclusion, which is $250,000 for singles and $500,000 for couples.”
“I recommend that they look seriously at selling that house, even though it’s hard. It’s an emotional tie that ends up strangling the woman. She ends up losing it anyway, and she has given up her retirement money. I ask women to just think a little bigger.”
Smith agrees: “Sell the house and take what you make and put it into something where you know that you’re able to pay your expenses and have a cushion, especially in an economy where we have no clue what’s going to happen.”
Change those beneficiaries. Despite what your divorce decrees, if you don’t change the beneficiaries on your will, trusts, IRAs, pension plan and life insurance, your ex could wind up with an unexpected windfall in the event of your untimely demise. As long as you’re at it, this is a good time to review your various policies to make sure they fit with your new circumstances. And don’t forget to delete your ex-spouse from these documents and policies and change your marital status where applicable.
Reclaim your name. For some women, divorce adds another task: reclaiming your name. If you are reverting to your maiden name, you may be required to produce the divorce decree or document signed by your ex-husband that acknowledges your new name in order to obtain a new driver’s license, passport or other identification. Use your new name to announce your new marital status to your circle of contacts: your doctors, employer, human resources department, children’s teachers, landlord, pharmacist, mail person, health insurer and clergy.
Don’t forget to register your name change (and adjust your withholding if needed) on your W-4 and other tax forms and with the Social Security Administration. A mix-up could cause you to lose valuable Social Security credits for your work, and you may have to show proof of both names when applying for benefits.
Check your retirement. Speaking of Social Security, if divorce finds you within chipping distance of retirement, you will want to contact the Social Security Administration. If you are 62, were married for at least 10 years, have been divorced more than two years and have not remarried, you may receive benefits based on your ex-spouse’s Social Security record, even if he or she has not applied for benefits. If you are raising a child younger than 16 years old from the marriage, you may receive benefits on your ex-spouse’s record even if you were married for less than 10 years. In most cases, you can expect the same amount you would have gotten if you had remained married, and possibly all of it if your ex-spouse dies. The benefits you draw do not affect amounts due to your ex’s current spouse.
Guard your health coverage. Sadly, divorce often forces one party to sacrifice health care coverage. Don’t let this happen to you. One uncovered medical emergency can cripple your finances. Under the COBRA program, you are guaranteed 18 months of health coverage, albeit at rates that might induce cardiac irregularities. If you have no other avenue for affordable coverage, keep the COBRA plan in place until you find one. “You can’t afford not to think about things you need such as health insurance, disability and life insurance,” says Hayden. “If you can’t afford all these things, you really should consider getting rid of the house and downsizing.”
Dust yourself off and start living. Yes, you’ve survived a train wreck. If you accomplished most of these steps, you are more aware than you’ve ever been of your true financial picture and what you need to do about it.
If you receive a lump-sum payout, don’t splurge for revenge or because you feel you deserve it. There is a wealth of financial planning help online. When you’re ready, consider hiring a financial planner to help you sort out your newly single money situation. Financial experts recommend that you pull your credit report three months after the divorce and clean up any loose ends.
As seen on Bankrate.com
For more information on family law solutions, visit www.aj-familylaw.com