Four Exceptions To The Recapture Of Front-Loading Of Maintenance

This is part of our Divorce Tips series

The Tax Reform Act of 1984 enacted rules designed to prevent excess front-loading of maintenance payments. Recapture under §71(f) can occur only in the third post-separation year. The Internal Revenue Code under Section §71(f)(5) provides four exceptions where the alimony recapture rules do not apply:

Exception #1: Either spouse dies before the end of the third post-separation year or the spouse entitled to receive the payments remarries before the end of the third post-separation year. [§71(f)(5)(A)(i)]

Exception #2: [Read more]

Divorce Your Health Insurance?

When one spouse brings home the health insurance, what’s the ex-spouse supposed to do for health insurance?

This is an important consideration no matter which spouse loses the health insurance, especially if they have pre-existing conditions.

For example, it is not uncommon for women over 40 years of age to develop severe health problems. Some become almost uninsurable, at least at a reasonable cost. This is a real concern where they are suddenly on their own and responsible for acquiring health insurance.

And the longer the marriage lasts, the more likely it is that one spouse will leave the marriage with health issues.

The COBRA law passed in 1986 allows a spouse to continue to get health insurance from their ex’s company if it has at least 20 employees, for three years after the divorce. The normal COBRA provision states that, if an employee is fired or leaves a job, he or she can get health insurance from that company for 18 months. However, in a divorce, it is extended to 36 months.

Linda and Bob are getting divorced. Assume that Linda decides to continue health insurance under COBRA from Bob’s company. Linda must pay the premium as agreed. If she misses a premium payment, the health insurance company can drop her and they do not need to reinstate her.

Typically, Linda will not get the discounted group rate but will be charged the full rate. It is important to shop for health insurance, even though the COBRA provision may supply a quick solution to health care coverage, it may not be the best. It may be purchased at a lesser cost somewhere else.

There are two drawbacks to using the COBRA health insurance provision: [Read more]

Baby Boomers and Divorce: A Bumpy Road for Many? Results of National Poll

A first-of-its-kind national poll reveals how divorced boomers are holding up.

To determine if a consensus exists about how divorced baby boomers are holding up, a National Poll on Divorce was conducted by the National Association of Divorce for Women and Children and the Baby Boomer [Knowledge Center].
Questions:

Participants in the poll were asked three fundamental questions about the divorce process, the relationship with their “former” spouse and inevitability the affects of divorce has on the dynamics of the family.

1. What was the most challenging part of getting a divorce: custody of the children, dividing the assets or finances?

2. What life skills would have been helpful when going through your divorce: stress management, coping skills and/or communication skills?

3. What is your relationship now with your former spouse: amicable, have learned to tolerate each other for the sake of the children or can’t be in the same room together and do not speak to each other?

[Read more]

How A CDFA Can Help You Afford to Get Divorced

A Recent Survey Conducted By the Institute for Divorce Financial Analysts Shows Increase in Number of People Unable to Afford Divorce

In a recent survey conducted by the Institute for Divorce Financial Analysts^TM of 270 Certified Divorce Financial Analysts^TM from across the country, 68 percent indicate that they have seen clients who could not afford to get divorced because of recession-related financial problems; 63 percent of respondents says this number has increased since the previous year. Those surveyed believe this will result in delayed or drawn-out divorce proceedings as well as an increased number of couples trying to save money through DIY divorces, foregoing professional legal services.

“It’s imperative for divorcing couples to keep in mind that the current economic conditions will indeed change, and planning for their future is paramount,” says Fadi Baradihi, president and CEO of The Institute for Divorce Financial Analysts^TM (IDFA^TM). “With people cutting back on legal and other professional fees, it’s even more imperative that they understand how to plan for their long-term financial stability. Working with a Certified Divorce Financial Analyst^TM can help to preserve the family’s finances – which is crucial in today’s economy.”

Working with clients and their attorneys, a Certified Divorce Financial Analyst^TM(CDFA^TM) forecasts the long-term effects of the proposed divorce settlement. CDFAs assist attorneys by helping the client make financial sense of proposals, and they also give attorneys the tools they need to help prove their cases. While lawyers serve a crucial role as individual legal advocates, they are not necessarily there to explain financial consequences in detail, or to empower their clients with the knowledge they need to make smart financial choices.

FAQs About Qualified Domestic Relations Orders

What is a Qualified Domestic Relations Order?

A “qualified domestic relation order” (QDRO) is a domestic relations order that creates or recognizes the existence of an alternate payee’s right to receive, or assigns to an alternate payee the right to receive, all or a portion of the benefits payable with respect to a participant under a retirement plan, and that includes certain information and meets certain other requirements.

Reference: ERISA § 206(d)(3)(B)(i); IRC § 414(p)(1)(A)

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What is a Domestic Relations Order?

[Read more]

Sharing Children For Tax Purposes

Starting with 2009 tax returns, a noncustodial parent claiming the tax exemption for a child much complete a Form 8332 if  you were divorced (or changed your agreement) after 2008. The noncustodial parent will have to attach Form 8332 singed by the custodial parent and whose only purpose is to release a claim to the exemption.

Check with your tax preparer and/or attorney if you think this situation may apply to you.

The Absentee Parent

You want to be able to continue having a great relationship with your kids after separation or divorce. This means focusing on the kids rather than your ex-partner. You need to be parents rather than partners.

Breaking up is difficult enough without losing touch with your kids…you are feeling the loss of that everyday contact and you believe your children miss you too. You may not always be sure of the best way to be involved with your children. Remember – you are important to your children so make contact and hang in there for them.

Even if you live a long way from your children, you are still their parent. No matter who your children live with, they need and deserve to know that they are loved and wanted by both of their parents.

Children can be frightened by the strong emotions that often come from parental breakups. You may have to work to regain their trust. Your children need to feel safe with you and this can take time.

Studies support the importance of children generally having both parents in their lives. This helps their self-esteem, wellbeing and their success in life as they get the benefit of both parents’ strengths and experience.

Separation often means that you have to parent one-to-one for the first time and this can be a challenge. At the same time, it is a new chance to get to know your child as a person and show them they are important to you. Kids have their own ways of doing things. Let them know you love them for who they are.

Plan what you are going to do with your children. Outings don’t have to cost a lot of money but they just need to be enjoyable for the kids and yourself. The kids will enjoy just spending time with you and knowing you are still an important element of their life.

Phone calls can’t replace being with your children but they are a great way of staying in touch. Whatever happens, you are making contact and kids realize that you care.

Think about what you are going to say before you pick up the phone. The more you talk with your children, the more things will flow and you will discover how special they are.

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Anne Wolski has worked within the health and welfare industry for more than 30 years. Go to www.magnetic-health-online.com to see many wonderful health articles, many of them written by doctors and others who have been involved in the health industry for many years.

Role of the Financial Planner in the Divorce Process

The use of financial planners in the divorce process is relatively new, but is a rapidly growing trend. The reasons for this are simple. The divorce process involves to a large extent the untangling and subsequent division of assets and income. Despite a lack of formal training in personal finance, attorneys and mediators have historically been thrust into the roles of financial analyst and adviser. This has been an area fraught with danger, both from the divorce professional’s and the client’s point of view. While accountants and actuaries have participated in the process, their services have usually focused on the valuation or investigation of assets, not on personal finance.

Financial planners are recognized experts in personal finance. Because they have traditionally helped individuals achieve long-term financial goals, such as saving for college or retirement, they have specialized training and skills that enable them to analyze financial issues in their long-term context. They are thus able to peak into the future and provide insight into how a particular allocation of assets and income might play out over time.

A divorce financial planner can help individuals going through divorce focus on the difficult financial issues at hand, which sets a more positive and productive tone for discussion and makes the process more efficient and cost-effective. It empowers individuals to make wise and workable decisions regarding the hard, but often necessary lifestyle adjustments. People frequently feel more secure about the choices they make, are able to reach workable settlements more quickly and are less likely to be forced to revisit support issues in the future.

Here are some of the things you can expect a divorce financial planner to do for you:

• Help stabilize your financial situation.

• Prepare accurate and realistic post-divorce budgets.

• Calculate your respective needs and paying abilities.

• Legally minimize taxes.

• Analyze alternative settlement scenarios and determine their workability.

Our thanks to http://www.divorceinteractive.com for this article.

7 Don’ts When Going Through A Divorce

The normal point of belief is to trust your spouse, but when you are in the process of a divorce, you will have to imagine you are engaged in “warfare.” As strange as that may sound, it is a reality in most cases. Your life will change drastically in a very short time so you must think defensively in order to protect your future.

Following are a few points to ponder:

1. Don’t , in any case, use your spouse’s lawyer, even if they claim they are saving money. Their lawyer is NOT your friend! Your future will be about money! Protect it! Find your own lawyer, one you trust.
2. Don’t sign anything legal until your lawyer okays it. Even if they say “trust me, I wouldn’t hurt you.” Oh yes, they would.
3. Don’t make any verbal promises. Your spouse could be recording you and in some states, recorded messages are legal. If not, a savvy lawyer could use your words against you and influence the judge.
4. Don’t date anyone else until you are divorced or legally separated. Check with your lawyer on your legal rights. It could be used to your disadvantage, even if your spouse is already cheating on you.
5. Don’t depend on your spouse’s credit rating. Establish your own credit in only your name, before the divorce. Without it, you will not be able to rent an apartment, buy a car or many other necessities. Your personal good credit is like gold to you, married or not.
6. Don’t wait until you are divorced before you make plans of living alone. Investigate a safe environment in which to live, in case you have to sell your home and divide the spoils. Work on a personal budget so you will know what to ask for in the proceedings.
7. Don’t suffer alone. Join a Support Group, seek counseling, legal, financial and emotional. Waiting until you are in a heap on the floor may lead you to make bad decisions. You may not be thinking clearly and need someone to help you clear your thoughts.

In some cases, divorce becomes un-declared warfare. Being unprepared could mean the soft of heart will be the one who suffers most. The above suggestions are the bare minimum to be aware of. Educate yourself on your rights. Read, go to divorce informational groups, check the net for ideas of self protection.

Listening to friends legal suggestions is a mistake, unless they are a lawyer, or have official information. Divorce is unpleasant enough on its own terms, but making mistakes because of a lack of knowledge can be avoided.

This is a Guest Post courtesy of Patricia Hubbard. For more tips and tools on how to survive divorce and loss and make healthy relationship choices you are invited to visit http://askpat.typepad.com. Patricia Hubbard has Facilitated a Support Group for Separated, Divorced and Widowed people for the past 12 years.

5 Financial Mistakes in Divorce

Avoiding these 5 financial mistakes during a divorce could save you thousands of dollars after your divorce is final. Many people act on emotion rather than logic and therefore make mistakes they later regret. Here are the 5 financial mistakes you must avoid.

1. Holding on to the marital home at all costs

In a divorce situation one spouse may decide they can afford to keep the house and buy the other spouse out by giving them their share. However, keeping the three or four bedroom marital home may be a financial undertaking that neither party can absorb in the post-divorce environment. Especially with economic times the way they are right now, the amount you buy out your spouse for now may not be the same amount of equity you will get when you go to sell in a year or two. A good divorce attorney or Certified Divorce Financial Analyst will help you decide whether it is a good financial decision to purchase the home. Often it is not a good move.

Home values are declining throughout the country and it is a good idea to get your money out of the marital home and then downsize. If you wait to sell the home, your half of the equity could end up vanishing as your home value diminishes in a declining real estate market. Maintenance and child support to the recipient parent can help fund the mortgage and taxes, but some parties find that the burdens of keeping the marital home post-divorce outweigh the benefits, especially in this current home market/mortgage environment.

2. Failing to make a clean financial break.

Clean separation of assets and debts is another difficult task, but one that needs to be done. During the divorce process it is usually a roller coaster ride. Some days are okay and some days are nightmares. You should not take a chance on your spouse running up debt that could negatively affect your credit score. Once a debt is reported to your credit bureau it is very difficult and time consuming trying to get it removed

3. Counting on your ex to honor financial commitments.

Depending on your former spouse to comply with financial arrangements is also a huge mistake. Although both parties in a divorce are held to a court-ordered divorce agreement, creditors are not bound by the terms of the divorce judgment. If your ex fails to pay on debts or loans, you may suffer the consequences when applying for future financing. If the divorce procedures are going smooth you would think you never have to worry but all it takes is one argument and usually there are bitter feelings that could lead to one spouse not cooperating. You can prevent this by not depending on that spouse for any financial commitments unless it is in writing.

If you can pay off debts during the divorce process, that is the best way to go. If you have joint debts and your spouse declares bankruptcy, the creditors will go after you, no matter what the divorce decree states.

4. Forgetting to change your will and beneficiary forms.

Wills and trusts can also be seriously impacted by divorce proceedings. Parties in divorce should separately seek counsel for the redrafting and execution of new estate plans, reflecting the wishes of the maker of the will and/or trust prior to the time of the divorce.

5. Overlooking taxes.

Finally, never forget which amount of money in your divorce settlement is maintenance, and which amount is child support. While child support payments are not taxable to the recipient, maintenance payments are. Having a great accountant could come in handy to keep great records of your finances if you are too busy to do so.

This is a guest post by Michigan divorce attorney Jannelle J. Zawaideh who specializes in family law including child support, child visitation rights, spousal support, alimony, property division, and paternity matters. Call the Law Offices of Jannelle J. Zawaideh to schedule your FREE initial consultation to discuss any family law or marital options you may have. Michigan Divorce Lawyer Jannelle J. Zawaideh has the most reasonable rates to meet your budget. You can also visit http://www.themichiganlawyer.com for more information.

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