Divorce Survival Guide - A guide to assist you through the financial considerations of a divorce. Answers to the most common divorce questions from filing for divorce to property division to child custody to spousal support.

Divorce Survival Guide

If you wish personal assistance in planning your divorce as it relates to your finances please email or call me to discuss creating a divorce financial plan. I have provided a link to a sample divorce financial plan for your review.

This guide is not a replacement for seeking legal advice from an attorney, but a tool to assist you and your attorney to achieve a financially-fair divorce. This website does not seek to offer legal advice. Consult with your attorney. Also take note that each state has it's own set of rules concerning a divorce.

You will gain a comprehensive foundation of practical knowledge on topics such as:

Personal vs. Marital property in a divorce
Valuing and dividing property in a divorce
Retirement plans, pensions, and QDROs in a divorce
Splitting the house in a divorce
Alimony considerations
Child Support Issues
Divorce Tax problems and solutions

When seeking legal advice, remember vast majority of attorney are trained in legal matters and not financial matters such as taxes, investments, retirement plans, financial forecasting and financial planning in general. The divorce decree will have a lasting impact on your financial situation for years to come. Best advice I can offer is "be prepared", know how every financial proposal in the divorce process will impact you both in the near as well as long term.

Divorce can be very mentally draining as well emotionally stressful and financially costly for all parties concerned. If you are unsure you want a divorce or wish to work through your martial problems then you might want to consider reading either or both of the following books. "Save The Marriage" and "Save My Marriage Today".

In the next following several months I will expand this section to cover in more depth, the above topics.

Key Financial Issues in Divorce

Each party wants to feel that the other party did not get too much.
Each party wants to feel that the financial outcome is fair to him or her.
Each party wants to know that he or she will be “OK” in five years.
How will you pay for the children’s college education?
How much cash will you get when they sell the home?
If retirement is looming, how will that affect the situation?

Key Financial Issues: Budget

If you haven't done so it is extremely important you set up a budget. Things to consider concerning your budget and standard of living. Often in a divorce, each side thinks the other side is doing quite well. Occasionally that’s true, but more often it’s not.

Can I make ends meet?
Can I maintain my standard of living?
Is my spouse getting rich?
What can I do without?
Who will pay for health insurance?
Who will pay for health insurance for the kids?

Key Financial Issues: Residences

In a divorce, at least one party has to move out of the marital home. Sometimes both parties do. Should you to plan for selling now or later, buying now or later, and renting now or later. Sometimes a spouse gives up too much in order to retain the residence. This move raises several questions:

Can the custodial spouse afford to live in the old home?
Should the spouse(s) rent or buy a new home?
Should the home be sold now?
Should the home be sold later?
Should one or both spouses move out of town?

Key Financial Issues: Property Division

If there is any property, the parties will have to divide it when they get divorced. Your goal may be to get as much property as you can, or it may be simply to assure a fair result. You may know that you are aiming for a division of, say, 50/50…but is that 50% of all property, or just marital property? And how do the parties decide who gets which property?

Key Property Division Issues: Marital vs. Separate Property

In almost all cases, each item of property is categorized as either “marital” or “separate.” In community property states, marital property is called “community” property, but the approach to property division is similar. In a divorce, typically, the separate property is “off the table” in property division discussions.

Separate property includes property owned previously, and inheritances during marriage. To remain separate, it must be kept in separate accounts and not used to pay joint expenses. Gifts from one spouse to another (e.g., jewelry) are typically separate property.

Key Financial Issues: Child Support

In every state, there are formulas that determine the amount of child support it is necessary to pay. These formulas are called “guidelines". Despite the mechanical nature of the calculations, there are points of flexibility.

Child support is not always simply the application of a formula. Here are some of the reasons:
At high levels of income, the guidelines typically do not apply. The level of income at which guidelines cease to apply varies from state to state.
There may be disagreements about what constitutes “income,” especially if a party is self-employed, or the income varies widely from year to year.
A spouse may be deliberately under-employed. Then a judge may “impute” income to that spouse.
In all cases, the parties may negotiate a child support different than the guideline amounts. A judge will generally approve the negotiated outcome unless it is clearly unfair to one party.

Key Financial Issues: Alimony

Unlike child support, which has a significant state involvement, alimony is almost always purely the result of the negotiation between the parties. In a few states, there are alimony formulas. But even there, the alimony calculated is usually intended to be only temporary.

Different states have different attitudes to alimony. Some states are inclined to award lifetime alimony after ten-year marriages in which the recipient stayed home and supported the family. Other states are not inclined to award any alimony at all, or will award alimony of only a few years, intended to allow the recipient to train for a career (often called “rehabilitative” alimony).

Key Financial Issues: Education

If the children are young during the divorce, the children’s college is often the furthest thing from your mind. But children of divorce miss out on higher-quality four-year colleges much more than do their peers from intact families. And this is often the case despite the fact that one of the parents can afford to pay. If a parent can afford to pay, this is the moment to think about it, and get that commitment. More immediately, there may be private schools for the children, or education for one (or both) of the parties. You want to plan for this as well.

Key Financial Issues: Retirement

If one or both parties are nearing retirement age, then the financial picture will change sometimes dramatically when retirement comes. You will want to look at the total picture when retirement comes, in order to plan wisely. In retirement the following things happen:

Wages and salary stop
Social security begins to pay the recipient parties
Defined benefit pensions begin to pay out
IRAs may begin to pay out
The parties may be spending down savings

Key Financial Issues: Tax Issues

The calculation of taxes is complicated and difficult and you should seek advice. Some of the following should be considered:

Claiming the Exemptions
Tax Filing status
Alimony Tax Deductible
Alimony Recapture (Alimony vs. Property Settlement)
Alimony vs. Child Support
Mortgage Interest Payments
High-Basis vs. Low-Basis Assets
Investment assets