Prior Divorce Tips of the Month

January 2008 - Counseling

A divorce or the end of a relationship can be stressful and challenging. It is difficult for the most grounded of people. It is easy to lose the perspective that divorce is a life transition and that you, your spouse, and your children will have a complete yet different future. Because of the normal emotions, most people are not at their "best" when seeking a divorce. It can be very helpful to have good professional support to help you become grounded, to help you see problems from different perspectives, and to help ensure that your decisions are in harmony with your highest long-term priorities and goals. A mental health therapist can provide that support and help keep you grounded during your divorce. There are many excellent therapists in the Greater Seattle area. More and more healthy and normal people who divorce have experienced the enormous benefits that good therapy can provide during this transition, thereby improving both the experience of their divorce and their future.

  February 2008 - Financial Advice

There are many parts to a divorce. This month's divorce tip is about the important financial part to a divorce. There are four primary financial parts in a divorce: property and debt division; spousal maintenance (alimony); child support; and professional fees (transaction costs). The components can be interdependent. The property division may affect spousal maintenance and child support; spousal maintenance may affect the property division and child support; and child support may affect spousal maintenance and even sometimes the property division. Financial decisions that are made during a divorce may well have tax consequences (now or later), and the tax rules can be complicated. Different types of property have different after-tax values. In Washington, there is no formula for property division or spousal maintenance amount and duration; there are worksheets for child support, but they only yield a presumptive amount from which there may be a “deviation.” Generally, the goal in a divorce is to ensure that the overall outcome will be as fair to everyone as circumstances will permit, including the obligation to support children. The financial part of a divorce is very important, and will affect your future and your family's future. Be sure to get good financial and tax advice, and take your time to carefully consider your options and the various ways to accomplish your financial goals before making any final decision. In a collaborative divorce, be sure that your team includes a neutral financial specialist, who can provide you and your spouse with careful financial analysis and education.

  March 2008 - Divorce Choices

With as many as 50% of first marriages ending in divorce, there are many different procedures available to get you to your divorce decree. They range from do-it-yourself paperwork to a full-press court battle, with many options in-between. Because a divorce represents the end of the dream of the marriage, there is a natural grieving process that accompanies divorce. Psychologist Elisabeth Kubler-Ross identified 5 stages to grieving: Denial, Anger, Bargaining, Depression, and Acceptance. Not everyone goes through these stages in a divorce, and it is possible to go back and forth between stages, but the general progression is normal and natural. Usually, each spouse goes through these grief stages of divorce at their own time schedule. While in the middle of the grieving process, each part can seem overwhelming. However, it each stage is temporary and should eventually lead to acceptance unless you allow yourself to stay stuck in one of the stages. When thinking about your situation, and your spouse, remember that each of you is going through a grieving process, which is often also accompanied by a fear of an unknown future. When choosing the procedure that will get you to the divorce decree, consider which stage you may be in, and which stage your spouse may be in. The anger, denial, or depression that you or your spouse may feel today will likely be gone in the future. Yet, choosing the wrong divorce procedures made in a natural but transitional moment of grief can be long-lasting. Take your time to choose the process that is best for you and your family. A divorce lawyer who is familiar with this and the other normal and expectable emotional processing which is part of a divorce transition may be able to better guide you through your divorce. Collaborative divorce is a process that may allow you some more time to process the stages of grief.

  April-May 2008 - Consider the Public Record

One of the inherent realities of divorce is that it is generally necessary to separate one household into two households. If your goal is for both spouses to own their own separate residences after divorce, or if the divorce settlement involves a cash-out that must be funded by refinancing a residence, then it may be beneficial to finalize your divorce settlement before filing any papers with the court. Once you file a petition for dissolution of marriage (the document that starts the divorce), the existence of the divorce becomes a public record. To the surprise of many divorcing couples, that public record can interfere with the ability to get financing. It therefore pays to take care to structure your divorce process so it does not interfere with your settlement plans. As a public record, any pending divorce will appear in your credit report. Because a pending divorce means that your future income and assets are yet to be determined as part of the divorce process, many mortgage lenders hesitate lending money to divorcing couples. In other words, mortgages may be unavailable or more expensive once your divorce is filed with the court. In order to both divorce and obtain refinancing or new mortgage financing, and to avoid unnecessary disappointment, it is usually beneficial to refinance before filing a divorce petition, or after you have reached your final settlement. (The final divorce settlement exists when it is in a binding, written document that is enforceable in your State.) By carefully managing the timing of the filing of the divorce petition, you and/or your spouse may both be able to qualify for financing/re-financing to make your divorce settlement a reality. It is often useful to consult early with a mortgage specialist to determine what is and what is not possible in your divorce settlement. Other considerations may affect this decision, and it is best to consult with a qualified divorce lawyer if you are in doubt. In the collaborative divorce process, it is common to strategically time the filing of the divorce petition with the court to maximize the benefits, and to engage in careful financial and mortgage planning, designed to maximize the economic benefits available to both spouses after their divorce. While the degree of planning may not always be possible in all processes, the timing of filing of the divorce petition is always an important consideration.

  June 2008 - Tax Consequences of Divorce

Perhaps the last thing many people want to have to think about when they divorce is taxes. Yet, there can be significant tax ramifications resulting from a divorce. Good divorce planning should therefore also include tax planning. A divorce will almost certainly affect your taxes in several respects, including your tax bill as well as payroll withholding and/or estimated taxes. Different tax tables apply to unmarried persons instead of married persons, selected based on their marital status on December 31. Additionally, persons with different incomes may be in different tax brackets—if, after the divorce, the divorcing spouses are in different income tax brackets, which can affect budgets and cash flow. Add to this that spousal maintenance (alimony) is usually tax-deductible to the paying spouse and treated as income to the recipient, so long as certain rules are followed. If the rules are not followed as part of the divorce, the tax-effect of the alimony as part of the divorce settlement may be different. However, child support and property division normally have no direct income tax effect. An important consideration is that different types of property come with different tax considerations that may affect their economic value, and which may affect how you view your divorce settlement. For example, property with a low cost basis (purchase price plus allowed costs of improvements) may come with a future tax bill, which may affect its value. Similarly, retirement plans, IRAs, and similar tax-deferred assets come with future tax obligations that may affect how you view their values. Some types of property, such as various types of options, can have very complicated tax considerations that should be considered in a divorce. Finally, head of household status and dependency exemptions may affect each spouse’s finances following a divorce. Many of the variables can be considered and addressed in your divorce, so that you and your spouse can take maximum benefit of the provisions of the tax laws. Divorce tax planning can therefore be an extremely important part—though a sometimes overlooked—part of the divorce process.

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