Are More Women Paying Child Support and Spousal Support?

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The quick and easy answer is yes. Both in statistics as well as our experience.

The American Academy of Matrimonial Lawyers (AAML) released a statement with a rather catchy opening sentence. “This Mother’s Day, it appears that an increasing number of mom’s will be setting aside time to sign child support and alimony checks.”

The key to note is that they are signing the front of the check, not the back. 56% of the AAML fellow attorneys said they have seen an increase in mothers who pay child support and women in general paying spousal support.

As our society progresses the social norms are changing and stay-at-home fathers are becoming more common. I personally support the family’s right to choose what is best for them and whoever is more inclined to be in the work force should be. It is encouraging to also see income in-equality becoming less of a concern as well.

I have seen an increase in women writing the support checks in my practice too and I am here to report the female support check writer is every bit as troubled about writing the child support or spousal support check every month as her male counterpart. In fact I might say even more troubled by having to write that check every month. Maybe this piece of the social norm shift hasn’t caught up yet. The stigma on men receiving spousal support or child support payments seems to be alive and well.

 

BEING A DIVORCE COURT JUDGE IS HARD WORK

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judge, divorce financial analyst

Clients often complain a judge’s decisions are arbitrary and uninformed. It helps to illustrate exactly what happens to information in the litigation process.

 

A family court judge has a lot of information thrown at them in very short timelines.

 

Depending upon your jurisdiction, a judge might have to here every piece of a case from spouses bad-mouthing one another to accusations of infidelity to child custody disputes and forensic accounting to prove lifestyle or separate property claims. It is natural for there to be two sides to each issue as divorce is a dispute after all so the judge must often here the same story twice just told in two different ways.

 

Judges are tasked with listening, understanding and ultimately rendering decisions. In order to do so they must understand the flow of information and our clients should too.

Where to begin

When it comes to a family’s financial picture it is unlikely that anyone will start a divorce proceeding with an accurate and complete picture of everything. This is why data-gathering is so important to a divorce case. The largest box in the cartoon represents the actual complete financial picture.
An attorney is tasked with gaining an understanding of the family financial picture in order to educate a judge and argue their client’s case in a divorce matter. It will never be 100% complete and 100% accurate because it is not their life. It is rare that an individual has a complete and accurate understanding of their own finances. It would be overly optimistic to assume an attorney can ever understand something more intimately than their clients.
In any contested divorce case their will be two opinions and maybe even two sets of data. In a perfect world you could at least agree upon the data but discovery problems, stonewalling and lack of trust cause problems. So it follows that a judge hears two sides of the same story and given even less time than the attorneys had, must assimilate the knowledge imparted by both lawyers into their own understanding. Given the lack of time and the need for summary data the judge will understand even less.

The result

Ultimately a judge must then make a decision based on the testimony, evidence and legal arguments which will render some of what they learn from the lawyers to be worthless. After three days of trial and various conflicting points of view the judge is left with a microcosm of the original financial picture and they render an opinion which is ultimately turned into an order.
So, next time you are wondering about the value of information in a divorce case, do your best to keep the decisions in the hands of those who know best: the clients.

wellspring divorce advisors

Wellspring Divorce Advisors helps individuals and couples address the financial aspects of divorce in a civilized, equitable, and efficient manner by providing expert divorce financial planning and advice.

Contact us to find out how we can help you through this process.

Annuities and Your Divorce

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Following are excerpts from an article ran in the March 19th 2012 issue of Investment News. It underscores one of the many pitfalls of divorcing without the help of a financial expert. Unexpected penalties, fees, taxes and charges can wreak havoc on a post divorce financial plan.

Breaking up is hard to do – especially with annuities

Attorneys often split contracts in divorce settlements, unaware of the potentially costly impact

 By Darla Mercado

When a client came to his office bearing her new divorce decree, adviser Dale Russell became the bearer of bad news. During the divorce proceedings, the couple’s lawyers decided that their chief financial asset, a $500,000 variable annuity inside one of their individual retirement accounts, was to be split among the two. But that Solomon-like decision was made without the attorneys’ awareness of its dire financial consequences.

Splitting the variable annuity meant that Mr. Russell’s client had to pay an 8% surrender charge and a 10% penalty for an early withdrawal from the IRA.

With nearly one in two marriages ending in divorce, financial advisers who deal with divorcing couples often face complex problems connected with untangling annuities that are in the pool of shared assets.

With divorce attorneys typically unaware of the nuances of annuity contracts and the various ways insurers treat contracts in the context of divorce, and with advisers typically out of the loop when settlements are hammered out, the problem lands in the lap of advisers.

“This was essentially the only asset they had, and instead of my client’s getting the $250,000 she expected, she’s getting almost $50,000 less,” he said,

“It’s a big problem, said adviser Lili A. Vasileff, president of Divorce and Money Matters LLC and president of the Association of Divorce Financial Planners Inc. “Most attorneys think these annuities can be divided, and don’t wait for the consequences.”

Couples who work out divorce agreements on their own are even less likely to consider the financial consequences of splitting an annuity, and typically face surrender charges and loss of accrued living or death benefits due to excess withdrawals.

What makes annuities peculiar is the fact that they usually are not liquid in the immediate term, and each contract has its own rules on how it can be divided.

Contract Terms

Contract terms vary wildly among insurers, with some prohibiting partial tax-free exchanges into other annuities, which potentially could be a way to apportion an annuity in a divorce. Exchanges into a new annuity, however, generally involve the beginning of a new surrender period.

Ideally, an adviser would intercede early in the split, analyze the shared pool of assets and communicate with life insurers about the annuities. This would also entail ensuring that if an annuity split involved a partial Section 1035 exchange, the division would be performed without the risk of taxes.

It pays to be attentive to these details, advisers said, as insurers adhere strictly to the terms of the divorce decree.

“If the court says the contract needs to be split a certain way, we have our hands tied,” said Brian L. Kunkel, national director of advanced planning and solutions at Prudential Financial Inc.

“If the client calls us, we can outline the options available to comply with the court agreement and still be as contract-friendly as possible,” he said. “If people just process the agreement, then we merely follow the instructions.”

In most cases, a divorce decree absolves the attorneys involved from responsibility for any financial consequences.

 

The Vocabulary of Collaborative Divorce

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  1. Your Lives = Your Decisions (Self Determination, Control, Ownership, Options)
  2. A team centered around you (Teamwork, Resources, Control)
  3. Resolving Disputes Respectfully (Respect, Role-modeling for children)
  4. A Focus on the Future (Turning negative to positive, Options, Gift that keeps on giving)
  5. Sensible, Constructive, Mutual
  6. You Are Not Alone
  7. Shared Solutions Acknowledging Highest Priorities
  8. A client centered approach
  9. Supportive, Considerate, Respectful
  10. Divorce with Dignity
  11. Agreements everyone can live with (Durability, Lessening the Negative, Hope)
  12. Support when you need it most (Empowerment, Healthy Transition, Protection for Children)
  13. It begins with something you both can agree on: self-respect (Respect, Responsibility, Communication, Self Determination)
  14. Open communication(Respect, Integrity)
  15. Self Determination
  16. Giving the Children a Voice. (Protection for Children, Healthy Transition, Hope)

Knowledge is Power in Financial Negotiations of Divorce

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Knowledge is power  in the financial negotiations of divorce.

 

In most marriages one party will have taken responsibility for the management of the family finances. This is a natural by-product of economics. The fact is that one party will have a comparative advantage when it comes to managing finances either based on experience, education or efficiency. The party with the comparative advantage should take on the specific task in question in order to make best use of the family’s limited resources.

 

The unexpected consequence of this rational economic decision is that one party will find themselves on the outside looking in when divorce comes into the equation.

 

How you can take control of your divorce

 

One of the first and most important tasks Certified Divorce Financial Analysts undertake with clients is the gathering of information. When one party has all of the financial documents, information and knowledge the couple is not operating from a level playing field.

 

In amicable proceedings this is easily rectified by gathering the information through informal discovery and doing a little bit of education. In litigious cases, financial documentation and knowledge is often wielded as a weapon. The financially savvy party may make it difficult to gather documents and not be completely forthcoming with details. In this case it is necessary to pursue information through formal discovery which may include subpoenas, depositions, oral testimony and interrogatories. The formal discovery process can be the most significant cost in divorce proceedings when there is reason to believe a party has hidden or mis-appropriated assets and incomes.

The figure below details the value  of information in the negotiations of divorce financial settlements. As Financial Knowledge increases on the vertical axis, Power increases on the horizontal axis. It is extremely important to level the playing field with complete financial data gathering and expert guidance.