From Dr. Phil: 5 questions to ask yourself before your divorce.

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Dr. Phil

As we all know, divorce can be complicated. It involves money, custody issues, child support, spousal support, and other legal aspects. You need to educate yourself, protect yourself and empower yourself on these issues. Until you’ve done that, you’re not ready.

For example, do you know how many bank accounts you have as a couple and individually? Any other marital assets you might be entitled to? Consult with at least three attorneys as you explore the option of divorce. “There are economic realities that you have to acknowledge,” says Dr. Phil, “but you are not powerless.”

Dr. Phil’s Questions:

1. Have you done everything you can to save and rehabilitate your marriage?

2. Do you have unfinished emotional business?

3. Have you researched, planned, and prepared yourself legally for divorce? 

4. Are you ready to adopt a new standard of conduct with your children? 

5. Are you willing to create a new relationship as a co-parent? 

 

Our thoughts.

Here is our take. All of these questions are important to consider before embarking on dissolution proceedings. If you enter divorce proceedings without having them answered the process is guaranteed to take longer and cost more money because the unanswered questions will play themselves out in conflict during negotiations.

Or course, Wellspring Divorce Advisors gravitate directly to question #3 because it deals with money and we agree it is absolutely mandatory to do your homework before filing if possible. Find the family bank accounts, copies of tax returns and investment account statements and research the options available for settling your differences outside of court.

However, we also find it helpful for our divorcing clients to work with a mental health professional as a coach during the process to get assistance with difficult and emotional decisions.

Read the full text at the link below courtesy of Huffington Post.

5 Questions You Need To Ask Before You Decide To Divorce.

 

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.

The Death of an Ex: How does that affect spousal support?

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spousal support

Q. What if spousal support is payable for 6 years, but one spouse dies?

Payments must cease upon the death of the recipient in order for it to be considered spousal support for tax purposes and tax deductible to the payor. Spousal support can be paid after the death of the payor, typically from their estate in some form, but most settlement agreements and divorce decrees state that it will stop upon the death of either spouse.

Our suggestion.

We suggest the payor spouse be required to carry a life insurance policy to cover the lost cash flow for the payee spouse in the event of premature death. If this isn’t required in your settlement you should ask for it to be added. In the event the agreement can not be modified you should consider buying the policy on your former spouse yourself. You will have to pay for it but the peace of mind is worth the cost.

In order to determine the death benefit amount needed you would do a present value calculation on the stream of cash flow from the spousal support payments.

For example, a $5,000 per month spousal support payment payable for 10 years would have a present value of $471,540. (Call us if you need help determining the right amount of life insurance.)

No matter the route you take for insuring the payments make sure you, the support recipient, are both the owner and beneficiary of the life insurance policy. Losing the cash flow from spousal support can have devastating affects on your ability to maintain your lifestyle.

 

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.

Paying for College After Divorce: The truth about split finances

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Paying for College After Divorce

The struggle is real.

It should come as no surprise that in most divorce cases, paying for college after divorce becomes a challenge for both parents. In fact, a study published by the Journal of Family Issues found that divorced parents contribute about one third of what married parents contribute.

The truth is, students with divorced parents face a greater burden in financing everything; from their first car to a college education to flowers for their prom date…usually finances aren’t what they were before. The reality is that there is often less to go around now that many expenses, like heating bills, are double the amount they were during marriage.

Children must also decide who they should hit up for the money when they need it. Do I ask Mom or Dad? (The really smart ones will ask Mom and Dad in the hope they can collect from both and double their take.)

Sometimes ignorance is bliss.

I was once contacted by a journalist “seeking a student with divorced or remarried parents to comment on how their parents’ marital status has affected their college education and finances during college.” The writer wanted to ask, “Did your parents’ divorce really cause them to contribute less to your education, whether directly or indirectly?”

The kid doesn’t know what they don’t know and it should stay that way. My hope is that all parents will let their kids know they are doing their best to help in every way they can and leave it at that. No child will benefit from knowing that Dad “can’t pay for all of tuition this year because he has to pay Mom Spousal Support.”

Should you even be paying for college???

My advice to all parents is to pay yourself first. Do not even consider paying your kid’s tuition until you have maxed out all available tax deferred retirement vehicles.

Why?

Your kids can get loans at fairly favorable terms and may even get scholarships and grants they will never have to pay back. No one will give you loans to pay for your retirement and you certainly aren’t going to be getting any scholarships to your local country club. For those who absolutely must limit the amount of work your child takes on (outside of being a student), please at least have them work during their summers off.

 

Justin Reckers

 

Need help figuring out college funding with your ex or soon-to-be-ex spouse? Wellspring Divorce Advisors are here to help answer your questions and get you on the right path! Contact us at jreckers@wellspringdivorce.com or 858-523-8249.

How do I figure out how to live on less money after the divorce?

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less money

Finding ways to stretch the family dollar and live on less money is often the hardest part of life post divorce. Here is a place to start:

Create a budget with the goal of achieving the following results.

1. Detail all income and expenses

  • Determine your net disposable income from employment, support and any other sources.
  • Get your checkbook register, checking account statement and credit card receipts.
  • Categorize your expenses into home, food, entertainment, etc. on a monthly basis.
  • Create a separate budget for child related expenses
  • Categorize your expenses between Fixed and Discretionary.
  • Determine your Total Spending.

2. Create guidelines for your spending in each category.

Remember these are just guidelines. If you treat them like rules you may not feel like you’re making a positive change.

3. Create a snapshot of your financial world.

  • Compare your Net Disposable Income to your Total Spending.
  • Once you have the first snapshot of your income and expenses you can begin planning to make changes.
  • Decide what constitutes a realistic budget.
  • Click here to compare your children’s budget to the National Averages.
  • Determine your debt to income ratio by determining what percentage of your monthly income goes to paying debts. If it exceeds 28%; consider trying to reduce your debt load.
  •  Discretionary expenses include entertainment and dining out and offer the best source of budget cuts.

4.  Find where you can cut discretionary expenses.

Discretionary expenses include entertainment and dining out and offer the best source of budget cuts.

It will be helpful, even necessary for some, to work through this process with a Financial Planner. You are not alone in your dread for budgeting. Humans are built to think about surviving today at the expense of tomorrow.

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.

 

Social Security Benefits and Divorce: What you need to know to plan for retirement

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social security benefits

Retirement planning is a big piece of the divorce puzzle. It’s important to know what Social Security benefits you’re entitled to so that you can plan for the future.

The history of Social Security benefits and Divorce

Social Security in the United States refers directly to a lesser known federal Old Age, Survivors and Disability Insurance program or OASDI.

The program was originally rolled out in the 1930s in an attempt to limit what were seen as dangers to the American way of life such as increased life expectancy, poverty, and fatherless children. So the Social Security Act, signed in 1935, created social insurance programs to provide benefits to retirees, the unemployed, and as well as a lump sum benefit to the family at death.

Many amendments have been made since the original Social Security Act of 1935. Most importantly, Medicare was added in 1965. The Social Security Act of 1965 also recognized for the first time that divorce was becoming a common cause for the end of marriages and added divorcees to the beneficiary list.

When Can I Collect Benefits?

The earliest age at which reduced benefits are payable is 62. The age at which full retirement benefits are available is dependent upon the taxpayers age. An increase of regular retirement age was enacted to reduce the amount of benefits payable.

For those currently over age 70 the normal age was 65. Anyone born after will fall somewhere on increasing scale which climbs incrementally to age 67 depending upon birth date. Anyone born after 1960 must reach age 67 for normal retirement benefits. Delaying receipt of benefits will increase a taxpayer’s benefit until age 70.

As A Divorced Spouse What Do I Get?

Divorced spouses are eligible for benefits equal to one half of the worker’s benefit if they were married for 10 years, have not remarried, and are at least 62 years old. This is called a derivative benefit. A spousal applicant must wait until the worker has reached retirement age, 62, in order to apply for benefits. The worker is not required to have applied for benefits in order for the ex-spouse to apply for spousal benefits. They are not entitled to increases for benefits taken after normal retirement age.

If a worker has died and the ex-spouse has reached full retirement age they can receive 100% of the worker’s benefit as survivor benefits.

What else do I need to know?

If an applicant is between age 62 and their normal retirement age; the application for benefits will be based on the applicant’s earnings record. If one half of an ex-spouse’s benefit is greater than the applicant’s benefit on their own record, the applicant can choose to take whichever is greater. If you wait until your normal retirement age and file for spousal benefits you can continue to accrue benefits and enhancements for delaying your own retirement up until your age 70.

An ex-spouse’s receipt of derivative benefits on the worker’s record does not reduce the worker’s benefits. It is even possible for more than one ex-spouse to collect on the worker’s derivative benefits. This could lead to as much as 500% of the original benefit being claimed by the five ex-spouses.

 

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.