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Divorce and Money

The Role of the Financial Professional… After 1995 If You Live in Ireland

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By Amy Clews, CPA, CDFA, CVA, CFE Addleman & Associates
www.addlemancpas.com

Why do we need a financial neutral in our Divorce?

The month of March is upon us, and many of us are looking forward to St. Patrick’s Day and celebrating all things Irish; however, did you know divorce in Ireland was not even legal until 1995? And if you’re struggling with the six-month waiting period in California, imagine waiting three years in Ireland where divorcing couples must live apart for two of the last three years before they can divorce.

How will a family potentially support two households both temporarily and in the long-term when finances are separate? How will an equitable settlement be achieved so the family can move forward amicably? These are only a few of the financial questions divorcing couples must consider.

In the collaborative process, the financial professional is there to help the couple address financial issues such as: 1) assisting with gathering financial documents, 2) preparing financial analyses, 3) presenting financial analyses to the collaborative team and the couple, and 4) assisting with financial planning for the future. The financial professional will help you plan for the agreements that you decide will work best for your family moving forward.

The financial professional is able to help with various financial analyses depending on your financial needs. Some of these analyses include…

Assisting with Gathering Financial Documents

The financial professional will provide a document request list that details the information and documents requested to complete your financial analyses.

Marital Balance Sheet

What do you own and what do you owe? An assets and debts analysis will help the divorcing couple determine what needs to be divided after considering the tax implications of those assets. For instance, it is important to consider a retirement account is not equal to a cash account.

Income Analysis

How much income is available to provide spousal and child support? An income analysis determines what historical income levels have been for the family. Income sources can include many items such as wages, business income, interest income, dividend income, tax-exempt income, equity awards, and other sources of income.

Needs Analysis

How much money do you need to pay your expenses? A needs analysis is essentially a budget. This budget looks at historical spending and estimates future spending as well.

Tracings

Do you have separate property that is included in your marital balance sheet? If so, tracing may need to be completed to determine the source of monies used for a current asset.

Business valuation

What is our business worth? The financial professional can help determine the value of the business and provide alternatives for owning that business going forward.

Projections

What does my financial future look like? During the collaborative process, the financial professional can assist in researching different financial alternatives to see how different agreements may affect your financial future.

The collaborative process allows you to find your solutions that serve your family. These creative solutions would not be offered in a true litigation environment. A collaborative process also keeps your financial information confidential, which can help heal your family as it moves on to the next chapter.

The Best Kept Secret to a Successful Collaborative Divorce: Utilizing Coaches, Child Specialists and Financial Neutrals to Focus on Interests and Manage Emotions

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By Paula J. Swensen, Esq.

As family law collaborators and mediators, we know all too well how the emotional aspects of a divorce can threaten to derail what often begins as a stable and effective process toward a peaceful resolution of our clients’ family law disputes.

Clients come to us for help in resolving their family law matters with the hope and intention of staying out of court.  This is a laudable goal, and most everyone comes with the highest intention of achieving that goal.  But then, something quite predictable happens… and if we collaborative professionals are not ready for it, the entire process can be unexpectedly hijacked, thereby posing a threat to the successful outcome for our clients and their families.  The ‘something’ that invariably shows up is our clients’ deeply held emotions about the unraveling of their marriages, including all of the uncertainty and fear that accompany such momentous changes in a person’s life circumstances.  As we know, once strong emotions enter the picture, it is quite challenging to remain in option-creation and problem-solving mode during the collaborative or mediation process.  However, that is what we must do, relying effectively upon our best kept secret, the “neutrals”.

 

Who Are the Neutrals?

We refer to the “neutrals” as those members of the collaborative team that are exactly that — neutral.  They are not advocating for either client, but rather, they serve to facilitate the successful outcome of a collaborative divorce through their professional roles as: financial neutral, child specialist, or as a single coach for both clients.

 

Why So Many People?

We are often asked, “why do I need so many people in my collaborative process”?  Understandably, prospective clients new to the collaborative process are wary of paying “so many” different professionals on the collaborative team.  It soon becomes clear to our clients just how invaluable the neutrals are to the successful outcome of a collaborative divorce.  Because the effective use of neutrals often dictates the likelihood of success, they are indeed, the “best kept secret” of the collaborative process.

Most clients do not think twice about the necessity of employing and paying for a lawyer to advocate on their behalf in a divorce.  While we lawyers enjoy a vital role on the team, it is often the work of the neutrals that makes the difference between a successful outcome or one that falls short.  Why?  Because sometimes when clients get stuck in the mud over a challenging issue, their advocates get stuck right along with them.  While this is certainly not desired, it is not uncommon for an advocate to get caught up in the strong emotions of his or her client during the divorce process.  It often takes someone who is not advocating for either client to better explore and explain options for breaking an impasse so that the matter may continue to move forward.  In this way, the neutral can play an instrumental role to enable the clients to reach a mutually-satisfying resolution.

 

When and How Are the Neutrals Best Utilized?

Question: When is the best time to utilize the neutral professionals?  Answer: Early and often.  It is highly recommended that the neutral professionals be made part of the collaborative team at the commencement of collaborative process.  In this way, they show up at the “collaborative table” as equal members of the collaborative team along with the lawyers.  This pays dividends throughout the process as the neutrals are vested, from the outset, with no less credibility and gravitas than their legal counterparts.  This allows the clients to have confidence in the input of the neutrals from the very beginning.

Our neutral professionals fulfill a vital role when it comes to managing and overcoming the emotional obstacles presented in a divorce.  For example, where an impasse can arise over the amount of support or whether the couple should sell the family home, the financial neutral can often be the secret weapon in helping the couple to break the impasse.  Where a spouse can get bogged down in all of the emotion surrounding wanting to stay in the marital residence, the financial neutral can explain the numbers in such a way as to help a client to visualize whether staying in the home presents a viable option or not.  The input of the neutral is future-focused and geared toward helping to solve the problem, rather than in furtherance of any position.  The coach or child specialist operates in the same manner.  They bring credibility, option-creation and problem-solving to the table in a way that the clients can trust in their unbiased input, especially if the neutrals have been involved from the outset of the collaborative process.

 

Neutrals-The Secret to Success

As has been proven, the collaborative model works so well because all of the members of the collaborative team play a critical role in the success of the collaborative process.  We know that emotions can run high during a divorce.  We also know that emotions can get in the way of rationality, and the ability to access the cognitive areas of our brain, which is critical for effective problem-solving.  That is precisely why the use of neutrals is one of the best-kept secrets to success.  As impartial and unbiased members of the team, they are best-suited to help clients move past the emotion of a given impasse, and to focus on feasible options to obtain an optimal outcome for their families.

Five Important Financial Issues in Military Divorce

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By Kristine Rushing, CFP®, CDFA® Intro: There are many considerations in divorce, but those experiencing military divorce have some additional things to think about. Here are five issues military spouses should be aware of. 

 

Along with cooler weather and thoughts of Thanksgiving, November also brings Veterans Day, providing an opportunity to honor and thank those who have served in the United States Armed Forces. For many, that service has required personal sacrifices, from family challenges to the ultimate sacrifice. Whether during war or peacetime, events such as frequent moves, multiple deployments, isolation, stress of war, injuries, and returns to civilian life can all cause stress and anxiety for service members, spouses and their children. While the military branches offer programs to support relationships, divorce becomes a reality for many. Like their civilian counterparts, military spouses will need to determine a co-parenting plan, asset and debt division, and child/spousal support. However, those experiencing a military divorce need to be aware of some special rules.

 

1. Jurisdiction and State Law

Generally speaking, a spouse may file for divorce in the state where either spouse legally resides, with minimum residency requirements. However, the laws and treatment of property varies from state to state and there are some other factors pertaining to jurisdiction for military spouses, especially if divorcing while the service member is overseas. When there are questions about this it would be wise to consult with a knowledgeable attorney. For the most part, all other aspects of the property division, co-parenting, and child or spousal support follow state law similar to a civilian divorce. However, the “Service Members Civil Relief Act,” or SCRA, allows active-duty service members to file a Motion to Stay Proceedings which, if granted, causes a delay of 90 days, plus possible extensions.

As with civilian divorce, one of the most important decisions a couple has to make is which process to use. There are four major options: DIY/Kitchen Table, where couples sit down and reach their own settlement agreement; Mediation, where couples hire a neutral professional to assist them with the negotiations; Collaborative Divorce, where each party has their own legal representation, one or more divorce coaches/therapists, a neutral financial advisor, and perhaps a child specialist, all working together in a team approach; and Litigation, where parties cannot agree and ask the court to decide the outcome. Whenever possible, either mediation or collaborative divorce are recommended. These usually provide the most efficient process and set the parties up for more effective co-parenting and healing post-divorce.

 

2. Dividing Military Retirement

Military pensions are considered a marital asset and the Uniformed Services Former Spouses’ Protection Act (USFSPA) allows for division, though it is not necessarily required. Technically, it is the “disposable retired pay” that is subject to division, which is the gross retired pay less deductions for disability pay benefits and Survivor Benefit Plan premiums. Spouses may divide the pension or, instead, arrange a full or partial off-set via lump sum payment in cash or other assets to the non-service member spouse. The option for a lump sum or off-set is more common in short term marriages and requires a pension valuation to determine the present value of the off-set amount.

Those divorcing after retirement use a straight-forward coverture formula to determine the marital portion: months of marriage overlapping military service ÷ total months of military service at the time of retirement. For those divorcing prior to retirement, there is still a coverture fraction, calculated as a percentage of the service months overlapping marriage based on the total service months at the time of dissolution. However, it is applied to the hypothetical retirement benefit the service member would have received based on pay at the time of dissolution rather than actual retirement.

With the implementation of the new Blended Retirement System (BRS) in 2018, many service members receive automatic contributions and possible matching to a Thrift Savings Plan (TSP), a defined contribution account. The TSP operates much like many private company 401(k) plans do, allowing service members to leave the military with those TSP retirement benefits before serving a full 20 years, even if they choose to forego the pension benefits.

 

3. Getting the Retirement Division Done Right

Once the non-military spouse’s retirement benefit allocation has been determined, there are two ways in which the actual division and payment administration can take place. If qualified according to the “10/10 Rule,” the benefit payments for the non-military spouse may be issued directly from the Defense Finance Accounting Service (DFAS). The 10/10 Rule refers to the provision within the USFSPA which allows for this direct payment to a non-service member spouse as long as the pension division results from a marriage lasting ten years or more, which also overlapped service by ten years or more. A Military Pension Division Order (MPDO) must be carefully completed and submitted to DFAS. Retirement divisions that do not qualify for direct DFAS administration and payment according to the 10/10 Rule must be handled directly between the parties.

There are additional considerations for survivor benefits and disability pay. The Survivor Benefit Plan (SBP) is an annuity program allowing the service member to provide continued income to a surviving beneficiary in the event of their death. Only one beneficiary may be designated, and if the intention is to name the former spouse, it must completed in a timely manner.

Unlike the military pension, which is a defined benefit plan, division of the TSP is more straight forward. Once the amount or percentage being allocated to the non-service member spouse is determined, and after the divorce is final, the account funds may be transferred into another retirement account in the non-service member’s name, such as an IRA, with a Retirement Benefits Court Order (RCBO). It is important that the terms be defined clearly and having a professional prepare this, as well as the MPDO mentioned above, is recommended.

 

4. Healthcare and Other Benefits

Tricare and care at military treatment facilities, as well as commissary and exchange privileges, may be available to the non-service member spouse in long-term marriages that overlap service. The USFSPA offers Full Coverage under the “20/20/20 Rule,” and Transitional Coverage under the “20/20/15 Rule.” The full coverage rule requires the spouses to have been married for at least twenty years, the service member must have at least twenty years of creditable service toward retirement pay, and that twenty years of marriage overlap twenty years of creditable service. The transitional coverage rule provides one year of medical coverage (no commissary or exchange privileges) have between fifteen and twenty of years of marriage overlap the years of creditable service.

 

5. Co-Parenting, Child Support, and Spousal Support

Child support is based on state law, including factors such as custody, time with each parent, and incomes. The Leave and Earnings Statement (LES) should be used to determine all forms of compensation, including Basic Allowance Housing (BAH), the value of on base housing, and other non-taxable in-kind compensation. While service members can face penalties from their commanding officer if delinquent on support payments, enforcement is typically handled by the state court system.

Like child support, spousal support, also called alimony, is determined according to state law. The USFSPA, however, limits the amount paid to a former spouse directly through DFAS to 65% of disposable retired pay, including up to 50% of pay for pension division and other garnishments such as alimony and child support. Considerations for the spousal support order may include the length of the marriage, the earning capacity of each spouse, age, and health. 

While most of the issues facing military spouses in divorce are the same as their civilian counterparts, these specific concerns do need to be addressed carefully. Spouses should take advantage of the various resources available and consult with an attorney who specializes in military divorce when needed. Again, one of the most important decisions a divorcing couple must make is which process to use. Whenever possible, work together and consider mediation or a collaborative team approach, including attorney-mediators, a financial advisor, such as a CPA, CFP® or CDFA®, and therapists and/or coaches to provide accurate legal information and the best chance for effective co-parenting and healing post-divorce.

To all members of the U.S. Armed Forces, we honor you this Veterans Day and thank you for your service in defending our nation and protecting our freedom.

Dealing with the Fear in a Divorce

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By Bart Carey | Originally posted on https://familypeacemaker.com/fear-dealing-with-divorce/

All of the emotions that we see during the course of the breakdown of a marriage and the divorce process boil down to fear. I do not say that from my own expertise but from what I have heard over and over again from my colleagues in the mental health profession.

The first victim of any marriage that is going south is communication. As communication breaks down, people cannot solve problems together anymore. So, what they do is out of frustration and they start taking unilateral action.  However, because we are in a relationship, what you do affects me.  This is when the fear sets in. You lose control and you do not know what’s going to happen next and you don’t understand why your spouse is doing this to you.

This is when the fears arise and what it leads to is a tit for tat situation. It leads doing something that will make me feel like I am back in control of the situation. This back and forth starts to happen and it evolves. All of this happens before the client comes to us in the family law arena. This goes on because of their fear of loss of control, their fear that they can get along, or protect themselves for what is going on. They do not know what is going to happen next.  Their trusted advisors tell them, “You need to talk to an attorney. You need to protect yourself.”  A lot of them use words like you need to attorney up.

Out of fear they hire an attorney.  The process that they choose can make all the difference.  The Collaborative Divorce process offers is a safe space, a structure where they can rely on the supportive professionals that they can trust.  It gives clients a sense of gaining some control back in their lives. That is huge for allaying their fears. It provides a way to reestablish communication that has been lost, which allows them to start making agreements about their divorce. Something they haven’t been able to do for a long time is to agree and solve the problem together.

Suddenly they can start doing that with the structure and the safety of the process and the support that they get from the collaborative team. They start to get a little more assurance and a little less fear and start working more from the problem-solving part of their mind instead of the fight, flight, or freeze part of their mind.  Plus, then the kids start to see them doing this. The kids have seen them fall apart. Now they see their parents working together to create a safe space for the kids and structure in the parenting and the co-parenting that kids depend on.

There is a legacy in this.  You enter into a process that teaches you the skills and tools to be able to solve your own problems to co-parent together, to make agreements about what to do, even when you’re not on the same page about why to do it but what to do. The parents have a competency that allows them to have a more successful future. As parents, the kids see the parents solving one of the biggest life crises that they will ever face and they start to believe that there is no problem too big that you cannot solve it. Collaborative Divorce builds resiliency for both the parents and the kids to deal with future challenges. A future that is not overwhelmed by fear.

Does COVID-19 Cause Divorce?

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By Leslee Newman, Family Law Attorney, CDSOC Member

The pandemic of COVID-19 has swept us up and dramatically changed the way we live in just a matter of weeks.  Our existence has become restricted, regulated, and different than we’ve ever known.  We have all become isolated in our own homes.  The freedom to come and go as we wish has been greatly altered.  We cannot go to restaurants, to our offices and work sites, and to many public places.  We cannot enter places of religious worship, attend lectures, professional meetings, go to the theater, to concerts, to movies, or even personally meet with friends.  And our children cannot go to school.  How traumatically sad for those students in the Class of 2020, graduating from high school and college.

With children now at home full-time, who cares for them, who teaches them, who keeps them busy, and prepares their meals?  We are all prisoners of the Covid pandemic, isolating ourselves to avoid this terrible, and often deadly disease, especially for mature and older adults.

And as we sacrifice and struggle to remain healthy, most of us are restricted from our work places, or worse, furloughed, laid off from work, or even permanently terminated.  Thus, without the expected household cash flow, how will we maintain our residences, and way of life?  How long can we hang on, even with some promised government assistance or unemployment checks?  If the disease doesn’t make you ill, the worry about paying the bills and trying to maintain a standard of living is enough to make you sick.

Although we have suffered many tragic events in the “golden state” due to diasastrous fire storms, and earthquakes, this silent pandemic is not limited to certain areas or neighborhoods.  It doesn’t respect boundaries, and will spread wherever it can.  All we can do is to isolate ourselves from carriers of this terrible disease.

How are families bearing through these troubled times?  Are spouses respecting one another, working more closely with one another?  Are spouses acting more lovingly to one another, with greater patience and understanding, or are they pebbling apart?  Are thoughts or threats of divorce making this crisis even more unbearable?

To make matters worse, courts are closed, with no cases to be heard right away.  No court orders or final judgments are being filed by the court.  What can be done?

Right now, we have no choice.  If divorce appears inevitable or necessary, it’s time to slow down, obtain information, and to carefully learn about the different options of divorce.

One of the most caring ways to do this is to learn how to stay out of court by utilizing a divorce process like mediation or a simplified collaborative divorce.  Not only are these methods faster, more respective and caring, but generally speaking, much less expensive than the traditional litigated divorce.

To learn more, contact Orange County collaborative professionals in your areas from the member’s page of Collaborative Divorce Solutions of Orange County.  Obtain information up front about better alternatives to divorce or separation from experienced legal, mental health, and financial professionals who are compassionate and experienced in their respective areas of divorce and separation.

No Drama Divorce… How to Manage Fear and Expectations in a Co-Mediated Divorce Process Using Collaboratively-Trained Professionals

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By Patrice Courteau, MA, LMFT and Paula J. Swensen, Esq.

The ending of a marriage can be a minefield of emotions and reactions.  A “no drama” divorce helps to shift a mindset from pain and unrealistic expectations to one of managing emotions, learning better communication skills, and gathering information in order to reduce anxiety of divorcing spouses.

In our experience of working together in a co-mediation process, the goal is to reduce the drama by reducing fear, managing both spouse’s expectations, and setting a course for the couple to be able to successfully navigate.  We cannot overstate the value to clients of using well-trained collaborative professionals to help them manage the fear and emotion in order to achieve their best family-centered outcome.

While the legal professional is educating on the legal process and the issues presented, the mental health professional (divorce coach or child specialist) is gathering information from the spouses regarding their urgent issues and concerns, including any communication challenges.

Throughout this process, it is essential for the clients to be heard, and to feel that they have an equal voice in reaching a resolution.  Often during this process, clients learn a new way to communicate with one another.  If children are involved, the goal is to be able to communicate better to more effectively co-parent.  Children, regardless of age, can be affected positively by parents communicating more effectively, keeping the best interest of their children at heart.

The value added by working with highly-trained collaborative professionals allows for seamless communication, timely responses to interim issues, and for maintaining momentum toward a practical, family-focused resolution.  There is also value added by a mediation process that can be far more creative in its outcome than any court-imposed judgment.

A “no drama” divorce, i.e., the ending of a marriage, can also be a new beginning for the individuals going through it.  We, as professionals, are continually amazed at the transformation of clients who have grown through the divorce process.  We often witness a combination of compassion and practicality shown by the clients toward one another by the end of the process.  This transformation does not usually occur after a litigated divorce, which underscores the added benefits of utilizing collaborative professionals to resolve the parties’ matter outside of the court process.

“I Just Need to Win”… How Collaborative Professionals Can Help Shift the Paradigm

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By Paula J. Swensen, Esq.

Those of us of a certain age remember the immortal words of a successful football coach after whom the Super Bowl trophy was long ago named.

Vince Lombardi famously opined, “Winning isn’t everything… it’s the only thing.”  That’s a pithy and fitting philosophy for a coach to use to inspire his or her team to attain greater and greater success on the football field, but we collaborative divorce professionals know that it is not so useful when it is applied in the context of a divorcing couple.

It goes without saying that everybody wants to win.  No one wants to lose, regardless of the undertaking or the endeavor in which one is engaged.  We know intuitively from a very young age that winning is “good,” and that losing is “bad”.  We all want our team to win, and we become frustrated and sometimes angry, when our team loses.  We all know from following sports that when there is a winner, there is also a corresponding loser.

This concept of “winning” is ingrained in our being from an early age, and it has now saturated our culture.  We want winners, not losers when we choose employees, spouses, friends and professionals such as doctors and lawyers.

As a certified family law specialist who has litigated, and also mediated many divorces, it never ceases to amaze me when a spouse will say, “I just need to win.  You have to help me WIN!”

At such times I am compelled to ask, “What do you mean by “win” your divorce?” “What is a win?” “What does a win look like to you?”

Those of us who have dedicated our practice to helping couples finalize their divorces in a more peaceful manner, know that we can bring a much-needed paradigm shift at the beginning of their divorce process to better assist a family transitioning from one household into two separate households.

Our first challenge is often to help spouses understand at the outset that a divorce is not a zero-sum game in which there is one “winner” and one “loser”.  Given the near-automatic reflex to think in those terms, it can take some work to dispel that ill-fitting notion.  Yet, helping to shift the focus from that initial mindset of needing to “win” to one where a spouse can appreciate the benefit of achieving an outcome that is, instead, in the best interest of the family as a whole, cannot be overstated.

As we are well-trained to do, focusing on concerns that each may have rather than focusing on positions is likely to obtain a better outcome for the divorcing couple and their family.  We, as collaborative professionals can assist spouses to think slightly differently about this whole concept of “winning,” and to broaden their outlook to include the well-being of their entire family.

How do we help a couple create a “win/win” mindset based on a balanced outcome?

What if a “win” meant using the funds that would have been spent on contentious litigation to instead put toward the children’s education?

What if a “win” meant the ability to stay in the marital home for a period of time so that the children would not be displaced from their school and their friends?

What if a “win” meant that both parents could attend a child’s milestone events: recital, birthday, holidays, special occasion party, graduation or wedding without the child being forced to choose one parent’s attendance over the other?

What if a “win” meant that each spouse was able to move beyond the divorce with a positive outlook for his or her future?

The collaborative professionals have a unique opportunity to assist the transitioning couple to discard the mindset of divorce as a zero-sum game, and to embrace the concept of finding resolutions that are in the best interest of the whole family.

Mr. Lombardi’s familiar adage should rightfully be relegated to the football field, as it serves no useful purpose in helping couples to achieve a peaceful divorce that best meets the needs of their family.

The Advantage of Child Support Calculation Through the Collaborative Divorce Process

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A recommended article written by Leslee J. Newman, Collaborative Attorney, Mediator, and Family Law Specialist

“A divorce with children who are not yet adults includes decisions regarding child support payment.  In every state including California, there is a different formula to calculate child support.  If divorcing parents go to court and request a judge to make the child support order, the statewide formula must be used to arrive at the amount of the support to be paid from one parent to the other.  Find out how parents selecting an out-of-court process like collaborative divorce can create their own agreeable amount without going to court.”

Click the link below to read more.

https://divorcepeacemaker.com/blog_index/the-advantage-of-child-support-calculation-through-the-collaborative-divorce-process/