Yearly Archives: 2020

There are important considerations that must be made if you have a child, or children, with special needs and are considering a divorce. Divorce is difficult but adding the complexities of a divorce when a child with special needs is involved can be overwhelming and even debilitating. There are so many details that require special attention that it can be difficult to know where to start.  Caring for a special needs child without the complexities of divorce is challenging enough. I have personally watched my parents try to navigate and understand the government rules and regulations surrounding benefits my brother could or couldn’t qualify for at varying stages of his life. Now as they begin to walk through the transition to retirement and what that means for my brother’s assistance, like Medicaid to Medicare and how that may or may not affect other assistance from local agencies is overwhelming.

If you are heading down the path of divorce and you have a child or children with special needs, it is imperative that you gather the right team around you to move through this process. Typical divorce challenges, like child support, determining a co-parenting plan and the financial settlement all have additional layers of complexity to consider. If your child will be unable to emancipate then the typical short-term decisions become lifelong decisions.

There are irreversible financial implications of divorce that if not done correctly could cause a child to completely lose government assistance programs, like Medicaid or SSI.  If you are getting a divorce and a have a child with special needs you want to include professionals like a family law attorney, an estate attorney who specializes in special needs trusts and guardianship, and a Certified Divorce Financial Analyst who understands the financial intricacies of planning for a child with special needs.  

I understand how impossible it can seem to find the right resources or guidance to navigate the world of government assistance programs or even put thought to tomorrows challenges. Unlike a Certified Divorce Financial Analysts, attorneys are often limited to a specific geographical area where they can practice. If your family is walking down this road do not limit yourself to receiving piecemeal information, add a CDFA to your team, either local or remote, to help guide you through all the facets of your divorce and planning for your child with special needs.  

We live in a time when most everyone has some level of debt, whether it be student loans, credit card, auto, home, medical, etc.  The big question is, can you get a divorce with debt…the short answer is ‘yes’; however, you should be aware of a few key factors that come into play when debt is part of your settlement.

As you enter divorce negotiations it is important to disclose all your marital debt and most importantly to understand who “owns” or whose name is listed on the debt.  As you split debt, one key post-divorce task should be to ensure that you and your spouse remove each other from the debt the other will carry forward.  A lender does not care that a divorce has taken place. If your name is on a loan that your ex-spouse is not paying, then creditors can and will come after you, and it will affect your credit as well. 

There are situations, especially with the primary home, where one spouse may be unable to qualify to refinance the home. If your name is remaining on the primary home, but you will no longer have access to that asset, you want to be sure that safeguards are put in place within your divorce decree that offer protection for you in the event your ex-spouse is unable to pay the mortgage. Working with a financial neutral, like a Certified Divorce Financial Analyst at Next Step Divorce Solutions, can help guide you and your spouse to develop a creative settlement solution that would address these types of situations.

If possible, it best to begin a post-divorce life debt free. From the onset that may seem impossible but with the right creative solutions that could be a reality. There are some assets that waive tax penalties if transferred in a divorce. An example are transfers made within a Qualified Domestic Relations Order (QDRO). You are allowed a onetime withdrawal from a 401k or other ERISA plan, penalty free before 59 ½, if that asset is transferred by a QDRO. Another possible example we often don’t consider is utilizing the equity in the home. It is not uncommon that what is often the two largest assets in a divorce, retirement plans and home equity, are considered locked up, but in the case of divorce those assets could become accessible.  

Divorcing with debt is possible, and with a Certified Divorce Financial Analyst on your team we can help you to navigate the potential pitfalls and payoff solutions in your divorce settlement.

You made it. (Take a Breath…you deserve it) The divorce process can be long and grueling, and I am sure by now your ‘divorce brain’ is at its peak. So now what? You have been laser focused on completing this one task and now that it’s done you get to choose what happens next, BUT FIRST you want to make sure that you IMPLEMENT that divorce decree that you have worked so hard to finish. I know, I know it is probably the last thing you want to touch or deal with. Your idea of implementation is likely to make the changes to accounts you need access to right away and put the rest on the back burner to deal with later. Yes, take a break and allow yourself some time to relax from it all…but do not let a year roll by before you touch it again.

I encourage you to finish the end of this process and avoid dragging it out longer than necessary. I promise, attempting to implement months or years later is significantly more challenging. There are a handful of crucial things that should be done…and the best part is, your CDFA® can help you or put you in contact with the professionals that can.

Unless you and your spouse maintained separate finances, you are likely going to need to remove your ex-spouse from some bank and investment accounts. If you received a portion of your ex-spouse’s ERISA retirement plan that requires a Qualified Domestic Relations Order (QDRO) to split the asset, you DO NOT want to delay. These can take time and delaying may require additional legal steps to get the process started.

As you begin reviewing and re-registering your accounts, don’t forget to also review your beneficiary designations. Your IRA or 401k may only have your name on the account but at your passing that particular asset will transfer to whomever is listed as your beneficiary.  Consider meeting with an estate attorney to update all your documents, they can also direct you on how best to update all beneficiary designations.

You may find yourself making financial decisions that you never made before. Ask questions and get guidance, it will take time to build confidence in handling your finances. The right financial advisor can help to educate and guide you through building your new financial future. Don’t be afraid to reach out for help and to learn, you are capable!  

For more information or details on how to implement the pieces of your divorce contact Next Step Divorce Solutions today.

It is common that throughout the divorce process someone will decide that they want to keep the family home. As a mother you may find that your inherent need to be the caregiver has shot you into fight mode to maintain some form of normalcy for your children.  You may find yourself holding tight to the home you believe can provide that stability you know your children (and you) desperately need during this time.  While it can be tempting to want to lean on something familiar you need to be cautious that it may also be the costliest mistake you could make. I know it sounds cliché, but a house is just a house, and over time your home will become wherever you are.  The family home can hold a lot of emotion, good and bad. So first try to look at the house as just another asset to be divided.

There are a handful of factors that are at play when deciding what happens to the family house. In some cases, the financial affects may not be felt until years down the road, but can be costly, nonetheless.

Oftentimes the house is the largest asset in the divorce settlement. If you decide to keep the house, you may find your financial freedom locked up in the equity of that building.  Let’s assume you have been in your house for a while and the market value is $400,000 with $300,000 in equity. As marital property you are entitled to half of that equity. So, if you were to keep that house, then the full $300,000 of your divorce settlement would be tied up in the property.  If you were to take that same $300,000 and conservatively invest it, you could generate over $12,000 a year in income. And don’t forget about the costs of upkeep, maintenance, and for places like Texas, the high property tax. These items will require you to increase the amount of income needed just to make ends meet.

The factor that can come back at you down the road is taxes. If you were to sell the house while you were still married the $300,000 gain would fall under the marriage exclusion of $500,000 and be tax-free. However, if you were to sell the house after it has been transferred into your own name that gain is no longer fully covered under the reduced exemption of $250,000 for a single individual. Now you are looking at a gain of $50,000 that would cost at least $7,500 in capital gains taxes and even more if you’re a high wage earner.

Divorce is hard but it also can open the door to a new beginning, a new you.  Starting on the right financial footing is essential to your future. To be certain that you understand all the ramifications of the property settlement you are considering, bring a Certified Divorce Financial Analyst® (CDFA®) into your team to guide you through some of these issues. You only have one chance to get your settlement right. Take the time to gather information and make sure you are doing the right thing. It will be the best decision you ever made.

The Institute for Divorce Financial Analyst summarizes the role of the Certified Divorce Financial Analyst® (CDFA®) professional as someone that helps both the client and lawyer understand how the financial decisions made today will impact the client’s financial future, based on certain assumptions. In many cases the CDFA® professional already has an extensive financial background as a Certified Financial Planner® (CFP) or in accounting as a CPA. 

That definition, although accurate, misses the most impactful service a CDFA® provides.  You have heard “knowledge breeds confidence, confidence destroys fear”.  When one of our loved ones becomes ill, our desire to help tends to drive us to research and learn everything we can about that illness.  Right?!? Ultimately, we lean on the professionals who are well trained to help our loved ones, but the more we learn and understand brings a level of calm that minimizes the fear of the unknown.  As we flip the equation to your divorce, consider the peace that more knowledge and understanding could bring to the situation. A CDFA® does more than help you determine the best financial course of action. They provide education about what you have and what it means to you, and ultimately guide you along the process to help you make the most informed decision about your settlement. That additional knowledge provides a new calm that otherwise would have you strapped in fear; fear of the unknown, fear of the future.  

Your CDFA® professional is specifically trained to help you gain an understanding of your financial outlay and then in turn identify for you and your spouse the most equitable settlement options. In addition, they can then illustrate how those settlement options could impact each of your financial futures.   It is expected that the role of the CDFA® professional would be to provide financial expertise for individuals engaged in the divorce process, but I believe the most overlooked advantage is their ability to minimize the impact of fear. They add a crucial factor that an attorney just cannot provide, financial clarity…for the now and the future.  Minimize your fear by hiring a CDFA® to help guide you through your divorce.  

When you begin to consider divorce you need to know you have options.  If you have made it to this point you, probably have exhausted your resources to try and save the marriage; but if not, I would encourage you to first seek out a family therapist/counselor.   

Most people are familiar with the traditional avenue of divorce, I hire my attorney and they hire theirs, then we battle it out in court or separate mediation. This option is typically the most expensive, most lengthy, and I would even argue the most emotionally detrimental to all parties involved. In the state of Texas divorce cases can average six months to a year long and cost on average $15,000 to $30,000.  Most people don’t realize there are alternatives to this solution.

The least expensive option is to file ‘pro se’ or file completely on your own.  This is the full pendulum swing from a litigated or attorney driven mediation.  There are however BIG dangers with choosing this option, without receiving any professional guidance HUGE mistakes could be made. Standardized forms may not be detailed enough to clearly detail your specific situation. You may choose a settlement that looks “fair” on paper but is anything but that at the end of the day.

Another option is to forgo an attorney and go directly to a mediator. This process is less costly but without proper guidance could still lead to some financial mistakes. If you choose this option, I would recommend having an attorney prepare your divorce papers from your ‘Statement of Understanding’. Your mediator should provide that document once you have come to an agreement with your spouse.  

Then you have collaborative divorce. This process includes each spouse choosing a collaboratively trained attorney as a first step, and then other professionals to complete the team as necessary.  The full team includes your attorney, a mental health professional, mediator (in many cases this is also your mental health professional), and a neutral financial expert. There are rules surrounding how this type of arrangement might work that have many pros and cons.

At the end of the day you want to finalize your divorce in the quickest, least painful way with as minimal financial expense as possible. My suggestion to you is under “normal” circumstances you should consider reaching out to a CDFA® or a Certified Divorce Financial Analyst® to help give you some guidance on which of these divorce processes might work best for you. Why a financial expert?  One of the leading causes for divorce in the U.S. is financial issues. It’s not surprising that couples have ugly divorce wars when they are trying to agree on the one thing that they never could agree on before. So why would you not have a financial expert help you navigate the intricacies of splitting assets??? At Next Step Divorce Solutions, we offer an alternative solution to divorce that aims at saving you money and preserving your family relationships, if possible, by avoiding the war of divorce and offering a more respectful, streamlined process.