Marital Financial Issues For Women:
Q. Why do I need a financial specialist, why not just use an attorney?
A. Finances are the most important aspect of any divorce, and they can be very complex. Utilizing a financial professional to
help you understand how the divorce process will impact your finances not only saves you time and expense, it can also
reduce the likelihood of costly litigation. Once your finances are established you will have the option of pursuing alternative
methods of conflict resolution, such as mediation or collaboration. However, even if litigation is a foregone conclusion,
understanding your finances is an essential first step in analyzing your legal options and deciding which attorney is best suited
to handle your divorce. Contested or not, all divorces have potential financial issues and using a financial professional
independently or in conjunction with an attorney can be the most effective and efficient way to protect your future.
Q. When should I start planning for my divorce?
A. The simple answer is...as soon as possible. The advantages of planning ahead are unquestionable. Establishing your
lifestyle, expenses, sources of income, assets and liabilities, as well as your future financial needs will take time.
Understanding how your assets and liabilities are classified, when they are valued, and at what point your income and debt
will become separate is essential to protect yourself. Even if you are not currently considering a divorce, you should still be
prepared for the possibility. Living with the anxiety of not knowing or understanding your marital finances will only make
matters worse. The sooner you start planning ahead, the better off you will be.
Q. How do I find out what we really have?
A. You will need to gather as much financial information as possible. Copies of your tax returns, bank, brokerage and
retirement accounts is a good place to start. A financial professional can assist you in this process, and legal means are
available to force cooperation in sharing this information. Once you have as much information as possible, you will need to
have your marital finances analyzed and valued.
Q. What if my spouse is hiding anything?
A. Due to modern technology, hiding assets has become much more difficult. There are numerous forensic financial
techniques available to deal with this issue. Nevertheless, attempts to defer income, accelerate business expenses, prepay
taxes, transfer assets into trusts, undervalue investments, and run up debts are some of the strategies you may encounter.
Most of these issues will become transparent once your finances have been evaluated. Hiding assets seriously jeopardizes
anyone's standing in front of a judge, and those who are caught forfeit 100% of the hidden assets in some states.
Q. How much and what do I get to keep?
A. 50% of all marital assets is the starting point. In general you are entitled to half of everything that was earned or
accumulated during your marriage, as well as any appreciation of marital assets or separate assets due to marital effort or
expense. This would include earned income, investment income, accumulated non wage compensation, retirement benefits,
partnership and small business income, real estate, insurance, and annuities among other things. Some states even include all
premarital separate property for division, property purchased in contemplation of marriage and property purchased during
premarital cohabitation. Which assets you keep should be based on factors such as tax, liquidity, and appreciation potential.
Community Property, Equitable Division, and "All" States differ...but judges generally have discretion to consider many
factors, including separate assets, health issues and future employability when considering the actual percentage distribution
you will be awarded. You should consult with an attorney before any final agreements are made.
Q. Can I keep the house?
A. Keeping your home in todays economic environment is not necessarily an advantage. Refinancing is difficult and
valuations are unstable. Upside down mortgages with the potential for foreclosure or short sales make the analysis more
difficult. Divorce is considered one of the "hardship" qualifications for short sales if you decide to sell your house. All things
considered however, if you have the cash flow to cover your expenses for several years, and you have considered liquidity
and tax issues, you could negotiate to keep the house. If you have residential custody of any minors you may be given the
option. If you have liquidity problems you may need to refinance or assume a property settlement note to your spouse. You
may be able to structure maintenance in the form of mortgage payments from your ex spouse. If you are considering selling
a house that has substantial long term appreciation within the next few years you should make sure to preserve both you and
your ex spouses capital gains deductions.
Q. What will my income and expenses be?
A. A thorough analysis of your ordinary and "customary" expenses will be made. Your wage income and any investment
income will then be combined to determine your net cash flow. If you will be receiving support, one alternative is to base it
on a "break even" cash flow basis. Using certain assumptions, like income growth and inflation, this can be projected out for
a number of years.
Q. What kind of support can I expect?
A. Minimum Child Support is legally mandated in all States, and can include college expenses, health care and a contribution
towards any unforeseen extraordinary expenses. Maintenance is based on numerous factors such as "lifestyle" and length of
marriage, health issues and employability factors...just to name a few. In most situations, maintenance is considered
"rehabilitative" not permanent. Your spouses current and projected future income from all sources will be used to determine
his ability to pay child support and or maintenance. Maintenance, like child support, is modifiable. If you chose to waive
maintenance in return for a higher cash settlement however, you may lose your right to any future maintenance should your
circumstances change. You should consult with a qualified attorney for legal details.
Q. How can I make sure I will get this support?
A. Child support is strictly enforced, with many legal means to garnish wages and other sources of income as well as attach
liens on property. Jail time is even possible for routine offenders. Life insurance is one alternative to protect against death of
a payee but policy ownership issues such as the ability to change beneficiaries and borrow against the policy can be
problematic. Lump sum present value payouts for future maintenance will guarantee your personal support. Some
settlements include larger marital distributions in lieu of maintenance. You will need to discuss various scenarios which
consider taxes, potential modification issues, and your spouses future ability to pay.
Q. What about college expenses for my children?
A. In some states contributions for post high school educational expenses can be ordered based on both individuals "financial
resources" and is normally limited to four years only. This would include all assets and liabilities, including real property and
retirement benefits, as well as income from all sources and net cash flow after normal and customary living expenses. In
most cases unless there is a substantial difference between each individuals financial situation, non custodial parents would
not be expected to pay more than 50% of college expenses. The non custodial parent's level of ongoing involvement and
participation in educational decision making can be a factor. The financial resources of the student and their ability to
contribute, their academic performance, their choice of school, and the expectations that higher educational expenses would
have been paid by both parents had there not been a divorce will also be considered. In some cases residential custodians can
file for state and federal financial aid for a dependent student using their income and assets only, and home equity and
retirement accounts will not be counted.
Q. Will I have to pay legal expenses?
A. If you have no liquid assets, you can get a judgement for fees which will be applied against any future distribution of
marital assets. If you have no assets at all, a contribution towards you legal fees is likely if your spouse has the ability to pay.
Your attorney can help you here.
Q. What happens to any debt we have?
A. Ordinarily all debts incurred while you were married are considered marital no matter who's name they are in, unless
judged not in the interests of the marital estate. In most states all debts after separation are separate unless judged to be
necessary to maintain the marital estate. Understanding how debt is affected by separation as well as divorce is very
important. Support obligations and settlement notes tied to these obligations have higher priority under new bankruptcy laws,
but general promissory notes should still be secured. In todays real estate market, you need to understand how foreclosures
and short sales will affect your marital finances...and your future credit. Beware of deficiency judgements on short sales or
foreclosures, joint credit card debt and potential back taxes from joint returns, no matter who was ordered to pay, and make
sure all liens on real property being divided are addressed before retitling, refinancing or signing any quit claims. If
bankruptcy is an issue you will need an experienced attorney.
Q. What will my financial future look like?
A. Projected cash flow and net worth analysis will show you 5, 10 and even 20 year projections. However, all projections
use assumptions which may not accurately reflect the future. Changes in health, employment and the economy can alter the
outcome of these projections significantly. You should only rely on conservative estimates of income and appreciation, while
anticipating the potential for higher inflation and lower investment returns.
Disclaimer: This is for informational purposes only and not meant to provide legal advice. Only your legal
representative is qualified to do so.
Q. Why do I need a financial specialist, why not just use an attorney?
A. Finances are the most important aspect of any divorce, and they can be very complex. Utilizing a financial professional to
help you understand how the divorce process will impact your finances not only saves you time and expense, it can also
reduce the likelihood of costly litigation. Once your finances are established you will have the option of pursuing alternative
methods of conflict resolution, such as mediation or collaboration. However, even if litigation is a foregone conclusion,
understanding your finances is an essential first step in analyzing your legal options and deciding which attorney is best suited
to handle your divorce. Contested or not, all divorces have potential financial issues and using a financial professional
independently or in conjunction with an attorney can be the most effective and efficient way to protect your future.
Q. When should I start planning for my divorce?
A. The simple answer is...as soon as possible. The advantages of planning ahead are unquestionable. Establishing your
lifestyle, expenses, sources of income, assets and liabilities, as well as your future financial needs will take time.
Understanding how your assets and liabilities are classified, when they are valued, and at what point your income and debt
will become separate is essential to protect yourself. Even if you are not currently considering a divorce, you should still be
prepared for the possibility. Living with the anxiety of not knowing or understanding your marital finances will only make
matters worse. The sooner you start planning ahead, the better off you will be.
Q. How do I find out what we really have?
A. You will need to gather as much financial information as possible. Copies of your tax returns, bank, brokerage and
retirement accounts is a good place to start. A financial professional can assist you in this process, and legal means are
available to force cooperation in sharing this information. Once you have as much information as possible, you will need to
have your marital finances analyzed and valued.
Q. What if my spouse is hiding anything?
A. Due to modern technology, hiding assets has become much more difficult. There are numerous forensic financial
techniques available to deal with this issue. Nevertheless, attempts to defer income, accelerate business expenses, prepay
taxes, transfer assets into trusts, undervalue investments, and run up debts are some of the strategies you may encounter.
Most of these issues will become transparent once your finances have been evaluated. Hiding assets seriously jeopardizes
anyone's standing in front of a judge, and those who are caught forfeit 100% of the hidden assets in some states.
Q. How much and what do I get to keep?
A. 50% of all marital assets is the starting point. In general you are entitled to half of everything that was earned or
accumulated during your marriage, as well as any appreciation of marital assets or separate assets due to marital effort or
expense. This would include earned income, investment income, accumulated non wage compensation, retirement benefits,
partnership and small business income, real estate, insurance, and annuities among other things. Some states even include all
premarital separate property for division, property purchased in contemplation of marriage and property purchased during
premarital cohabitation. Which assets you keep should be based on factors such as tax, liquidity, and appreciation potential.
Community Property, Equitable Division, and "All" States differ...but judges generally have discretion to consider many
factors, including separate assets, health issues and future employability when considering the actual percentage distribution
you will be awarded. You should consult with an attorney before any final agreements are made.
Q. Can I keep the house?
A. Keeping your home in todays economic environment is not necessarily an advantage. Refinancing is difficult and
valuations are unstable. Upside down mortgages with the potential for foreclosure or short sales make the analysis more
difficult. Divorce is considered one of the "hardship" qualifications for short sales if you decide to sell your house. All things
considered however, if you have the cash flow to cover your expenses for several years, and you have considered liquidity
and tax issues, you could negotiate to keep the house. If you have residential custody of any minors you may be given the
option. If you have liquidity problems you may need to refinance or assume a property settlement note to your spouse. You
may be able to structure maintenance in the form of mortgage payments from your ex spouse. If you are considering selling
a house that has substantial long term appreciation within the next few years you should make sure to preserve both you and
your ex spouses capital gains deductions.
Q. What will my income and expenses be?
A. A thorough analysis of your ordinary and "customary" expenses will be made. Your wage income and any investment
income will then be combined to determine your net cash flow. If you will be receiving support, one alternative is to base it
on a "break even" cash flow basis. Using certain assumptions, like income growth and inflation, this can be projected out for
a number of years.
Q. What kind of support can I expect?
A. Minimum Child Support is legally mandated in all States, and can include college expenses, health care and a contribution
towards any unforeseen extraordinary expenses. Maintenance is based on numerous factors such as "lifestyle" and length of
marriage, health issues and employability factors...just to name a few. In most situations, maintenance is considered
"rehabilitative" not permanent. Your spouses current and projected future income from all sources will be used to determine
his ability to pay child support and or maintenance. Maintenance, like child support, is modifiable. If you chose to waive
maintenance in return for a higher cash settlement however, you may lose your right to any future maintenance should your
circumstances change. You should consult with a qualified attorney for legal details.
Q. How can I make sure I will get this support?
A. Child support is strictly enforced, with many legal means to garnish wages and other sources of income as well as attach
liens on property. Jail time is even possible for routine offenders. Life insurance is one alternative to protect against death of
a payee but policy ownership issues such as the ability to change beneficiaries and borrow against the policy can be
problematic. Lump sum present value payouts for future maintenance will guarantee your personal support. Some
settlements include larger marital distributions in lieu of maintenance. You will need to discuss various scenarios which
consider taxes, potential modification issues, and your spouses future ability to pay.
Q. What about college expenses for my children?
A. In some states contributions for post high school educational expenses can be ordered based on both individuals "financial
resources" and is normally limited to four years only. This would include all assets and liabilities, including real property and
retirement benefits, as well as income from all sources and net cash flow after normal and customary living expenses. In
most cases unless there is a substantial difference between each individuals financial situation, non custodial parents would
not be expected to pay more than 50% of college expenses. The non custodial parent's level of ongoing involvement and
participation in educational decision making can be a factor. The financial resources of the student and their ability to
contribute, their academic performance, their choice of school, and the expectations that higher educational expenses would
have been paid by both parents had there not been a divorce will also be considered. In some cases residential custodians can
file for state and federal financial aid for a dependent student using their income and assets only, and home equity and
retirement accounts will not be counted.
Q. Will I have to pay legal expenses?
A. If you have no liquid assets, you can get a judgement for fees which will be applied against any future distribution of
marital assets. If you have no assets at all, a contribution towards you legal fees is likely if your spouse has the ability to pay.
Your attorney can help you here.
Q. What happens to any debt we have?
A. Ordinarily all debts incurred while you were married are considered marital no matter who's name they are in, unless
judged not in the interests of the marital estate. In most states all debts after separation are separate unless judged to be
necessary to maintain the marital estate. Understanding how debt is affected by separation as well as divorce is very
important. Support obligations and settlement notes tied to these obligations have higher priority under new bankruptcy laws,
but general promissory notes should still be secured. In todays real estate market, you need to understand how foreclosures
and short sales will affect your marital finances...and your future credit. Beware of deficiency judgements on short sales or
foreclosures, joint credit card debt and potential back taxes from joint returns, no matter who was ordered to pay, and make
sure all liens on real property being divided are addressed before retitling, refinancing or signing any quit claims. If
bankruptcy is an issue you will need an experienced attorney.
Q. What will my financial future look like?
A. Projected cash flow and net worth analysis will show you 5, 10 and even 20 year projections. However, all projections
use assumptions which may not accurately reflect the future. Changes in health, employment and the economy can alter the
outcome of these projections significantly. You should only rely on conservative estimates of income and appreciation, while
anticipating the potential for higher inflation and lower investment returns.
Disclaimer: This is for informational purposes only and not meant to provide legal advice. Only your legal
representative is qualified to do so.
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CLAY A. CALDWELL, CFDP Marital Finances.Com
INFORMATION FOR WOMEN