https://vimeo.com/506149934 Think about your family. There are grandparents, children, nieces, nephews, uncles, aunts, parents, and cousins. It’s a noisy, joyful, sometimes difficult to manage group of people who are tied together by love, and a shared history and bloodline. In a similar way, the people in a business are also bound together by a common cause. In fact, families and business share many things in common. Here are three things that families and businesses have in common: They Need Diversity Imagine that you’re fighting with your sister. The argument is…Read more
3 Lessons from Star Wars About Financial Literacy
https://vimeo.com/506145496 Yoda, the funny little green humanoid alien from the Star Wars movies, spouts off gems of wisdom in each of the films. He is a famous jedi master and teacher, the best in the galaxy. So vast is his wisdom that his advice is relevant to financial literacy. Whether you’re a young Padawan, or a seasoned Jedi master, Yoda offers important lessons from which we can all learn. Here are three valuable lessons in financial literacy that you can learn from Yoda in the Star Wars movies.. Read them…Read more
Outsmarting the Boomerang: Financial Independence for Adult Children in 3 Steps
https://www.youtube.com/watch?v=K5JVQFtchLs&list=PLrPVMfU_ZGupjzfPmHJ9wf-qLtz4PX1-7&index=2 Did you know that as of 2014, 18 to 34-year-olds were more likely to live with their parents than with a partner or spouse? Up to 15% of young adults now live with their parents for an average stay of 3 years. Even those who hold bachelor’s degrees follow the trend. This is the so-called boomerang effect. Many young adults try to strike out on their own by heading off to college, but can’t finance life independently. So, they return to the safety and security of their parent’s home.…Read more
Is a Financial Advisor Worth It?
The world of 50 years ago was a lot different than it is today. An individual often worked at the same job all his or her adult life, lived in the same house, and stayed married to the same spouse. In those days, too, one spouse could support a family, paying for college ordinarily didn’t require taking out a second mortgage, and people could look forward to retiring on Social Security and possibly a company pension. Today, your hopes and dreams are no different. Like most people, you probably want…Read more
What is risk management and how is it relevant to divorce?
Risk may be defined as the possibility of harm, injury, loss, danger, or destruction. One option to help manage risk is to purchase sufficient insurance to pay for losses. Risk management is an important topic for separated or divorcing couples. When a divorce occurs, the selection of life and health insurance beneficiaries may have to be revised and, in some cases, insurance coverage may terminate. Because it’s common for one spouse to maintain health insurance for the family, for example, the breakup of a marriage can have serious consequences for…Read more
What is debt and how is it classified for divorce purposes?
Like property, debt is classified as marital or separate. In general, both spouses are responsible for any debts incurred during the marriage. It doesn’t matter which party actually spent the money. When the property is divided at the time of divorce, it’s often the case that the person who gets the asset also gets the responsibility for paying any indebtedness secured by that asset. Even if your spouse agrees to take over the debt, joint obligors on a loan will remain jointly responsible. That is, the creditors can seek payment from either of you.
There are basically four types of debt:
- Secured debt
- Unsecured debt
- Tax debt
- Divorce expense debt
Secured debt gives the lienholder or lender a right to repossess the property in the event of your default on the loan. Some examples of secured debt include mortgages on your real estate, car loans, and boat loans. If a loan stands in the joint names of you and your spouse, you’ll need to make it very clear in your separation agreement who will be responsible for making payments on the loan. Otherwise, if one spouse fails to make timely payments, the creditor can pursue the other spouse or (eventually) seek repossession.
Unsecured debt does not give the lender the right to repossess any specific property, although there are other remedies at law. Typical examples of unsecured debt include credit cards, personal bank loans or lines of credit, and loans from family and friends.
If you sign a joint return with your spouse, you’re each liable for the tax debt. For three years after the due date for filing your return, the IRS can perform a random audit of your joint tax return (although the period may be longer than three years in cases of fraud or failure to file). To avoid potential tax problems in the future, your divorce agreement should spell out what happens if any additional interest, penalties, or taxes are imposed for any prior tax year. Notwithstanding any such agreement, you should be aware of the so-called innocent spouse rules, which provide certain protections to a taxpayer whose spouse understated the tax due on a joint return. A number of rules and conditions apply.
Divorce expense debt
Divorce can be expensive, and sometimes a spouse will seek a court order to make the other party subsidize attorney’s fees for both sides. This might happen, for instance, when only one spouse works. Since the homemaker-spouse may have no income to pay for a divorce attorney, a judge might order the working spouse to pay.
Sometimes both parties work or have sufficient funds with which to retain attorneys. In these cases, you’ll need to spell out who pays for what. For instance, if both parties want the family business, the family home, or a pension to be appraised, you’ll have to apportion the costs. The same holds true if you both decide to transfer title to an asset after a divorce.
Debts can also be incurred during the separation period. If luxuries are purchased during this period, courts are likely to assign the debt solely to the party who ran up the debt. In general, debts incurred after the separation date and before the divorce is final are the responsibility of the spouse who incurred them. One exception is family necessities (i.e., food, clothing, shelter, and medical care). These necessities can be paid by the other spouse if the incurring-spouse can’t afford to pay.
What are the rules regarding joint credit card debt?
Either signer on a joint credit card can be held responsible for 100 percent of the debt, not just one-half of the debt.
Example(s): Hal and Jane are seeking a divorce. During their marriage, Hal handled the finances and Jane stayed home with the children. During the discovery period of their divorce, Jane learned that Hal ran up over $30,000 on their joint credit cards to pay for his expensive suits, dinners for friends, recreational pursuits, and the like. Since they live in a community property state, all assets and debts will be divided down the middle. Thus, Jane will be responsible for paying $15,000 of the debt (from a judge’s perspective). However, if Hal fails to keep up with his monthly payments (or, if he decides not to pay any of his $15,000), the credit card companies can go after Jane for the full $30,000 because the divorce settlement is not binding on creditors.
During divorce proceedings, several issues can arise regarding credit cards, such as removing a spouse as an authorized signer, and understanding the obligations of joint credit card owners versus single card owners with two authorized signers.
Will my former spouse’s bankruptcy affect me?
Maybe. It will depend on the type of bankruptcy your former spouse chooses to file under (Chapter 7 or 13) and the type of debt owed. Debts such as alimony and/or child support payments (e.g., domestic support obligations) that are incurred as a result of a divorce decree/separation agreement, are protected from bankruptcy discharge (although a debtor’s bankruptcy can be the basis for the future reduction of these types of debts). On the other hand, debts owed as a result of a property settlement may be dischargeable under Chapter 13 bankruptcy.
It is important to note that the ways in which bankruptcy and divorce affect one another are complex. As a result, you may want to consult a bankruptcy or divorce attorney for more information.
How do you divide debt at divorce?
Basically, you have five options in allocating your marital debts:
- You and your spouse can sell joint property to raise the cash to pay off your marital debts.
- You can agree to pay most of the debts. In return, you can request a greater share of the marital property or a corresponding increase in alimony.
- Your spouse can agree to pay the bulk of the debts. In exchange, your spouse may get a greater share of the marital property or increase in alimony.
- You and your spouse divide the property and debt equally; that is, each of you gets one-half of the property and each of you agrees to pay one-half of the debt.
- If you’re a homemaker with children, your spouse might be ordered to pay the bulk of the debt, pay alimony, and perhaps allow you to keep the house and a portion of other significant assets, such as your spouse’s pension.
Because of the threat of bankruptcy and/or damage to your credit report, it might be wise to sell joint assets to pay off debt, or to assume responsibility for the debts yourself.
How can I repair my credit after a divorce?
Credit problems generally stay on your record for seven years, while bankruptcies can remain for up to 10. There are some steps you can take to repair credit damaged during a divorce:
- Obtain a copy of your credit report and look for errors. Sometimes, your credit history may be confused with someone else who has a similar name.
- Meet with a consumer credit counseling representative. A representative can provide you with tools to negotiate with your creditors. He or she can also give you some useful suggestions for paying your bills.
- Open a secured credit arrangement with your bank. If you deposit a specific sum of cash with a bank (such as $500), the bank will sometimes provide you with a secured credit card. Making timely payments will help to repair your credit over time.
What questions (relative to debt) should you consider before entering into a divorce settlement agreement?
Before sitting down with an attorney, think about which debts were contracted prior to marriage (separate debt) and which debts were contracted during the marriage (marital debt). With respect to marital debt, consider the following questions:
- If I wish to keep a particular marital asset, will I have sufficient income to keep up with the loan payments?
- Should I liquidate other assets to retire the debt completely (or partially)?
- If my spouse proposes a property settlement agreement, is there any likelihood that he or she would subsequently declare bankruptcy?
- Can I collateralize property settlement notes from my spouse so that bankruptcy will not eliminate his or her obligation to me?
- If, pursuant to our divorce agreement, my ex-spouse assumed responsibility for all credit card debt, what are my legal remedies if he defaults? How can the divorce agreement be enforced?
What is a qualified domestic relations order (QDRO)?
A qualified domestic relations order (QDRO) is a court judgment, decree, or order establishing the marital property rights of a spouse, former spouse, child, or dependent of a pension plan participant with respect to certain qualified retirement plans. Several requirements and restrictions apply. To what extent are retirement assets subject to divorce court jurisdiction? A retirement plan is a form of property. Like houses, cars, and bank accounts, a retirement plan can be divided between spouses at the time of a divorce. For example, if one spouse participates in a…Read more
What is a financial affidavit and how is it used in a divorce context?
When divorce proceedings are commenced, each spouse is required to fill out a financial affidavit. This form, which becomes part of the court record, shows income from all sources, debt (or liabilities), living expenses, and assets. Each party swears (under the pains and penalties of perjury) that the information contained on his or her affidavit is true. A judge will use theinformation contained in this affidavit when he or she issues temporary orders regarding separate maintenance (temporary alimony), child support, and other financial matters during the period of separation. The…Read more
Diamond Partner for KidSide
https://kidsidemiami.org/kidside-newsletter-july-2020/ SHECHTER & EVERETT, LLP recently became Diamond Partner for KidSide.Read more
What You Need To Know About Establishing A Realistic Budget
What You Need To Know About Establishing A Realistic Budget
Do you ever wonder where your money goes each month? Does it seem like you’re never able to get ahead? If so, you may want to establish a budget to help you keep track of how you spend your money and help you reach your financial goals.
Examine your financial goals
Before you establish a budget, you should examine your financial goals. Start by making a list of your short-term goals (e.g., new car, vacation) and your long-term goals (e.g., your child’s college education, retirement). Next, ask yourself: How important is it for me to achieve this goal? How much will I need to save? Armed with a clear picture of your goals, you can work toward establishing a budget that can help you reach them.
Identify your current monthly income and expenses
To develop a budget that is appropriate for your lifestyle, you’ll need to identify your current monthly income and expenses. You can jot the information down with a pen and paper, or you can use one of the many software programs available that are designed specifically for this purpose.
Start by adding up all of your income. In addition to your regular salary and wages, be sure to include other types of income, such as dividends, interest, and child support. Next, add up all of your expenses. To see where you have a choice in your spending, it helps to divide them into two categories: fixed expenses (e.g., housing, food, clothing, transportation) and discretionary expenses (e.g., entertainment, vacations, hobbies). You’ll also want to make sure that you have identified any out-of-pattern expenses, such as holiday gifts, car maintenance, home repair, and so on. To make sure that you’re not forgetting anything, it may help to look through canceled checks, credit card bills, and other receipts from the past year. Finally, as you list your expenses, it is important to remember your financial goals. Whenever possible, treat your goals as expenses and contribute toward them regularly.
Evaluate your budget
Once you’ve added up all of your income and expenses, compare the two totals. To get ahead, you should be spending less than you earn. If this is the case, you’re on the right track, and you need to look at how well you use your extra income. If you find yourself spending more than you earn, you’ll need to make some adjustments. Look at your expenses closely and cut down on your discretionary spending. And remember, if you do find yourself coming up short, don’t worry! All it will take is some determination and a little self-discipline, and you’ll eventually get it right.
Monitor your budget
You’ll need to monitor your budget periodically and make changes when necessary. But keep in mind that you don’t have to keep track of every penny that you spend. In fact, the less record keeping you have to do, the easier it will be to stick to your budget. Above all, be flexible. Any budget that is too rigid is likely to fail. So be prepared for the unexpected (e.g., leaky roof, failed car transmission).
Tips to help you stay on track
- Involve the entire family: Agree on a budget up front and meet regularly to check your progress
- Stay disciplined: Try to make budgeting a part of your daily routine
- Start your new budget at a time when it will be easy to follow and stick with the plan (e.g., the beginning of the year, as opposed to right before the holidays)
- Find a budgeting system that fits your needs (e.g., budgeting software)
- Distinguish between expenses that are “wants” (e.g., designer shoes) and expenses that are “needs” (e.g., groceries)
- Build rewards into your budget (e.g., eat out every other week)
- Avoid using credit cards to pay for everyday expenses: It may seem like you’re spending less, but your credit card debt will continue to increase