Keeping or selling the marital house can be a bone of contention with divorcing couples. One may want to sell it for financial gains and the other may want to retain it and live in it because it means financial security for him or her. In order to avoid such a situation, it is best that they have solutions in place.
If one person leaves the house, then the other person will have to worry about paying out the mortgage, insurance, tax, maintenance and so much more. Also, maintaining two households is expensive. But any financial gains made from the house by one party does not mean the gains will come to an end with them moving out of the house.
Certain other solutions may help you to sell or keep the house.
Buyouts – One spouse sells the house to the other spouse. An appraiser will determine the value of the property. After deducting the mortgage amount and any related encumbrances, the equity value of the house is determined. The spouse will pay half of the equity value in cash or via exchange of other assets or spousal support, and so on.
Tax consequences – Selling the house would mean having to pay capital gains tax. But if you retain the house, over time there will be depreciation of the property. It will mean that you will have lesser tax to pay.
Court order to sell the house – Situations may arise where neither of the spouses have the ability to buyout the house. The court can be asked to grant an order that would allow the house to be sold at the end of the divorce trial. It also happens when the spouses are unable to reach an agreement.
The court can also be asked to grant an order for selling the house before the divorce trial begins. If the spouses feel that they do not have the means to pay their attorneys or that the financial settlements such as child and spousal support will be difficult to meet. They may also fear about a foreclosure (inability to pay mortgage) of the property.
Getting a stipulation and order (agreement) – Selling a house while the divorce procedure is on can be quite complicated because certain restraining orders come into effect during this period. The complication can be avoided by asking the court to sanction a written agreement signed by both the spouses.
To learn more about the divorce process in California and how mediation can help, please visit our page, What is Divorce Mediation.
Property and debts have to be divided during a divorce. Many times, the divorcing couple does it itself or enlist the help of a mediator (a neutral third party). But if the couple fails to reach an understanding, it takes the dispute to a court and the judge gives a ruling based on state laws.
The court categorizes property and debts under equitable distribution or community property and then divides them among the couple.
Community property – Any marital property jointly owned by the married couple is known as community property. In certain states such as California, community property gets divided equally among the spouses. Apart from this, each spouse retains their share of the separate property (individual ownership).
Equitable distribution – The rest of the states divide all marital property, assets and income equitably or in a fair manner but not equally. The separate property may be awarded to one spouse to balance out the division.
Division of property does not necessarily mean a physical division. A spouse may be awarded a certain share of the total value of all the property. Apart from this, they will have their share of personal property, assets and debts.
Determining community and separate property
Community property – All earnings and acquisitions made, debts incurred during the period of marriage fall under community property.
Separate property of one spouse – Gifts and inheritances received by one spouse becomes their separate property. Any property purchased using their funds become their separate property. If the spouse owned any business before the marriage it will remain their personal separate property. But if the value of the business increased during the marriage, the increased value will be considered community property.
Separate and community funds used to purchase property – Any such property will become part community and part separate property. But you need to show that separate funds were used. But if separate property and community property is mixed, it usually becomes community property.
Determining who gets the marital home
If there are any children, the parent who is the primary care taker of the children retains the marital home. But if there are no children and both the spouses jointly own the property, it can become quite tricky.
To learn more about the divorce process in California and how mediation can help, please visit our page, What is Divorce Mediation.
Prenuptial agreements are usually a fraught issue in most marriages. When a couple is in love, the last thing they want to think about after their engagement is their prenup, something that tends to ominously portend the end of the very relationship they are celebrating.
So, why get a prenup?
Getting a prenuptial agreement drawn up before marriage can actually help both parties enter the marriage with a crystal clear understanding of each other’s financial situation. Besides, there are many reasons why a prenuptial agreement might even be required. For instance, in the event of a second marriage that involves custody agreements or when one spouse is drawing income from a family trust or when both parties are involved in business together, and so on. In cases when a prenup is required, it might reduce tensions later in the marriage, as all financial obligations are laid out clearly at the very outset.
If it is sensible to get a prenup, why should we be worried?
Regardless of how sensible it might be to get a prenup, it does not change the fact that the process of drawing one up can be distressing and painful for couples. Involving a battalion of lawyers in the process, and getting mired in legal proceedings might only make matters more difficult. Even worse, lots of lawyer involvement in the drawing up of a prenuptial agreement can very quickly make it an unnecessarily complicated and difficult document that can leave one or both parties feeling powerless and distrustful of each other.
How can we get a prenup that does not cause problems?
Considering how fraught the process of drawing up a prenup can be, it only makes sense to seek out the easiest, and most open process for drawing one up. This is where mediation comes in. Mediation allows a couple to settle on and draw up a prenup with a mediator they trust, outside a courtroom and without unnecessarily convoluted legal proceedings.
Mediation brings the couples together to collaboratively communicate and come up with an equitable agreement after in-depth discussion. In this process, couples are able to understand exactly what the other person brings to the marriage, address any concerns they may have with a neutral party, the mediator, and tackle their problems together. Mediation can build trust amongst couples as it demonstrates how potential problems within the marriage can be handled amicably and effectively.
Where do we find a mediator?
Once you decide on mediation, for your prenup, choosing a mediator is the next step. More often than not, divorce mediators tend to be excellent at mediating prenups, and can offer valuable advice. At the conclusion of the process, the mediator, who will also be a lawyer, will draw up a mutually beneficial, and agreeable, prenuptial agreement.
Getting a prenuptial agreement might be the smartest, and most responsible thing that a couple can do before getting married to ensure that they protect each other. Do not let the process of drawing one up weaken your relationship. Find a mediator today to help you draw up your prenup.
To learn more about the divorce process in California and how mediation can help, please visit our page, What is Divorce Mediation.
During a divorce, you work through all the intricacies of dividing the marital assets and determining alimony payments if needed. But what if all your best laid plans go awry because you overlooked one document you prepared a decade or more ago, when things were better between you and your spouse? The will.
Why people update their wills after divorce
If you do not want your retirement savings and property which you battled tooth and nail for to pass to the very adversary you wrestled it from, then updating your will becomes critical. It is also important if you do not want property held by you to pass into the hands of the new spouse if your ex remarries. Most important, however, if you wish to give the property or assets to your children, this will pave the way for them. They will be able to inherit without the added hassle of a legal battle with your ex (especially if they are your kids from an earlier marriage, or a new one) or long-winded court procedures to prove their rights to the estate. In some cases, the very executor of your will may have been your spouse – something that calls for needed change.
Updating your will: What you should take care of
To update your will, you need to start by “revoking” the old will by destroying it. Then, put together (with the help of a financial advisor and legal team if need be), a new outline for a will describing who each asset should go to.
You will also need to identify someone to be the executor of this new will. It could be somebody different to the first time around, especially if that was someone you no longer communicate with like your spouse’s friend/colleague. Also suggest an alternate if your first choice isn’t available.
If you have custody of your kids and don’t want your spouse to have them after you are gone, mention this and add supportive documentation. While this is no guarantee, the judge may give it some thought. A guardian should also be named, in the event both you and your spouse pass on.
Also check that all financial documents for items beyond the purview of the will are updated to reflect new beneficiaries.
Revising your will after the divorce
Estate planning after divorce becomes an important activity that is sometimes overlooked, especially if you didn’t hire a financial advisor to work with you during the divorce process. It is never too soon to update your will and plan for your estate.
To learn more about the divorce process in California and how mediation can help, please visit our page, What is Divorce Mediation.
When you are going through a divorce, it may sometimes feel like an army of advisors and experts to get through the process. But do you really need so many people on your side even if you’re taking the mediation route? The short answer – yes. If you need to keep your financial and legal interests protected, plan to retain the services of a financial advisor to ensure you have all your bases covered.
Why you need an expert
The decisions taken during mediation and after the settlement agreement has been signed are binding and you will have to live with them for the rest of your life. It is rare for an alimony payment for instance, to be reconsidered, unless there is a drastic change in the lives of you or your spouse. Simple oversight is not grounds for a redo.
A mediation expert may or may not be a financial expert. While a divorce mediator and your attorney can both help in their own ways, you may still need someone specifically trained in financial planning.
Is the expense worth it?
It might seem like an added expense to hire a financial expert, but it could save you money in the long run. Remember, a divorce isn’t just about this one-time activity of ending the marriage. It is also about planning your finances, alimony, and division of property in a manner that will help you maintain your lifestyle as it was, before the split.
If you head back to the courts many years down the line to fix a problem you didn’t spot during the agreement arrived at in mediation, you are likely to meet with opposition from your ex. This will likely lead to a legal battle and huge expenses. This could be avoided by getting the financial aspects right the first time.
What will your financial advisor do for you?
A financial advisor can help you factor in the tax implications of certain decisions you arrive at during mediation. They will be able to project future income, taxation levels, and give you clarity on what your tax burden as well as disposable income will be. This will help you choose the option (of the many being discussed with your ex and their advisory team) that is best for your financial security.
If there is a gap in the terms you are planning to agree on, they will help you work out a way to bridge it. For instance, having the primary holder of an insurance policy changed, or taking out an insurance policy with you as the primary beneficiary to secure your future if your alimony payments stop on the passing of the earning spouse.
They can also highlight smaller things that you might miss discussing, but that could have big financial repercussions.
During a divorce mediation sessions child custody and money/assets are most important matters for most couples. The good news is, with the right advisor by your side, you can work towards an outcome for the financial aspects, that is good for you both today, and in future.
To learn more about the divorce process in California and how mediation can help, please visit our page, What is Divorce Mediation.
If you are going through a contentious divorce process, then be sure to build in all the safeties you can to secure your hard-won settlement. Here’s how life insurance could hold the key to some of your concerns around the divorce settlement and your financial future.
Why you need a fail-safe guarantee
For someone who is a dependent spouse, relying on the alimony payment from a now-estranged spouse can be a nerve racking experience. This is made even more daunting when old age creeps up on you, or if your ex has a host of health problems or lives on the edge. Even without all these risks, the loss of your estranged ex will mean that your alimony payments stop completely with no one to make them. Often, after a divorce, couples will revise their wills to exclude the ex from inheriting their estate – whether it is property or other assets. There is however, one way to ensure you don’t find yourself in a spot when a spouse passes on.
Life insurance and how it can help
If you do not earn an income, and are totally dependent on the money that comes in as alimony, you may find yourself with no money in the bank when your ex dies. Life insurance can help give you a payout on their passing which will see you through.
Term insurance vs. whole life policy
A term policy covers the life of the insured individual – your ex – for a fixed duration of years. If your divorce settlement agreement dictates that payments will be made as child support until the kids are of a certain age, then it makes sense to have a term policy that runs for that duration only so you pay lower premiums. A whole life policy also has an investment component with some returns on the premium paid besides the death benefit.
Who pays?
Many couples have life insurance policies when they are married, but after divorce the earning spouse may choose to stop making these payments. If they were the holder of the policy, they could even change the beneficiary. It is therefore important, as a dependent to be the holder of the policy and to ensure payments are made. You could work out so that premium payments are made by your spouse even if you are the holder, but in many cases the earning partner may not agree, especially if they are to make alimony payments. In such cases, it is well worth cutting the premium out of your own alimony received to keep up a policy or to take out a new life insurance policy on them. Think of it as an investment in your own future and financial security.
To learn more about the divorce process in California and how mediation can help, please visit our page, What is Divorce Mediation.
Alimony/spousal support payments to be made after a divorce, by one spouse to the other, are designed to help the partner who is in need of the financial help, lead a life that is somewhat comparable to the circumstances prior to divorce. However, there are some important things to know about spousal support:
Alimony payments are dictated by need not income
You might believe that you are owed a certain amount by your spouse because they are earning far more than you are, or because you have invested a lot of time and lost out on career opportunities for the sake of your marriage. The reality however, is that the judge will make a decision on what amount you get as spousal support based on a dozen or so factors, depending on which state you are in. And one of the key factors that will come into play will be the perceived need of the spouse who is to receive the payment. Even if your spouse works, you may still have to pay alimony.
Payment of alimony may not be forever
There are a number of different kinds of spousal support, including something called short-term or rehabilitative alimony. This is designed to help one spouse tide over the initial phase after a divorce, where they need the help while they get their finances and life in order. Other kinds of alimony may also cease to be due, if the recipient moves in with a new partner or remarries.
The duration of your marriage matters
When it comes to alimony, the duration of the relationship also comes into play. The same couple going through a divorce after just 2 years of marriage will see a very different outcome and quantum of alimony being payable, compared to a couple that has been together for a couple of decades or more. That’s because the investment in the marriage and the opportunity cost for the spouse earning a lower income as a result of decisions taken to support the marriage, is greater.
You can take legal action if your spouse doesn’t pay up alimony
Once you have an alimony order, your spouse is required by law to give you the required payments as dictated. However, if they fail to do so, you could choose between undertaking an ‘earnings assignment order’ or a take out a ‘contempt’ proceeding. In extreme cases, if no payments are made in spite of a court order, the court could even put your ex in prison to get them to fall in line.
The role kids play in determining alimony
If your soon to be ex is the one with the primary care-giving responsibility for your kids and will continue to look after them after your divorce, the court will, in addition to the child support payments, also likely mandate a longer duration of spousal support. This is done so that he/she can find help and return to a full-time or regular job which they may not have had to do within the marriage. The extra time helps gives them the flexibility to re-qualify and hunt for a job.
To learn more about the divorce process in California and how mediation can help, please visit our page, “What is Divorce Mediation.”
Despite the common perception that divorce is simply about the legal aspects, that is not the case. Going into a divorce involves a number of things, only one of which is legal. How your divorce plays out will also depend on the procedure you opt to end your relation. In a litigated case, there are a number of legal aspects to take into account and legal aspects are often the most important. With other modes of divorce, such as an Orange County divorce mediation, the most important role is that of finances, i.e. money.
Whatever decision you make in your Orange County divorce mediation will affect the way you live life. To ensure that you don’t end up ruining your financial future, here is the low down on the 4 financial issues you need to take into account before going into a divorce.
1. Are you able to make ends meet?
Most people are typically under the impression that divorce is a way to have more money at your disposal. That irrespective of it being an Orange County divorce mediation or litigation is not the case. If anything divorce creates an expense on you. Logically speaking, when you end up making one family life into two you are doubling the house rent, the utility bills and everything else. When you know the position you are financially in, you can make a better decision as to what you should bargain for in your mediation.
2. If you want to stay in the house, how much will staying cost you?
People, especially kids are emotionally attached to homes. When you and your spouse decide to call it quits using Orange County divorce mediation, either of you, whoever the kids stay with longer will want to keep the home. Yet, keeping the home since it has sentimental value can cost you financially. Before you let your emotions overpower you, think about how much the repairs and maintenance of the house would cost, how the mortgage payments would be made, etc.
3. Is your job stable?
Especially when you are considering payments of spousal and child support, this factor needs to be considered. The days when you could keep your job for life have long gone. Now, you can be terminated for the slightest of reasons. So before you and your spouse go on to make an Orange County divorce mediation resolution about spousal and child support, think about the stability of your job.
4. What will your divorce cost? And how much would it cost you to start a new life?
These are two financial aspects, but since they are interconnected they have to be talked about together. When you choose an Orange County divorce mediation you are freeing yourself from the costly divorce concept. Mediations are cheap and affordable. With that out of the way, knowing how much your new life will cost you should help you negotiate the financial capabilities you want to take out of the Orange County divorce mediation resolution.
To learn more about the divorce process in California and how mediation can help, please visit our page, “What is Divorce Mediation.”
Spousal support/maintenance is something that most spouses that are in a better economic state to their other spouse will have to pay once they decide to part ways. The idea of spousal support which is also known as alimony is designed to make sure that the dependent spouse in the marriage is protected during and post-divorce.
Determining spousal support in divorce can be complicated as there are various techniques that judges use to determine the amount of spousal support. Generally people who through a litigated divorce will be given out formulaic approach for support orders that have a stark disregard of the situation of the couple, and instead focus on black and white procedural rules.
A Comfortable Way Out
While the courts must stick with the rules and set precedents in deciding a spousal support order, people who go to divorce mediation will have the chance to getting their spousal support decided rationally.
The rational approach is a popular approach that most spouse uses with one another when deciding their post-divorce alimony payments. Use of this approach typically leads to a more just settlement that is closely modeled on the current economic situation of the parties.
The Rational Approach
The rational approach derives its concept from the word rational which loosely translated means reasonable. If you are considering divorce mediation in Orange County with your spouse, looking to make use of this approach, here is a lowdown on how it works.
The process starts with a detailed analysis of the living expenses that can be reasonably associated with each party. It is important at this stage that the two parties don’t get into a futile argument as to what expense to keep and what to leave.
If you think that you have a legitimate claim to some expense that needs to be added in your reasonable expense list and your spouse should accept it. It is advisable that you carry a credit card, a monthly bank bill of the withdrawals of cash made each month and the monthly receipts of items you regularly need in your life. If you are able to show all of the evidences your case in front of the other party will strengthen, more often than not compelling them to agree to your assertions.
The rational approach will usually divide the spousal payments into multiple schedule lines, easier for the spouses to divide amongst each other. The common factors that need to be taken into account before deciding on the rational approach spousal maintenance are:
Monthly payment of spousal maintenance
Gross monthly income covering all sources
Total expenses that incurred monthly
The total monthly income with respect to adding of spousal maintenance received and subtraction of spousal maintenance paid.
The total number of taxes that have been paid by each party off their incomes
Net income that is left remaining post payment of taxes and deduction of expenses.
To learn more about the divorce process in California and how mediation can help, please visit our page, “What is Divorce Mediation.”
A divorce itself can be a complex and tight affair. Add retirement plans to your already complex divorce and you have lots of things to deal with. There is a term used in divorce cases known as deferred compensation. This is a word used to refer to 401K plans, pension plans and other assets of retirement. There are a number of ways that these plans can be made divisible regardless of them being one party or the other in a settlement agreement.
Their division usually depends on the nature and the value of the asset. Here is a list of a few common retirement asset types.
· Saving Plans
These are plans such as the ESOPs, 401k plans, Thrift saving plans, IRAs etc.
· Defined Contribution Plans
A define contribution plan is different to a savings plan. The value of this plan is determined with respect to the contributions that are made to this plan over the course. The money invested in such plans can be invested and can grow.
· Defined Benefit Plans
A defined benefit plan is one plan that compensates the spouse once they have retired to the date when their life time ends. This is usually done through a monthly payment every month for the rest of their lives.
Dividing Saving Plans
Saving plans are considered cash plan and hence can be divided as part of a divorce between two spouses. They can be liquidated, but before the liquidation happens, it is important that the accounts custodian is given a certified copy that has the court order clearly written down on it. The IRA proceeds can either be directly paid to the spouses or they may be used to make two separate IRA accounts for both the spouses. This could however result in a loss of the 30% for taxes as a penalty for early withdrawal.
Dividing Defined Contribution Plans
Before defined contribution plans can be divided because of a divorce between two spouses, they’ll need to be valued. Their valuation is carried out by multiplying the vesting percentage to the balance of the account. Generally when such plans are divided each spouse gets one half of the vested current value of the plan.
Diving Defined Benefit Plans
The workings of a defined benefits plan are different to the above mentioned retirement plans. In such plans the benefits of the participants will not be liquidated before the retirement age of the owner spouse is reached. Once the age is reached the participant spouse will receive her retirement plan in her name with respect to the marital interest they have in the participant’s plan. This plane given to the spouse will also have the same terms and conditions as the original retirement plan has.
To learn more about the divorce process in California and how mediation can help, please visit our page, “What is Divorce Mediation.”
Keeping or selling the marital house can be a bone of contention with divorcing couples. One may want to sell it for financial gains and the other may want to retain it and live in it because it means financial security for him or her. In order to avoid such a situation, it is best that they have solutions in place.
Gerald A. Maggio is a trained Orange County divorce mediator who has amicably resolved cases many cases out of court, as well as an experienced divorce and family law attorney. Mr. Maggio founded California Divorce Mediators in 2012 with the belief that although “not every marriage can be saved, every family can” and a mission to save families from the financial and emotional distress associated with traditional divorce litigation. California Divorce Mediators is located in Irvine, California, and serves the Orange County area and other counties in California offering divorce mediation, child custody mediation and mediation of other family law matters. 
