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While often considered the kinder approach to divorce compared to traditional litigation, the benefits of mediation go far beyond those simply looking for a “nicer” approach. The best kept secret of mediation is that it is actually the couples with more conflict who can see the greatest benefit from mediation.

 

 

Those who are experiencing higher degrees of conflict will see the highest litigation-related expenses. The litigation process itself often heightens conflict. You do not have to be on the same page with respect to your settlement in order to try mediation. In fact, mediation is designed specifically to help you get on the same page. You do, however, have to share a commitment to the process.

 

Checklist: Is mediation right for you?

Here is a checklist to help you determine if mediation would be an appropriate process for settling the terms of your divorce. You and your spouse do not have to agree to everything on the list but if there are several items on the list that do not reflect your situation, mediation may not be the best solution for you.

☑  Parties agree to be civil in their communication. ☑  There is no history of domestic violence. ☑  Parties share a commitment to settle the terms of the divorce. ☑  Parties willingly provide full disclosure regarding assets, liabilities, and income. ☑  Neither party has denied the other access to the child(ren). ☑  Parties have a history of successfully work together to solve problems in the past. ☑  Both parties see some benefit to settling (e.g. quicker, lower legal fees, or unpredictable outcome if going to court). Get Started

If you are ready to determine if mediation is the right choice for you, schedule a strategy session. 

In your 60-minute strategy session, we will:

  • Explore your divorce options and get clear on the right solution for your situation

  • Review your finances

  • Map out a plan for transitioning to the next phase of your life

  • Identify your biggest fears and decide the best way to address them

  • Connect you with any other resources you’ll need in your process

We offer a limited number of strategy sessions each month. Schedule today to ensure availability!

 

The post The Best Kept Secret of Mediation appeared first on Great Lakes Divorce Financial Solutions.

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An interview with Amy Terrell, Senior Loan Officer & Certified Divorce Lending Specialist with US Lending Corp.

I find it important to develop a solid network of professionals who can support my divorcing clients. There are such a wide variety of issues that arise during the course of a divorce. One that frequently arises is refinancing the primary residence to remove one parties’ name from the loan. I recently sat down with Amy Terrell, a Senior Loan Officer and Certified Divorce Lending Specialist with US Lending Corp. During our conversation, I realized there are some important issues that I wanted to make sure people are aware of when it comes to divorce and your mortgage. She was nice enough complete a brief interview over email to share the information.

What are some of the biggest mistakes people make when it comes to their credit score when they are trying to refinance?

Some of the biggest mistakes people make are:

  • Opening new accounts:  This can cause you to go from being approved to not being approved
  • Shopping for/purchasing a car:  Even if you just look for a car, the inquiries made by the car dealership can lower your credit score anywhere from 25-100 points depending how many times your credit is run
  • Being late on any payments
  • Having anyone run your credit:  Any inquiries have the potential to lower your credit score
At what point in someone’s divorce should they contact you?

People can contact me at any time during the divorce process.  It may be advantageous to contact me earlier.  This way, I can see what I am working with.  If there is a credit issue, we can work together to improve what is necessary.  This way, when we need to proceed with the refinance or purchase, the client will be ready.  This will help if there is a specific time that the refinance or purchase needs to be finished. 

How long have you been in the mortgage industry?

I have been in the mortgage business for 8 years.

Why should those going through a divorce work with you?

I work well with people and have a great deal of knowledge and experience in the industry.   As a Certified Divorce Lending Professional, I took classes to become knowledgeable in Divorce Lending.  I take those practices and use them while working with people going through divorces.  In addition, I make myself available to my clients any time. Clients can always reach me on my cell phone.  I am focused on making clients comfortable with a streamlined process and always closing on time.

Can someone get approved for a home loan if their only income is spousal support? 

Yes, people are able to be approved for a home loan if their only income is spousal support.  First, they must have 6 months of documented payments. Once they have that documentation, they can apply. The support must be court ordered to go on for a minimum of 3 additional years after the initial 6-month period. 

Is there anything else you wish that people who are going through a divorce or their attorneys knew when applying for a home loan?

Things that I wish people knew ahead of time include:

  • Pay your bills on time – especially your mortgage!  Don’t spite your soon-to-be-ex because your credit will be negatively affected also.  No one wins.
  • Don’t open new credit cards.  Your loan will close in 21-30 days.  There will be time after that to get more credit cards.
  • If you are PURCHASING a home, have your down payment money in a bank account for 60 days.  This is called having your money seasoned.  No underwriter will ever allow “mattress money” for a down payment.  If you have cash and you want to use it for a down payment, go directly to the bank and deposit it.

Amy is a wonderful resource for questions about divorce and your mortgage. You can contact her directly with any mortgage-related questions. Her contact information is as follows:

Amy Terrell

US Lending Corporation

216-313-9017 Direct Line

amy.terrell@mysls.us

Let us help you make wise financial decisions

Our goal is to help people who are going through the divorce process make wise financial decisions. Sometimes that includes connecting them with the right resources. If we can be of assistance, please do not hesitate to contact us.

If you are ready to schedule a strategy session, you can do so right online. In this session, we will:

  • Explore your divorce options and get clear on the right solution for your situation
  • Review your finances
  • Map out a plan for transitioning to the next phase of your life
  • Identify your biggest fears and decide the best way to address them
  • Connect you with any other resources you’ll need in your process

Only 8 sessions available each month at a special rate of $149 (only $99 for a virtual session)! Schedule today to ensure availability!

BOOK A 60-MIN STRATEGY SESSION

The post Divorce and Your Mortgage appeared first on Great Lakes Divorce Financial Solutions.

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I am a big proponent of mediation because it gives parties greater control over the outcome of their divorce settlement. One of the stickiest issues addressed in mediation is spousal support. (Spousal support is also known as alimony or spousal maintenance.) There is no formula to determine spousal support in Ohio. Thus, if it is awarded, the amount and/or the duration can all be fairly subjective. That said, there are a number of considerations detailed in Ohio law. You can read about them here.

Sometimes clients  ask me what other people do when it comes to spousal support. There truly is not one way to handle it. In fact, the creative spousal support agreements I’ve witnessed in mediation illustrate the control parties have in mediation. This post is by no means meant to be a recommendation. Rather, it can give you some ideas for how others have found resolution to this issue.

5 Sample Resolutions to the Issue of Spousal Support in Ohio: Traditional Resolution

A traditional resolution is when one party plans to pay the other party a fixed monthly amount for a specified period of time. The amount and time frame vary significantly from case to case with a variety of factors considered. The primary factors considered tends to be the earnings power of each party and the duration of the marriage. Some parties try to come up with a solution that provide both spouses with the same amount of income. Others may negotiate a payment that allows the lower earning spouse to stay in the primary residence.

Spousal Support Buyout

Sometimes one or both of the parties do not want to deal with the issue of an ongoing payment. Thus, they will negotiate an upfront payment in lieu of monthly payments and/or a larger asset allocation to one of the parties in lieu of ongoing spousal support. For example, in one case, the parties agreed that one of the spouses would keep all of the equity in the marital home in lieu of spousal support. They divided the rest of their assets equally.

Tiered Approach

For another case, the wife just went back to work full-time after staying home with her children for many years. The husband was the primary earner for the last 10+ years. The children were teenagers at the time of the mediation and the wife obtained employment at a lower wage than the husband. However, the wife was capable of earning more once she was back in the workforce for some time. The parties decided that the husband would pay the wife a spousal support payment that was highest in the first two years of payment and then declined annually over each of the following three years.

Assignment of Assets with Greater Cash Flow

In another sample case, the wife came from a family of significant wealth. The husband had built a business during the course of the marriage. However, the parties primarily lived off of the income stream from the wife’s inherited assets. While much of the portfolio was considered to be separate property that would not be divided in the divorce, the clients determined that certain assets that would offer greater income be assigned to the husband in lieu of having the wife pay spousal support.

No Spousal Support

I’ve seen plenty of cases come through where parties determine there will be no spousal support. It is not a forgone conclusion that spousal support will be negotiated during mediation. Most of the cases that I’ve seen where the topic of spousal support is not discussed involve two parties with careers of their own. There tends to be a minimal difference in income between the parties.

Spousal Support Increasing with Inflation

There are times when spousal support is negotiated to cover a long period of time. This seems to be the case when one spouse is the primary earner and the other is responsible for the home and the children. I’ve also seen this when one of the parties suffers from a chronic illness. Sometimes the primary earner wants to ensure the other spouse is taken care of despite the fact that the marriage did not work out. Over time, inflation can have a significant impact on general living expenses. Thus, some parties choose to negotiate an inflation factor when resolving the issue of spousal support.

Not sure what to ask for?

If you are going through mediation and you do not know how much spousal support to ask for or for how long, I would strongly encourage you to sit down with a Certified Divorce Financial Analyst (CDFA). A CDFA can take a look at your overall financial picture to determine a realistic scenario of what will work best for both parties involved. They can create a financial plan for you that will help you to confidently negotiate your spousal support so you know exactly what you need to make ends meet and transition into the next phase of your life.

While we are located in Ohio, we work with clients virtually nationwide. If you need assistance understanding your financial picture, what your options are, and/or a plan for your future, contact us for a complimentary consultation. We are committed to educating and empowering clients to make wise financial decisions.

Schedule Appointment

The post Spousal Support in Ohio: A Look at Various Outcomes Achieved in Mediation appeared first on Great Lakes Divorce Financial Solutions.

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I strongly believe in the benefits of choosing mediation for your divorce but it’s also important to understand the challenges and prepare for those. The decisions made in mediation can significantly impact your life for years to come. With that in mind, it can be easy to become overwhelmed during the session if you are not adequately prepared. Likewise, you can make agreements that may not be in your best interest if you are simply tired and worn out from the mediation. These simple mediation strategies can help you get what you want from your divorce settlement.

Keep these strategies in mind to make the most of your mediation #1 Take Time to Reflect Ahead of Time

Spend some quiet time thinking about what you want and what you need.  Write your thoughts down on paper and read it aloud.  This process helps you organize your thoughts, identify your priorities and set realistic expectations.  Take this paper with you to mediation.  If you are represented by legal counsel, give your attorney a copy.

#2 Consider the Strengths and Weaknesses of Each Party

Analyze strengths and weakness on both sides of the table.  In other words, identify the strengths and weaknesses of the person on the other side of the table, but don’t forget to think about your own.  What are your soft spots that might make you vulnerable during the negotiations? Determine what you can do to improve your confidence in areas you feel weak. For example, if you are not confident in discussing finances, meet with a Certified Divorce Financial Analyst (CDFA) prior to your mediation session. A CDFA can provide you with the financial education you need to be confident in your financial negotiations.

#3 Monitor and Control Your Emotions

It is very easy for emotions to get triggered during a mediation session. Keep in mind that your reactions do not need to be your responses. Monitoring and controlling your emotions can be a challenge. However, doing so can help you reach your goal – arriving at a  successful outcome that gives you what you want and what you need.

#4 Don’t Overreact to an Offer

Remember that every resolution needs to start somewhere. Do not allow yourself to become so focused on the inadequacy of a first offer that you can’t continue the conversation in a productive manner. Many times a party to mediation will react strongly to a first offer.  Reactions might include comments like “That’s outrageous. We’re never going to agree on anything,” or “That’s an insult. I’m out of here.” A first offer is a starting point and should elicit a thoughtful, strategic response rather than an emotional outburst that derails the potential of a mediation session.

#5 Take Your Time in Making a Thoughtful Decision

Don’t agree if you are not fully ready to commit to your decision. If you are not confident that the offer being presented serves you well, don’t agree to it.  Ask for a break or ask for the mediation to be continued another day.  Give yourself time to think over the consequences of your decision and consult with a professional who can advise you on it if necessary.

There are many benefits to mediation – it’s more cost-effective, efficient and less stressful than going to court. You also have significantly more control over the outcome. That said, it’s important to take the time to you need in order to prepare so you can reach a favorable settlement. Your future can depend on it.

The post 5 Mediation Strategies to Get What You Want appeared first on Great Lakes Divorce Financial Solutions.

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Dealing with a divorce is difficult no matter the time of year but dealing with a divorce over the holidays compounds the stress. It means more time with family who may or may not be on board with this major change in your life. It means hearing opinions that you did not ask for even though they may mean well. It could also mean missing out on some traditions you absolutely love.

From someone who has been there, all I can say is that is really does get easier. The first holiday season either during and/or just following your separation/divorce is by far the hardest.

Here are some tips to help you survive your first holiday season after deciding to divorce: 1. Take Care of Yourself

Recognize that it’s a difficult time of year and take extra good care of yourself. Eat well, get exercise and make sure you are getting adequate sleep. All of these things will put you in a better position to deal with the stress.

2. Do Something Nice for Yourself

I know that at the holidays we often think more about others than we do about ourselves. However, if you are having a difficult time, do something nice for yourself. Get a massage. Go out to dinner with a friend. Take a bubble bath. Do something that will help you feel good about you. I know money can be tight during a divorce but you don’t have to spend lots of money to do something nice for yourself.

3. Make a Plan

Decide how you are going to discuss your divorce before the topic arises with others. Be thoughtful about how much it makes sense to share. It’s fair to assume that whatever you do say will get back to your ex. While that may not really be the case, it might make you think twice about what you say or how you say it.

4. Be Flexible When It Comes to your Children

Being flexible is key, especially if there are children involved. Remember that children want to spend time with both parents. If you won’t be with your kids on the 25th, simply plan a “Special Christmas” when you will be. There is no reason to give up anything, just rearrange.

5. Don’t Spend it Alone

With all of the changes you have going on in your life right now, it’s easy to cocoon in your home and avoid family and friends. Resist the temptation. Reach out to people who care about you and will be supportive.

6. Establish New Traditions

Let’s face it. Sometimes going through a divorce means you are divorcing friends as well. This is especially true if you and your soon-to-be-ex shared all of the same friends.  If you have done everything together in the past, it may be time to start some brand new traditions. Remember, you’re in the driver’s seat here.

Is this your first holiday as a single person?

Don’t let your emotions get the best of you. If this is your first holiday season as a single person it is normal to have some emotional ups and downs, you are still in the grieving process. Do your best to think about your new future and try not to dwell on the past. Think of new possibilities. What are the activities that you’ve always wanted to try but never had the time? Now’s the time to make it happen!

Good luck this holiday season. Remember that you are not alone. If you are struggling, consider attending a support group so you can meet others who are facing the same challenges you are.

The post 6 Survival Tips for Dealing With Divorce Over the Holidays appeared first on Great Lakes Divorce Financial Solutions.

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The anger in the room was palpable. I was sitting at a round table with a husband and wife who had chosen to use mediation as a way to come to terms on their divorce agreement. According to the wife, the husband had been unfaithful several times throughout their marriage. According to the husband, the two had not been intimate for many years. Regardless of why the couple was now facing the end of their marriage, in order for negotiations in mediation to be productive, we needed to find ways to bridge the divide between them. It’s not uncommon for years of disappointment and frustration to come to a head when couples are going through a divorce. Often, it’s the reason that individuals think that they cannot mediate their divorce settlement.

Negotiating the Nonnegotiable

A couple of weeks ago, I was fortunate enough to attend a continuing education program on this very topic. Dr. Daniel Shapiro of the Harvard International Negotiation Program presented content from his book, Negotiating the Nonnegotiable: How to Resolve the Most Emotionally Charged Conflicts. While Dr. Shapiro has been involved in negotiations in some of the most violent areas in the world, the framework he shared is relevant for even the most personal conflicts. As part of his presentation, he outlined how to counteract the five lures of what he refers to as the tribal mind. Counteracting these temptations are key to bridging the divide and having productive conversations in mediation.

The Tribal Mind

The tribal mind is characterized by a “me vs. you” mentality. Even if you have never participated in a divorce mediation before, I’m sure that you can see how easy it would be to be lured into the tribal mind. The biggest problem with the tribal mind is it makes people feel like things are non-negotiable and thus, the issue cannot be mediated. Being able to remain rational is key to decision-making in mediation. It is also the key to bridging the divide between parties who cannot see eye-to-eye on anything.

When our identity feel threatened, a whole set of emotional forces lure us into conflict. – Dr. Daniel Shapiro

Counteract these temptations to bridge the divide in mediation

Here are the five lures that Shapiro presented:

1. Vertigo

Vertigo is when time and space collapse. While I try to have clients focus on the future when going through mediation, it is common for memories to bring them right back to moments in the past – moments that may have happened last week, last month or even ten years ago but it feels like they are happening all over again. When in Vertigo, parties are unable to think clearly to make decisions about the future.  Judgment is clouded with all of the emotions from the past. The first step in avoiding Vertigo is recognizing that it is a problem that can hinder progress in mediation. Staying in the present moment and focusing on what you want your future to be like is critical.

2. Taboos

Taboos may be the elephants in the room. Consider if there is something that should be discussed that has not been. Also, consider if the topics that are being addressed are ones that you do not feel comfortable addressing and where that discomfort is coming from. According to Shapiro, taboos can be handled in three different ways: (1) Accept it, (2) chisel away at the issues, or (3) tear it down.

3. Repetition Compulsion

Repetition compulsion has to do with conflict patterns. Is there something that is triggering the same conflict in your relationship. Is the trigger bringing you into the cycle of conflict so you are unable to move forward? Sometimes there is comfort in the predictability of the cycle. It can actually become a part of our identity over time. While there may be comfort in the pattern, it has consistently proven unproductive. In mediation, we need to consciously choose to participate in a new pattern that leads to resolution.

4. Assault on the Sacred

Assault on the sacred is about feeling like the most important aspects of your identity are under attack. When going through a divorce, you are going through it with someone who knows you very well and knows what is most important to you. It is important that you both make a commitment to respect what each holds sacred throughout the mediation process.

5. Identity Politics

Identity politics is the last lure that Dr. Shaprio identified in his presentation. Identity politics has to do with whom we build affiliations. I always encourage clients to keep the conversations in mediation confidential. I recognize that many feel the need to blow off steam as they work through their divorce settlement. However, discussing the conflict with family and friends has the potential to pull you out of rationality and into emotionality.

Mediation is an Option Worth Considering

Many couples believe that their divorce cannot be mediated. It is not an easy choice. However, if Dr. Shapiro can help political leaders with negotiations in mediation in some of the most violent areas in the world, I have to believe that mediation is a possible solution for more couples than who realize it.  Divorce is difficult no matter what process you choose. Mediation gives you the greatest control over the process as well as the outcome.

The post Bridge the Divide: Negotiations in Mediation appeared first on Great Lakes Divorce Financial Solutions.

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Divorce can be one of the most stressful changes in your life. It’s common for just one party in a marriage to be responsible for all the finances. Even if both parties are aware of the day-to-day finances, it’s even more common for only one party to handle all the investments.

The combination of learning about your investments for the first time and watching the value of those investments decline in a volatile stock market can be overwhelming. How does a declining stock market impact your divorce settlement agreement? And as you look beyond the divorce, what do those declines mean for your longer-term financial future?

Educate yourself

If you have not been involved with your investments or even if you could use a refresher, I encourage you to start by sitting down with a Certified Divorce Financial Analyst (CDFA) to review each of your assets. When you do this review, I want you to understand the following about each asset:

(1) What type of asset is it?

(2) How is the value of the asset determined?

(3) What type of account is it held in?

(4) Do you need the cost basis of the asset and if so, what is it?

(5) How volatile is the asset?

(6) How liquid is the asset?

(7) What is the cost and what are the tax consequences of liquidating the asset?

(8) How is the asset titled?

(9) What documentation is required to change how the asset is titled?

It may be obvious to you why you need to be able to answer these questions, but it may not be, especially if this is the first time you are learning about these assets. One issue that often surprises me when it is forgotten during negotiations is cost basis.

Understanding the impact of cost basis

Cost basis can have a big impact on the after-tax value of your assets. As you consider each asset for division, it’s important to understand how it is taxed. If you are dividing stocks in an after-tax account, you’ll need to know the cost basis of those investments. The cost basis is the amount that was initially paid for each of the stocks. Let’s say you decide to evenly divide a $400,000 investment account. If you agree to take more of the assets with a low cost basis, you will receive less value on an after-tax basis because you would be responsible for a larger share of the capital gains taxes if/when the stocks are sold. Likewise, if one party receives more of the assets that are closer to the original purchase price, there will be less capital gains tax on the sale of the assets.

Here’s an example. Let’s pretend that a $400,000 investment account is divided evenly. Each of you will receive $100,000 in assets from the portfolio. That seems fair, right? Well, what if the Wife’s portion of the portfolio has a cost basis of $50,000? If the capital gain is taxed at a rate of 15%, the after-tax value would be $177,500. Now let’s assume the cost basis on the Husband’s $200,000 in assets is $150,000 then the after-tax value of his portion of the account is $192,500. Because of the varying cost basis of the assets, the division may not be a fair as it seemed.

Offsetting Assets

Once you understand your assets, you are in a much better position to negotiate. It’s rare that parties decide to divide every asset right down the middle, even in a community property state, where the marital property is shared 50-50. (For additional information about what is considered marital vs. separate property, see our post on the topic: What is considered separate property in a divorce?)

Instead, parties often negotiate to offset the value of certain assets. For example, one party may want to retain the primary residence in exchange for taking fewer investment assets. When the market is volatile, the date that assets are valued for this division is critical.

For example, if there is $300,000 in equity in the home, one party might negotiate keeping it in exchange for the other party retaining a $300,000 investment account. However, market volatility could drive the value of the investment account down 10% from the time of the initial valuation. At the same time, the housing market could continue to improve another 5%. By the time the divorce is final, the division may not feel as fair. The equity in the home would be worth $315,000+ while the investment account would be valued at $255,000. That’s why it’s really important to understand the pros and cons of each asset as you negotiate offsets.

The control you have over when the assets are valued is determined by the process you use to terminate your marriage. If you choose to litigate your case, the Court will ultimately determine the date of valuation.

The wording of the divorce settlement agreement becomes more important in a volatile market

I’m sure that you know it’s always important to pay close attention to how your divorce settlement agreement is worded. That’s why I always encourage all clients, even those filing pro se (without an attorney), to at least have an attorney review their paperwork. As it relates to your finances, the wording can have a significant impact.

In the earlier example, we were talking about dividing a $400,000 investment account equally so each party would get $200,000. If the settlement agreement specifically states that $200,000 is awarded to one of the parties and the market increases by 10% from when the account was originally valued then one of the parties will not benefit from the appreciation in the market and the other party will realize the benefit on the full $400,000. Thus one party would receive $200,000 and the other party would receive $240,000. The opposite is also true. If the market were to decline 10% and the dollar amount was stated, one party would still get their $200,000 while the other would receive $160,000.

You can see why the wording is so important. If the intention is for the account to be divided in half, then be sure your agreement says so and does not use a specific dollar amount. Language around how market gains and losses should be handled should also be included. It can often take months for all accounts to divided following a divorce and there can be significant market fluctuation from the date of division listed in your agreement to the date in which your assets are actually divided.

Likewise, if you are really counting on a certain dollar amount to cover basic living expenses or a down payment on a house, you may want to forego any market returns to be sure you end up with the money you need. The key is to make sure that the language in your agreement accurately represents the intent of your agreement.

Do you need help understanding how a declining stock market will impact your divorce settlement?

While we are located in Ohio, we work with clients virtually nationwide. If you need assistance understanding your financial picture, what your options are, and/or a plan for your future, contact us for a complimentary consultation. We are committed to educating and empowering clients to make wise financial decisions.

Schedule Appointment

The post How does a declining stock market impact your divorce settlement? appeared first on Great Lakes Divorce Financial Solutions.

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If you are recently divorced and not sure what to do with your ex’s retirement account, you are not alone.

It is very common for one partner to handle all of the retirement accounts in a marriage. In fact, I get calls all the time from individuals who are extremely frustrated because they’ve been divorced for over a year and never moved all of the relevant accounts into their own name. There is often a lot of confusion around this issue.

With respect to receiving a portion of an ex’s 401(k), here’s the first question:

If you are receiving a distribution from a 401(k), has the Qualified Domestic Relations Order (QDRO) been filed?

One of the biggest mistakes that a person can make after a divorce is not following up on the QDRO. I really encourage clients to have the QDRO drafted prior to their final court appearance if at all possible. That way, it can be signed by the Judge and submitted to the plan administrator right away.  Keep in mind that each plan has its own QDRO requirements so you’ll want to be in touch with the plan so you know what is required.

A Qualified Domestic Relations Order (QDRO) is not required for most IRAs and Roth IRAs. However, you will need to submit a transfer form and potentially open a new account (if you don’t already have one) to get those investments moved into your name. If you are not sure about the process or the form that’s needed, contact the financial institution where the investments are held. It is worth noting that there are some exceptions where a QDRO may be required to divide an IRA. This is why it’s important to do your research as you prepare for your divorce. Know what documentation will be required to divide accounts. It is usually easier to get these forms signed as part of the divorce process rather than after the fact.

If the thought of researching these issues on your own is overwhelming, having a Certified Divorce Financial Analyst (CDFA) as your advocate can be very empowering. A CDFA regularly works with clients on transferring assets as a result of divorce and can help you to navigate your financial institution.

Assuming you have already filed your QDRO or you’ve transfered other retirement assets into your own account and you’re now wondering if you should leave your ex’s retirement account as is, here’s my next question:

What is your goal with these retirement funds?

After your QDRO is accepted by the plan administrator, you will receive a letter asking how you want the funds to be distributed. Options could include maintaining an account at the current firm, rolling it into an Individual Retirement Account (IRA), and/or a cash distribution. As you are deciding what to do with the funds, carefully consider the tax consequences of your selection. I always encourage clients to contact me when they receive the form so I can help them to fill it out correctly. A simple mistake on the form could be extremely costly.

Worse yet, I’ve seen several people not fill out the form at all. Whether it’s because they don’t open their mail regularly or they just did not understand the consequences of doing so, the plan may just cut you a check if they do not know how to handle your distribution. If they send you a check, they are required to withhold 20% federal taxes. Depending on the amount of the check and your overall income situation, you could still end up with a substantial tax liability from this distribution. Bottom line, make sure you fill out the form. That way, you are in control of how the funds get distributed to you and you have greater control over the tax consequences.

What is your time horizon?

As you consider what to do with the funds, determine if you have an immediate need for cash. If so, plan accordingly. You will likely be able to do a partial cash distribution from the plan. However, as mentioned previously, you’ll want to carefully consider the tax consequences as well as the longer term financial implications of doing so. If you are taking a cash distribution directly from the 401(k), you may be able to avoid the 10% IRS penalty for early withdrawal if you are under age 59.5 but the distribution is still taxed as ordinary income.

If you plan to keep some or all of the funds invested, what is your time horizon? Do you plan to keep the funds invested for another 10, 20, or 30 years? If so, this should help you to determine an appropriate investment strategy.

What is your tolerance for market volatility?

Your tolerance for market volatility may be significantly different from that of your ex’s. If it is, you will likely need to reallocate the assets to more accurately reflect your personal investment objectives. If you don’t have any idea how comfortable you are with market volatility, I’m guessing you have not been involved in handling your investments in the past. This is all the more reason to evaluate whether or not the existing strategy is relevant to you.  Working with a trusted financial advisor to help you determine an appropriate investment strategy can help with your confidence if investing is new to you.

Is it possible to keep your share of your ex’s 401(k)?

The short answer is yes but this varies from plan to plan. Check with your specific plan for details. I generally do not recommend it because a 401(k) is designed by the employer for the employees. Non-employee participants do not get the same benefits as employee participants such as the ability to take a loan on the account.

One advantage of keeping the separated account is that you may have access to or be able to keep certain investments that only employees of that company have available to them through the retirement plan. If you would like to remain invested in those shares,  this would be one way to do so.

On the flipside, if you keep the account as it is, you may not have as many investment options as you would if you rolled it into an IRA. Also, rolling the funds into an IRA that is in your name will give you greater control over the funds.

What should you do with your ex’s retirement account?

Stop stressing. We recognize that deciding what to do with retirement assets that you have post-divorce is not always simple.  It’s a personal decision that is about your financial goals and objectives. Your ex should not influence your decision. I strongly encourage you to consider these assets as part of your overall financial plan. If you are not sure how to transition these assets into your name or you have other questions, contact us. We have helped hundreds of clients smoothly transition their assets. You do not have to go through this alone.

While we are located in Ohio, we have an active virtual presence and work with clients nationwide. Let us help you ease into your transition to financial independence. Schedule a complimentary consultation.

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The post Should I leave my ex’s retirement account as is? appeared first on Great Lakes Divorce Financial Solutions.

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Today we welcome guest blogger, Summer Masterson-Goethals of Masterson Law to share some new data that suggests your location may determine if your marriage will be successful.

Are Some States Better at Marriage?

By: Guest Blogger, Summer Masterson-Goethals

New findings on differences in divorce by state

Divorce rates can vary substantially from one state to the next. Across the country, divorce rates have held steady or have even been on the decline; the current overall risk of divorce sits around 40 percent. However, these statistics show sharp differences between states, according to research by Fatherly.com. In Iowa and Hawaii, for example, the divorce rate sits near 20 percent, in contrast with Oklahoma, where the divorce rate is 65.7 percent.

Nevada, Montana, New York, Massachusetts, and Louisiana are some of the other states where people are less likely to get divorced. On the other hand, Alaska, Texas, Ohio, Alabama and Wyoming are among the states where over half of all married couples decide to legally split.

Common reasons for divorce in the United States

No matter where they live, couples decide to divorce for an array of different reasons. Marriage can reveal deep incompatibilities about everything from sexuality to parenting to financial management. Research that has investigated the causes of divorce find that several reasons are particularly likely to lead to the end of a marriage.

Infidelity is one of the most common causes of separation; whether the cheating was done by one partner or both, it is often the end of the relationship. Addictions can also be a serious problem that divide marital relationships. When one partner spends time and income on substances of abuse, it can drain the marriage of the support and attention it needs to thrive. Financial problems are another major obstacle, especially when both partners disagree about how to handle the issue.

When couples fall out of love or lose their sense of commitment to one another, there can be little impetus to stay together, especially among younger couples or those without children. When people choose to marry at a young age, they often find that their interests and ideas become quite separate soon after the marriage.

Career choices can also affect the longevity of a marriage. According to one study by career website Zippia, workers in some fields were more likely to divorce. Of the top 10 professions with the highest divorce rates, military jobs filled three of the spots. Members of the military were also more likely to divorce before 30; military careers often combine extensive separation with young marriage, leaving relationships more vulnerable.

Why are divorce rates higher in some states?

When trying to understand the cause of these state-to-state differences, it can be important to understand how the divorce rate is calculated. It is measured in comparison to the number of marriages that also take place in the same state, so a lack of reporting can lead to inaccuracies. Nevada, one of the outlier states with a low divorce rate, is an interesting example because many people travel to Las Vegas to marry. Therefore, its high rate of marriages often reflects the popularity of the state for national wedding tourism, and it may seem to have a lower divorce rate than it does in reality.

Some states are difficult to compare properly, because they provide overall marriage rate information but not divorce rate information, like California, Georgia, Hawaii, Indiana, Minnesota, and New Mexico.

However, the differences are more significant than simple glitches in data collection. There are a number of factors that can change the rate of divorce in a particular state. As marrying young is a risk factor for divorce, places where people are more likely to marry young – like the American South or Midwest – may also have higher divorce rates. In addition, when people live together before marriage, both the marriage and divorce rates decline. Both marriage and divorce are more common in the South and less common in the Northeast.

Same-sex marriage can also affect divorce rates. In Iowa, same-sex marriage has been legal since 2009 – the third state in the country to take that step. Marriage equality may have enabled many more long-term couples to marry in Iowa, thus lowering the overall divorce rate. It could also reflect a Nevada-like effect, as Iowa became a destination for same-sex married couples.

The economy can also affect divorce rates. Because divorce can be costly, people may be more likely to stay together, despite their feelings about the marriage. “Family research shows that when there is financial hardship – and this is society-wide because of the recession – people just tend to maintain the status quo,” said one Iowa State University sociology professor.

In the end, living in a certain state won’t doom (or foolproof) your marriage. Marriage success is a complex question, with a variety of factors affecting the outcome. Although we can’t definitely say that one state is ‘better’ at marriage than another, it’s quite interesting to see how cultural and economics may impact this institution.

Summer Masterson-Goethals is an experienced divorce attorney serving families, businesses, and individuals in Springfield, Missouri. Masterson Law provides high-quality legal representation in Southwest Missouri at a reasonable price. Masterson Law is a general practice in consumer protection, family law, criminal defense, mediation, GAL, real estate, business, and civil litigation. As a firm, Masterson Law is committed to finding a litigation plan that works within your budget.

The post Divorce in the United States: Are Some States Better at Marriage? appeared first on Great Lakes Divorce Financial Solutions.

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First off, if you are considering leaving an abusive relationship and are in an unsafe situation, I encourage you to reach out to The National Domestic Violence Hotline for assistance.

I recently participated in Stacy Brookman’s Emotional Abuse Recovery and Resilience Summit. The topic I offered was a Financial Guide to Moving on From an Abusive Relationship. If you find yourself in that situation, I cannot recommend the summit enough. More than 40 experts shared on various topics. It was truly inspiring. For those who are looking for the more information on the financial topic of leaving an abusive relationship, here are some basics on establishing a solid financial foundation for yourself. By taking the time to prepare yourself (if possible), you will be off to a more stable beginning in the next chapter of your life.

Leaving an Abusive Relationship: 5 Steps toward a Strong Financial Foundation Get your financial documents organized

Find a place where you are going to store your financial documents. If you are concerned about raising any red flags, you may want to store them with a family member or friend instead of in your home. You can get a small file box. If necessary, consider using a safety deposit box at a bank. Here is a list of items you may want to store there (some may not be relevant for your situation):

  • Birth certificates for you and your children
  • Social security cards
  • Passport(s)
  • Marriage certificate
  • Tax returns
  • Will
  • Insurance policies
  • Mortgage and/or other loan documents
  • Rental agreement
  • Bank statements
  • Credit card statements
  • Retirement account statements
  • Credit report
  • Car title
  • School records
  • Medical records

If you need to request any of these documents and do not want them mailed to your home, set up a post office box.

Take a financial inventory

For some, you may know this as a statement of net worth or your personal balance sheet. Regardless of what you call it, I’m referring to a document that lists all of your assets (bank account, retirement accounts, real estate, business interests, valuables, etc.) and liabilities (loans, credit cards, and other debts). You may not have all of the information but you’ll want to include all that you are aware of. Also, go ahead and identify accounts that you know exist even if you do not know the value.

Also, take an inventory of your insurance coverage. Insurance is an important way to protect yourself from major financial losses. Identify the types of insurance you have, the carrier, the owner on the policy, the benefits and the beneficiaries.

Establish your own financial identity

For many who have been in a long-term relationship, it is common to have all of the finances combined. However, if you are planning to be on your own, it’s important to establish your own financial identity. This can feel like an overwhelming step for some but it can also be incredibly empowering. For starters, you’ll want to get a bank account that is in your name. When opening an account in your name, be cautious regarding any mail that will be generated from opening the account. Again, you don’t want to draw any attention to your preparations. Banks do, however, require a physical address when opening an account so while you can provide them with a post office box for mailing, you will need to provide a physical address in order to open the account.

Also, if you do not have a credit card that is in your name, be sure to open one. This is different from being an authorized user on someone else’s account. When you are an authorized user on someone else’s account, they can remove you from that account at any time.  Also, you are not establishing your own credit history. If you are married, you will be able to use your household income to open a credit card even if you do not have your own income. Make small purchases with the credit card and pay the balance off in full each month in order to develop a solid history of making consistent payments.  A good credit history is necessary for things like getting an apartment and/or a loan down the road.

Create a spending plan

Yes, you may also know this as a budget but let’s face it, many of us simply do not want to talk about budgeting.

Start with your income.  Include your employment income as well as any other sources of income. If you are not currently working, do some research on jobs that you would be eligible for to determine your earnings potential. Glassdoor is a great resource for salary research. If you are using your home computer to do research, use a private browsing window or incognito tab on your browser so the next person who uses your computer does not see what you have been researching.

In addition to your income, you’ll need to get a sense of your expenses. If you are leaving your relationship, your expenses will likely change substantially. Here are some categories to consider when thinking about your expenses:

  • Rent/mortgage
  • Utilities (gas, electric, water, etc.)
  • Phone
  • Groceries
  • Childcare
  • Insurance
  • Medical/dental/prescription
  • Pets
  • Taxes
  • Charitable contributions
  • Gifts
  • Entertainment
  • Other

We’ve previously written about why it’s critical not to underestimate your expenses when negotiating spousal and child support. For more information, read Avoid This Common Mistake: Don’t Underestimate Your Expenses.

Compare your income and expenses

Here’s the tough part. How do your income and expenses compare? If your income is substantially higher than your expenses, that’s great! Unfortunately, that’s often not the case. Going from one household to two means a significant increase in expenses so that may mean you need to determine ways to close the gap. In some cases, public assistance might be available to help you close the gap. In others, you may need to look at increasing the hours you work or taking on a second job to make ends meet. Regardless of where you stand, knowing your starting point will help you to determine the best way to move forward.

Next steps

If you have taken these steps to create a solid financial foundation for yourself, congratulations! I recognize that leaving an abusive relationship is extremely difficult both emotionally and practically. However, you are well on your way to being financially empowered. The next steps are a little different for everyone depending on the specifics of your particular situation. If you are contemplating divorce, I strongly encourage you to meet with a Certified Divorce Financial Analyst (CDFA) who can guide you through the process.

 
 

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The post Establishing a Solid Financial Foundation When Leaving an Abusive Relationship appeared first on Great Lakes Divorce Financial Solutions.

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