Since My Divorce | Easing The Pain & Stress Of Divorce
Mandy Walker is a divorce coach who went through a divorce of her own. Her blog provides advice about many facets of divorce, including emotional and legal challenges. She also has a great Story Catalog, which includes a large collection of stories about men, women, and children who experienced divorces. They offer unique perspectives that are not regularly found on other sites about divorce.
Compensation issues in divorce usually come up in discussions about spousal support or alimony, and child support. While child support can be pretty formulaic with well-established rules for addressing different compensation concerns, spousal support is much more variable and often is not as straightforward as simply taking a number off a pay stub.
Other compensation issues such as stock options and deferred compensation impact division of assets negotiations. These arrangements can be complex and confusing with even the recipient not fully understanding the benefit they have. If that’s the case, how is the STBX expected to decipher them and determine whether or not they have value?
Often times, with things we don’t understand, the tendency is to ignore them. We accept a reason to discount them, such as the options have no current value. Ignoring these compensation issues in divorce however is not the answer. It’s not going to create a path to making the decisions that are right for you.
Understanding these issues starts with seeking more information, becoming familiar with the more common compensation challenges and how they can be addressed. And that’s the topic for this Conversations About Divorce. Joining me is Michael Wayland, assistant professor in business at Methodist University. Michael is also a mediator with Christian Divorce Services. Listen in below (email subscribers click here) or keep reading for a synopsis.
Should The Stay-At-Home Parent Return To Work?
Barring some extenuating circumstances such as a chronic health issue or a special needs child, spousal support/alimony is generally rehabilitative in nature. That means it’s for a limited period of time and is intended to help the lower-earning or stay-at-home parent transition back to financially supporting themselves.
The fact is that sooner or later, most stay-at-home parents are going to have to go back to work. Thus the question is more one of when as opposed to if. Clients often ask if returning to work before the divorce is final is likely to lower the amount of support.
“What I always tell clients is to take a step back and think about what’s the right thing to do,” said Wayland. “What would you be doing if you weren’t getting divorced? Would you be going back to work?”
Whether you return to work or not, your STBX can ask the court to impute income to you. That means that in determining the amount of alimony, the court can make an assumption of what you are capable of earning. Returning to work and being able to provide solid evidence of the market rate for your skills could work in your favor.
And to Wayland’s point, returning to work is often a crucial element to divorce recovery and can make a significant contribution to self-worth, confidence and independence.
It’s worth noting that even if the court does impute income to you, the court can’t force you to return to work or force you to do work you dislike. You get to choose what you want to do but recognize that your choice will impact your future financial health.
Should You Start Your Own Business?
It’s not uncommon for a stay-at-home parent to consider starting their own business or even for an employed spouse to consider starting afresh. I think this is all part of the divorce territory that causes people to reinvent themselves. But the question is whether now is the right time.
Wayland evaluates this by looking to see the motivation for starting the business. Wanting to lower your income so the court would assign less spousal support and child support to you is the wrong reason and will likely also harm you financially.
“If you’re not doing it for bad purposes, it’s fine to start but you have to recognize the realities of the income,” said Wayland. “The first few years are pretty lean. There’s not a lot of money there.”
If you do decide to go ahead and start your own business, then one way to address the lower income is to build into the spousal support calculations stair steps as your business is expected to ramp up. Whether you also include step ups in your spouse’s income depends on their situation and on what you are both able to agree is reasonable.
What About Variable Bonuses Or Commissions?
When it comes to calculating alimony and child support, it’s typical to use total income. Bonuses and commissions are part of total income. But clearly, if bonus amounts change from year to year, it’s not fair to base spousal support solely on the most recent payment which may or may not be representative of the pattern of payments.
“A common approach assuming that there isn’t something different happening now, is to look at the last three years or the last five years and average it,” said Wayland.
How Do Know Self-Employment Income Is Accurate?
First, when we talk about someone being self-employed we’re referring to anyone who is generating their income. It is not specific to a particular type of entity. And remember, every business has two components: the income it generates and its value.
Next, it’s a well-known fact that self-employed people have significant discretion over their income. It’s not unusual for a self-employed person to have their business cover what are clearly personal expenses, such as having the grounds maintenance crew maintain both the office landscaping and home landscaping.
While Wayland says you could take an average of income over three or five years just as you would for someone with variable compensation, he prefers to get to what he calls ‘owner’s discretionary income.’ That’s basically the amount of money you would have as the owner of the business to spend. That’s going to entail reviewing the expenses of the business.
“We have to get to not just what they say on paper they make but what do they really have as owner’s discretionary income,” said Wayland.
What About Stock Options?
Very simplistically, a stock option gives the holder the choice to buy the stock at a certain price. If the stock price goes down, then you wouldn’t bother with the option. If the stock price goes up, you’d exercise the option, buy the stock and then sell it so you can profit from the difference in price.
“I think there is value in having the option even if it has zero current market value,” said Wayland. “You don’t have to actually buy the stock, you just want to see if it goes up and if it does you exercise the option.”
Wayland recommends valuing stock options using the ‘Black Scholes‘ method which is based on nuclear physics and is accepted by the IRS and major corporations. To run the calculation yourself you’ll need:
Stock price: what is the stock price today
Exercise price: what is the price that the option allows you to buy the stock for
Time to maturity: how long do you have to wait until you can exercise the option (buy the stock)
Annual risk free interest rate: the current interest rate paid on government bonds
Volatility: simplistically, about what percent does the stock fluctuate up and down in the stock mark
And it’s worth running the calculation (or getting someone else to do it for you) just to find out if this is something that needs to be included in the division of assets.
“Even if it has zero intrinsic value today, there is value in simply having the option,” said Wayland.
Stock options typically cannot be transferred between an employee and their spouse so once you have a current value of the option you can use other assets to balance that in the overall division of assets.
The value of the option will change over time, as the stock price changes so another approach would be to agree how the proceeds of the stock option will be divided when the option is eventually exercised. While such an approach does address some of the uncertainty around the proceeds of a stock option, pushing the division off into the future creates other risks such as the employee leaving the company and losing the stock options or the company going under. This is where you have to know what your risk tolerance is and assess how much risk your STBX presents.
How Is Deferred Compensation Handled?
Deferred compensation falls into two broad categories: qualified and non-qualified. Qualified plans are arrangements like 401(k)’s and pensions that have been approved for special treatment by the IRS. Given that qualified plans have to meet certain IRS conditions, how these get handled in divorce is pretty well-established.
Non-qualified deferred compensation plans have no set format and they can be very creative. Typically you can get a non-qualified plan valued but it depends on how it’s structured.
The most common structure uses a ‘Rabbi Trust.’ Basically, this allows an employee to set aside an amount of compensation. It stays as an asset of the company. Then at retirement or other defined event the employee is able to collect the deferred compensation, sometimes with interest.
“The risk is that if the employer goes out of business then it is the employer’s asset and you can lose the whole thing,” said Wayland.
Similar to stock options, deferred compensation plans are not transferable so that means a division has to be accounted for through other assets. You also have to decide whether to agree on the division of the deferred compensation account at the time of the divorce or at the time of payout which will depend in large part on the stability of the company and your own risk tolerance. The risk with a Fortune 500 company like Pepsi for example is very different from a startup.
Pay Attention To Your QDRO
A Qualified Domestic Relations Order is needed to divide any Qualified compensation plan such as a 401(k) or a pension plan. Wayland says the most common mistake he sees is people not understanding what goes into the QDRO.
For example, one way of dividing the pension is a ‘shared interest’ and this means when the pension owner retires and starts to draw the pension, an agreed portion is paid to the former spouse.
Contrast this with a ‘separate interest’ under which, the interest in the pension is divided at the time of the divorce and each spouse will start drawing their interest when they retire. The difference between the two methods maybe negligible when spouses are close in age but when there is a significant age difference, the younger party could be waiting many years to receive any benefit under a separate interest division.
Wayland advises taking the time to make sure you read the draft QDRO and understand the terms. This is particularly important if your STBX’s attorney has drafted the QDRO because it’s likely the attorney will have drafted it to be as much in their client’s best interests as possible and those may not align with yours.
Are You Paid Every Two Weeks Or Twice A Month?
A very common mistake is miscalculating earnings and deductions. If you’re monthly paid, then monthly amounts come from your pay stub. If you’re paid more frequently, then are you paid twice a month or every two weeks? If you are paid every two weeks, then it means you have to multiply the amounts on your pay stub by 26 and then divide by 12 to arrive at your monthly earnings. If you are paid twice a month, then you multiply by 24 and then divide by 12.
Michael Wayland is assistant professor of Business at Methodist University in Fayetteville, North Caroline where he teaches classes in Personal Finance, Business Strategy and Business Management. Wayland is also a family and divorce mediator for Christian Divorce Services.
The risk of suicide increases significantly with divorce. Knowing how to respond if you, your STBX or your child becomes suicidal is critical.
How do you know when to take a suicide threat seriously?
Should you put the divorce on hold or promise not to divorce?
Is it your fault if your STBX ends their life?
As a divorce coach, I worked with a few clients whose STBX has chosen to end their life during the divorce process. It’s extremely upsetting for friends and family and it’s rarely the outcome people want. This is an important Conversation and joining me to talk about how we respond to this threat is fellow divorce coach, Martha Bodyfelt. Martha is also a frequent guest contributor to Since My Divorce. Listen in below (email subscribers click here) or keep reading for a synopsis.
NOTE: Neither Martha Bodyfelt or myself are mental health professionals so what follows is not about a medical or clinical response or understanding the underlying cause for someone feeling suicidal but rather how to respond, support and help yourself, your STBX or your child.
Get Professional Help
I wish I could tell you that there’s a way to make getting divorced easy and quick but I haven’t discovered it yet. In my experience divorce is always hard, difficult, emotionally upsetting and time-consuming. Bodyfelt says she often has clients who feel that life after divorce will be worthless, that they may never see their kid again, or that without their identity as a spouse, as a provider they don’t know who they are. These all point to needing help from a mental health professional or life/divorce recovery coach.
“The number one thing is please, please, please get help,” said Bodyfelt. “It is not a stigma. You did not do anything wrong. It is not shameful to ask for help.”
If it’s your spouse who is feeling suicidal, encourage them to get help. It’s important to recognize however that getting help and making progress will take time. There isn’t a quick fix but the transitions that come with divorce are temporary whereas suicide is a permanent solution. Help doesn’t just come in one form. Getting counselling will help with the psychological concerns but gathering information on the divorce process, evaluating the finances, understanding parenting and divorce will all help in assessing the true impact of divorce rather than the perceived impact.
Don’t Downplay Suicidal Thoughts
Whether you’re talking to yourself or to your STBX or your child, avoid responding with remarks like, “Cheer up. It’s all going to be OK.”
Remarks like this come from a good place and are well-intentioned but are not helpful. They can make the person feel that they are not being taken seriously, that their concerns are being discounted and that you don’t understand their situation.
Bodyfelt says suicidal thoughts come from a perfect storm of existing psychological concerns compounded by the lifestyle and financial issues of divorce and a person’s entire identity being “ripped out.”
What to say instead? Practice reflective listening, for example “I hear you saying that you don’t know how to live without your family.” You also need to ask if the person has a plan for how they would take their life. More on that below.
Slowdown The Divorce
One of the most helpful ways to respond to suicidal thoughts is to slowdown the divorce. If it’s your STBX who’s feeling suicidal, you can offer this. If you’re feeling suicidal, you can request this of your spouse.
“What really divorce is, when you take away the emotional impact, is a business transaction,” said Bodyfelt. “You are dividing up your assets and there is no reason you can’t pause that business transaction.”
Pausing the divorce process will give yourself time to get help, to get healthy and to be able to proceed with the divorce. “Your health and your mental health is a priority,” said Bodyfelt.
Tell Your Attorney
If you are working with an attorney for your divorce, be sure to open up to them with what is going on. Chances are you won’t be the first case you attorney has worked on where suicide is a concern. They will be able to advise you on your legal options for slowing down the process. For example, if someone is feeling suicidal then it could be argued that they don’t have the capacity to make the decisions necessary for the division of assets or parenting. This might point to the need to appoint someone to act on their behalf or simply to have a waiting period to get more information about their health.
Is The Suicide Talk A Power And Control Tactic?
There are times when talk about suicide is made more as a threat, as a manipulative response to persuade the other person from proceeding with the divorce. Responses like this, especially when there’s been a history of abuse, are a power and control tactic. But it’s not always easy to discern the difference.
“This is a very difficult situation to be in because it’s, ‘OK, is my spouse just doing this to control me or does my spouse really mean it?'” said Bodyfelt.
If there has been a history of abuse, then the concerns broaden to how to keep yourself safe.
“If you are dealing with someone who is threatening suicide and who has power and control issues, do you have a plan to protect yourself, your children and your pets?” said Bodyfelt.
Your local domestic violence organization will have resources to help you formulate a plan. Don’t downplay or discount the threat to your personal safety – these are the situations that lead to the murder-suicides we see reported in the press.
I have also had clients who in this situation, admit that they wish their spouse would follow through on their threat of suicide. And that’s understandable, too. After years of an unhealthy marriage, emotional abuse, months of vicious fighting over the divorce, suicide would frankly bring an end to the turmoil.
Do You Have A Plan?
The suggested response from many mental health experts to suicidal talk is to ask the person if they have a plan for how they would take their life. If they have a plan, then they are in imminent danger and you need to call 911. If it’s you, and you have a plan, then you need to seek immediate help.
If they haven’t formulated a plan, then the threat is less urgent but you should still urge them to seek treatment. There are lots of resources available – the hardest may be getting the person who is feeling suicidal to accept help.
Having a plan and a history of power and control behavior increases the danger to yourself and this makes it vitally important for you to have your own safety plan.
What If It’s Your Child?
If it’s your child who is talking about suicide, then again, it’s urgent that you get them clinical help and consider getting them admitted to a residential program. Divorce will compound whatever issues the child is already dealing with.
“Children think that everything that is happening around them is because of them,” said Bodyfelt. “So if mom and dad are fighting sometimes that child will think, it’s my fault because of something I did.”
Divorce studies have shown that it is not the divorce itself that has long lasting negative impacts on children but rather on-going conflict between the parents, how the parents handle the divorce and how the parents treat each other after the divorce.
If your child is talking suicide then it’s absolutely critical for both parents to work together on supporting treatment for their child in short-term and then, how to parent their child together. That’s easy to say. The reality, and I have seen this with clients, is that the level of conflict and disagreement may be so high between the parents, that they are unable to even agree on treatment.
Bodyfelt recommends making your home as safe as possible by removing guns and weapons from the house or keeping them securely locked with ammunition locked up separately. It also means cleaning out old prescription medication and keeping current medications secure.
Should You Cancel The Divorce?
While slowing down the divorce is smart and advisable, canceling it or withdrawing it altogether likely doesn’t solve anything. It doesn’t address the underlying reasons for why either you or your STBX has decided to end the marriage.
Your child might ask you to promise not to get divorced. Bodyfelt and I agree that no matter what, you should not make promises you can’t keep. Following the advice for how to talk to your child about divorce is a starting point but given the heightened safety concerns, enlisting the help of a mental health professional is strongly advised.
Make A No Harm Agreement
Mental health professionals will often make a no harm agreement with a patient who is feeling suicidal. It involves a commitment that the person will not harm themselves and might say between the current day and the next appointment. They sometimes include the names and phone numbers of people that the person agrees to call if they do consider acting on their suicidal thoughts.
You could make a verbal agreement but putting it in writing may result in a deeper commitment.
“It’s a little more formal, ” said Bodyfelt. “It’s not enforceable but the spirit and intention of it is really powerful.”
Divorce often means taking each day as it comes and if there is the danger of you, your STBX or your child taking their life, then taking things one day at a time is all you can you and in these situations, having a no-harm agreement, could provide another safety net, especially if it is in writing.
“I think we’re conditioned that once we have our signature or we say ‘I promise this,’ we have a tendency to shift our mindset to, ‘I made that commitment to that person, I’m beholden to that person,” said Bodyfelt.
It’s Never Your Fault
When a person chooses to take their life, then it is exactly that. It is their choice. It’s not your fault and you are not to blame. I want to reinforce this because knowing this and accepting this is not easy.
Joining Mandy for this important Conversation, was fellow divorce coach Martha Bodyfelt. Read more about Martha’s work at her website, SurvivingYourSplit.com and sign up for Martha’s free divorce survival guide.
Often people think about divorce as something destructive and stressful. Seeing the plans that you’ve built with your beloved being shattered is terrible to experience. And it is also frightening to be alone, not knowing how to start over.
Divorce can be compared to a metaphor of a shattered vase. As something destructive, it can also be the foundation to build something new. But it is really hard to make this happen when you don’t have faith.
Faith gives us the strength to change something, as we believe that someone will guide us to our happiness. God is our guardian, who invisibly helps us overcome difficult stages in our life. So faith can help you get through anything. Still not sure? Here are five reasons.
“Put your hope in God…” (Psalm 42:5)
Hopelessness is the feeling that takes over our minds and souls when we’re going through a divorce. Moving past hopelessness is difficult; this is the emotion that describes the very essence of divorce for many people.
When we marry someone, we make a promise that the marriage will never break up by saying “till death do us apart”. But here you are, divorcing your spouse and feeling completely discouraged.
Remember, that God never wants you to feel that way; despondency is the Devil’s weapon against hope. But only your faith and hope can get you through this pain and heal your wounds.
“I have told you these things, so that in Me you may have peace…” (John 16:33)
Peace is the cure to heal after a break-up and find happiness. But it’s so hard to find it when your mind and soul are confused. You may feel that your happiness is far away, you’re feeling perplexed, overwhelmed and abandoned.
Whatever you may feel, you should always remember that there’s God inside your heart, and He will never abandon you. God is Love and He brings peace to everyone, who’s lost their way and got scared and confused.
Having a habit of waking up in the morning and feeling grateful to God is a way to find peace. Learning about how to achieve it is an ongoing process that will take some time but it’s totally worth it.
“When anxiety was great within me, Your consolation brought joy to my soul” (Psalm 94:19)
While feeling hatred is normal in a divorce, it only brings you anxiety and fatigue. This is a negative emotion that breaks your heart and soul even more. But is it possible to feel happiness and joy again, when all you see is the shatters of your failed marriage?
Faith and joy go hand in hand. When you have faith, you have something to look up to. This makes you feel uplifted and cheerful, as you find sense in life. And although it’s hard to get through the painful experience of the divorce, faith in God and joy will help you overcome this pain.
“’For I know the plans I have for you’, declares the Lord, ‘plans to prosper you and not to harm you, plans to give you hope and a future’” (Jeremiah 29:11)
The common feeling you experience after divorce is that there’s no visible happy future for you. Divorce often results in ruined plans and shattered dreams, which makes it hard to believe in a bright future.
This feeling can even make it hard to function in everyday life. “When my divorce was finalized, I felt abandoned, confused and scared”, says Mark Edmonds, a writer from Pro Writing. “But when I spoke to my pastor, he helped me understand that God holds something greater for me”. God is our only hope, and for He is love, He has only good things in store for us.
“Come to me, all you who labor and are heavy laden, and I will give you rest” (Matthew 11:28)
After a divorce, it’s unavoidable that you will start experiencing loneliness. This feeling crawls into your mind and heart and is a poison for your soul. While there are many ways how to deal with the loneliness of divorce, like calling a friend or staying with your family for some time, it hits you again and again when you are alone, on your own in your apartment.
Every time you’re feeling lonely, remember that God has made a promise not to leave you because all of us are his children. And He always keeps that promise, no matter what. Pray to God each time you feel lonely, and you’ll feel that he’s listening and comforting you every time you feel abandoned.
We often forget that God is always there for us when we need consolation and help. And in painful situations like divorce, we often realize that He is the only guide can help us get through. May God be with you and comfort you when you feel abandoned.
Lucy Benton is a writing coach, an editor who finds her passion in expressing own thoughts as a blogger, and currently works at www.assignmenthelper.com.au. She is constantly looking for the ways to improve her skills and expertise. If you’re interested in working with Lucy, you can find her on FaceBook and Twitter.
Whether or not you’re using attorneys, to get started on your divorce, you will have to gather all of your financial information and share it with your spouse (and vice versa).
Many people, inadvertently skip this step and jump straight into discussions about who’s going to keep the house and how other assets should be divided.
That’s not smart and it can lead to deadlocks and breakdowns in the negotiations. You’ll also be making life-changing decisions with incomplete information.
Yet, when people do start gathering this information, frequently it’s overwhelming and confusing so they put it off and procrastinate.
The reality however is that the sooner you do this, the better it is for you. You’ll have a much more accurate assessment of the financial impact of divorce on your lifestyle, you’ll have more clarity, more certainty and you’ll be in a better position to make the decisions that are right for you.
So what financial information are we talking about? Where do you start? How do you value different assets? And what can you learn from different documents?
Joining me for this Conversation are financial advisors, David Chwalek and Renee Senes who are co-authors of the book, Money & Divorce: Costly Mistakes You Don’t Want To Make. Listen in below (email subscribers, click here) to learn the ten financial essentials you need to know to get started on your financial preparations. And if you prefer, keep reading for a synopsis …
Get The Big Picture
Everything changes with divorce so it’s not surprising that you want to figure out where you’re going to be living, what’s going to happen to your retirement savings or how your monthly income is going to look like after divorce. But you’re getting ahead of yourself if you dive into these details before you know the totality of your finances. It’s like going for hike before you’ve put your shoes on.
“People want to meet with an attorney or a mediator and they want to get right into what can I expect in alimony and child support and who gets the house,” said Chwalek. “But the first thing we do with everyone we meet with is not only to make sure we identify all the assets but also appropriately value them.”
If you are working on your own, try going to your state’s judicial website and looking for the financial disclosures you’ll be required to make as part of the legal process. There’s likely a financial statement you’re going to have to complete and this is a great document to help you identify all the information you’re going to need to collect.
Your Name On An Account Doesn’t Make It Yours
Just because an account is listed solely in your name, such as your 401(k) account, doesn’t make it your separate property. This is a difficult concept for many people to grasp and learning about this when your marriage is unraveling makes it a challenge to accept.
“You need to understand that just because you earned it or it’s in your name doesn’t mean that it’s yours for the purpose of divorce,” said Senes.
So the first step is to list every account on which you are listed even if it is an account that you share with your mother or your kids. Then you can identify what are marital assets and what are separate assets.
Generally speaking, anything that was acquired or maintained after the marriage with marital funds is going to be considered in whole or in part, a marital asset. If you had any separate assets coming into the marriage, or you’ve had an inheritance, then you’ll likely have questions that will be best answered by a consult with an attorney in your local area. This doesn’t mean you have to retain the attorney – many attorneys will work on an unbundled or a la carte basis and this is a great way to get your questions answered.
Knowing whose name is on an account is important for a couple of reasons. First, it can help in deciding how to divide assets. “Part of identifying who owns an asset is that we try and advise our clients to move the least amount of assets they possibly can,” said Senes.
This makes a lot of practical sense because it cuts down on the amount of work involved in implementing your divorce agreement and if you are using an attorney, it’s also going to help save on post-divorce attorney fees. There may also be fees for dividing or transferring accounts so it makes sense to minimize these.
The second reason, is that post-divorce, we want to see that accounts are listed to the person who has assumed ownership and we like to see this done as quickly as possible. Listing the correct titling of the account at the beginning stages helps to understand the work that will need to be done for post-divorce implementation.
Get Your Tax Returns
You’re going to need at least three years of tax returns. When we talk about tax returns, that means not just the Form 1040 but also all the supporting schedules. If you and your STBX usually work together on your tax returns or if you’re the one who’s handled the taxes in the past, that’s great. You probably know exactly where they are.
If you don’t know where the returns are, you have a couple of options. The easiest one is probably to ask your STBX however, you may not be ready to explain why you need them. Another option is to file a Form 4506 with IRS and the IRS also offers a transcript of your returns. Getting the actual returns as opposed to a transcript is probably going to make it easier for you to understand the numbers. The process does take time and of course, there is a fee. Don’t let that deter you because you do need these documents.
If you’ve used a CPA, then you have another option.
“This is a great time to make friends with your CPA so not only do you have your tax return but you also have a good explanation for what the numbers on your tax return mean,” said Senes.
A word of caution however. If your CPA is more closely aligned to your STBX or you have not yet told your STBX about the divorce, then use this option carefully.
“In a perfect world, once a couple starts discussing divorce we hope there’s open disclosure and sharing of documents,” said Chwalek.
But divorce is rarely a perfect world and you may need to rely on the legal process to get the tax returns from your STBX along with statements for accounts that are solely in their name.
Read Your Tax Returns
Getting your tax returns is not enough. If you haven’t been involved in the preparation of the returns you will learn a lot about your finances by reviewing them especially the schedules.
Schedule A will show you all the real estate taxes and mortgage interest.
Schedule B will give you all the bank accounts and brokerage accounts that pay interest.
Schedule C is where you’ll find details of self-employment.
Schedule D is where you can look for gains and losses from stock, bond and mutual fund trading.
“I like clients to lay the years out side-by-side so you can scan across the return to look for any major discrepancy,” said Senes. This also helps to see what’s happening now that didn’t happen before.
“We don’t assume anyone is going to do anything illicit and very rarely do we see it,” said Chwalek. “But it does happen where one spouse in preparation for divorce may want their income to look lower than it has been in previous years.” That’s especially true for the self-employed who have more ability to control their income.
Review Your Bank Account and Credit Card Statements
You should have access to statements for any bank accounts and credit cards you share with your STBX and you will want to review the transaction detail on these especially on your credit cards.
“Not only do assets get divided, debt gets divided also,” said Senes. “You really want to be looking at this and saying, ‘is this marital debt?'”
Spending that doesn’t seem to be for the benefit of the family e.g. an engagement ring for the new girlfriend, subscriptions to dating services, would call for an adjustment to the division of assets.
People do often set up a separate, individual bank account in anticipation of divorce but it is still a marital asset and it does still need to be disclosed. This points to checking through bank statements to make sure that transfers in and out are to accounts that you know. And if you find an account that hasn’t been disclosed, avoid jumping to conclusions that it’s malicious or intentional. People do often forget about an account that they haven’t used in years or even accounts where the transactions are automated.
If you have concerns, then through the discovery process you should be able to get up to three years of statements and again, this might be an indicator that you need to be working with an attorney.
Understand Your Pay Stub
You might check your pay stub to see your net pay but there is a wealth of information on there so you’ll want to see your STBX’s pay stub too. Pay stubs tell you if someone is salaried or hourly paid, earning commissions or bonuses or overtime. The deductions will tell you to look for a retirement account and approximately how much is being contributed annually. You’ll also see deductions for health insurance and for other benefits such as stock options, union dues and expense allowances.
“When you are looking at the pay stub you will know very clearly what your spouse’s work life looks like and where there might be assets you hadn’t thought about,” said Senes.
Value Your Cars
When it comes to valuing your vehicles, the go to resource is Kelley’s Blue Book or Edmunds. You’ll have different options for valuing such as trade-in or private sale. Which one you use is less important than making sure that all the vehicles are valued on the same basis unless there is good reason for a different valuation basis. For the most part, vehicles don’t get sold in a divorce.
“What we see a lot is that husband has a car that he uses, wife has a car that she uses,” said Chwalek. “Rarely is it a sticking point for asset division.”
The bigger problem, according to Senes is that the cars are often not titled in the way they are used. And that has to be addressed in the divorce agreement.
Leased cars often don’t have a value since they get turned in at the end of the lease but there are times when the projected value is higher than the lease end value and that does mean the car has a value that needs to be disclosed.
Understand The Difference Between A 401(k) And A Pension
Pensions are very different from 401(k)s. The value of the latter is what you see on the statement. There are no promises or guarantees about future benefits. A pension however is a promise of payments in the future and often times the value that is shown on a pension statement is a cashout value and not a true pension value which is the worth of that future stream of payments.
“Clients are typically surprised to find out how much their pension is worth,” said Senes. “When we do the pension valuation we figure out what part was earned inside the marriage and what was earned outside the marriage, and the part that was earned during the marriage can be divided.”
The options for dividing a pension are plan-specific so you have to contact the institution to find out what they will allow. An alternative to dividing the pension is to offset the value through a transfer of other assets.
Check for 401(k) or 403(b) loans
Loans against retirement plans can complicate the financial picture. Unlike another debt such as a credit card debt, as the loan is repaid, the value of the 401(k) increases because you’re paying the interest and capital repayments to yourself.
In deciding how to handle the loan, Senes and Chwalek recommend looking at the reason for the loan – was it for a child’s college education, home improvement? If the loan is not going to be repaid from other assets at the time of the divorce, then Chwalek recommends using the value of the account net of the outstanding loan amount.
Establish A Best Guess Value For The Home
Given that the home is often the most valuable asset, you need to have an estimated value of the home as a starting point. If you and your STBX are agreed that the house is to be sold and the proceeds to be divided equally, that’s the simplest of scenarios but if one of you is going to keep the house, then having a value will help you figure out the buyout for the other party and how much refinancing will be needed.
Chwalek says one way to do this is to ask a local realtor for a Competitive Market Analysis. Most realtors will offer this as a complimentary service. Sometimes, each spouse will get a CMA from a realtor and that’s OK. If you can’t agree on a value ultimately you’ll get a formal appraisal but in the beginning, having an approximate figure is all that is needed.
You can also get this from services like Zillow, Redfin and Homesnap. Senes also suggests looking at your real estate tax bill or looking at the listing for your home with the local assessor’s office. This approach may work if home values in your area have been relatively stable and if you understand the basis of valuation. For my house, for example, I got my revised valuation in May 2017 effective for the 2018 tax year. The value of the house however is based on home sales July 1, 2014 through June 30, 2016. We’ve seen significant increases in house prices since then and so using the assessed value would be an understatement.
When you are navigating or recovering from divorce, there is one all-too-common emotion that causes us way more headaches than you need: Anger.
Being ticked off. The persistent rage that will not leave you but could jeopardize your future relationships.
To start off with, there is something that you must remember.
Anger is a thief. Don’t let it rob you of your chance to move on.
You work hard to maintain the things you love. Think about. You probably keep your house or apartment nice and cozy, and you probably have homeowner’s insurance to protect it in case something happens to it. Your beloved heirlooms and the mementos you treasure are probably tucked away with the greatest of love and care.
You wouldn’t leave your door unlocked and invite a thief in to destroy those things in your home that you love, would you?
Heck no! Those things are yours. You worked your ass off to safeguard the things that give you joy and comfort.
So, why on earth are you leaving the door to your life and the door to your happiness, inviting Anger in on a daily basis? Just as a thief will break into your home, wreck it, and take away everything that is dear to you, so will Anger.
It’s time to lock the door and install one of those baller home security systems. It is time to protect one of the most precious things that anger will rob you of: your happiness and chance to heal.
Anger = your reaction to other people’s stupid stuff trying to control you. Why let it?
When you are ticked off at something, your body is all too happy to let you know it. Your blood pressure, breathing, and heart rate increase because your adrenal glands are being set into “fight or flight” mode.
This physiological reaction may have served cavemen and cavewomen when it was time to fight off whatever prehistoric beast threatened their survival, but that same anger disrupts your calm. Why let it control you like that?
The fact that your ex didn’t treat you right, the fact that the marriage is ending or has ended, and the fact that the ex and their lawyers may still be doing stupid stuff is just that. They are only facts, but they are not indicators of how you are obligated to react because of them.
Do you remember the delightful “Pirates of the Caribbean” movies with Johnny Depp as Captain Jack Sparrow?
If you don’t, please rent these movies or stream them. NOW.
Of the many memorable quotes and tidbits of wisdom this swashbuckling pirate said, the one that stuck with me was the following:
“The problem is not the problem. The problem is your attitude about the problem.”
The things that anger you are merely facts or things that are happening or have happened in your life. Think of them as “the problem” in the first sentence of the quotation.
“Your attitude about the problem” is your anger. The stupid stuff that you are reacting to doesn’t have to disrupt your peace of mind. How you choose to react to the problem–in this case how you choose to react to the facts (the events that are making you angry), is what makes the difference between navigating this process with less drama and stress for yourself, or letting all the madness drag you down and leave you exhausted.
You’re better than getting ticked off at something that you cannot control in the first place. It’s time to focus on the things you actually can control.
And the first step to leaving the anger behind you? It’s simple.
If it does not serve you, then let it go.
Some years ago, I was sweating my butt off in a hot yoga class, frustrated that I could not get into a back bend because my arthritis decided it didn’t want to play nice, my stomach churning because of the third argument I had had with my boss that week, and my heart sinking because a man who I had been seeing and who I really liked had called the night before to break up with me. I was a knot of rage that afternoon in the yoga class.
“If it does not serve you, then let it go.”
Although the yoga teacher probably meant it for the students to be kind and patient with themselves, reassuring them the back bend would happen when the body was ready for it, those words stuck. And I remember bursting into tears.
It wasn’t about being upset about not being flexible enough during that moment in time.
It was about not letting the fact that we were inflexible cloud our ability to just be and move on.
It was about understanding that if a negative emotion was not going to improve our lives, then we needed to show it the door. There is no place for anger holding us hostage.
The next time you start to feel angry from the divorce drama, do the following.
When your pulse starts to quicken, take a step back.
Close your eyes and take 3 deep breaths.
Remember that whatever BS is coming your way does not have the power to piss you off.
Remember that if the anger is not contributing to your well-being, then breathe that negativity out.
Inhale in the fresh air and focus on the beautiful life and calm that will be your guide.
Carry on, because you have way too many awesome things going on to waste your precious emotional energy on anything toxic.
The long and winding road of divorce navigation and recovery is not easy. But learning how to manage the anger, let it go, and move on is an indispensable tool and gift you give yourself as your start your new life.
Martha Bodyfelt is a certified divorce and recovery coach whose website “Surviving Your Split” helps readers navigate their divorce with less stress and drama, so they can move on with their lives. For your Free Divorce Goddess Recovery Kit, stop by Surviving Your Split or drop Martha a line at email@example.com.
Many people struggle with the financial details of their divorce especially if they weren’t the one managing the household finances but the recent tax law changes mean that it’s especially important for you to ask what you need to know about the new tax law changes and your divorce.
If your divorce was already in process last year and negotiations well underway, these changes may mean going back to the negotiation table before you sign your papers. Most people will be reluctant to do that however, some of these changes may have a significant impact on your after-tax income and if you don’t renegotiate now, you’ll lose your opportunity. Once your divorce papers are entered by the court and become court orders, it’s rare that you get a do over and your STBX is likely not going to renegotiate something because the tax law has adversely affected you.
Fortunately, understanding these changes doesn’t mean having to wade through the bill itself. My guest for this Conversation is Michael Wayland who is an assistant professor of business at Methodist University and he recently published a detailed White Paper on the topic. Listen in below (email subscribers click here) or keep reading for a synopsis.
Changes To Alimony
Currently, alimony (also known as maintenance or spousal support) is tax deductible to the payor and taxable to the recipient unless the parties agree otherwise. For agreements signed January 1, 2019 and onwards this is no longer the case and alimony payments become tax neutral. Wayland says this is the most significant issue in the new tax bill because of its impact on “income shifting.”
“If the payor was in the 25 percent tax bracket and spousal support was deductible, for them to pay $100, it really only cost them $75,” explains Wayland. “On the other hand, for the recipient, very frequently they are in a lower tax bracket so they receive the income but they only pay 10 or 15 percent. Let’s say they receive $100, they still get $90 out of the $100.
Through this income shifting the parties would save taxes even though they were no longer married. More than this, it would often enable the payor to pay more to enable the recipient to survive financially post-divorce and to provide more for their children.
Anecdotally, in my work I have found it interesting that couples who are divorcing are often willing to cooperate to ensure that the government gets less of their money.
Under the new law, alimony payments will now be treated in the same way as child support and unlike other elements in the new law, this change does not revert after 2025.
Opinions on how this will impact divorces currently being negotiated vary. I’ve seen some that suggest that there will be a rush to get divorces finalized this year before this change takes effect. This certainly seems true for people who will be paying spousal support but recipients have an opposing interest and may be motivated to delay until after 2018.
Similarly, we could see a rush of people who are already receiving spousal support and who’d like to renegotiate those agreements so their payments become non-taxable and the new law provides for this. It’s too early to know how the courts will handle this. However if your agreement is for non-modifiable alimony then this is likely a non-starter unless both parties voluntarily agree to the revision.
What we also don’t know yet is how states that have formulas for calculating alimony will respond. If those formulas take the after-tax position of parties into account then it’s likely that these formulas will need adjusting.
This change in alimony could possibly also impact child support calculations however it is very dependent on the formulas used by the states and you’re best advised to run the calculations to see if the difference is worth pursuing.
Child Tax Exemptions
Previously, a taxpayer had the ability to claim an exemption for themselves, their spouse, each child and other dependents. Each exemption was worth $4,050.
This meant in divorce negotiations, the parties would make an agreement as to who would claim which child as an exemption. Typically, if there were two children, then each party would claim one child. If there was only one child, then the parties would agree to alternate who would claim the exemption each tax year.
Under the new year, these tax exemptions essentially go away effective as of the 2018 tax year and this will impact existing agreements.
“It really takes some analysis to sit down and say how does this really affect me and my after-tax income,” said Wayland. “That after-tax income is what’s important to be able to support yourself and your children.”
That doesn’t necessarily mean you can ignore these child exemptions. To be able to claim Head of Household filing status (see below), you need to have at least one dependent so you might still make an agreement on child exemption and use this as the basis for who can file as Head of Household.
Another reason is that the child tax credit has increased from $1,000 to $2,000 and this is refundable meaning that the individual receives it even if they don’t owe taxes resulting in a refund. Agreeing who has the child exemptions gives a basis for claiming the child tax benefit. For people earning over $75,000 this is less important because the credit is phased out for incomes higher than this.
Finally, many of these changes are set to revert in the tax year 2026 unless Congress takes action before then. For people whose children are currently in high school, this is likely a non-issue but if your child is in Kindergarten, then these child exemptions could be relevant. Negotiating these now, gives you a fall back position for the future and may avoid having to renegotiate this in the future.
Filing Status Matters
The standard deduction for single filers has been increased as of 2018 from $6,500 to $12,000 maybe to balance out the impact of eliminating the child tax exemption.
“I think the intent of the lawmakers was we’re going to take away these individual exemptions but instead we’re going to raise the standard deduction,” said Wayland.
There are a couple more gems… filing as Head of Household is available to single taxpayers who can claim a dependent (see IRS Publication 501 for the full definition of dependent but broadly it would include a minor child who lived with you for more than half the year). The Head of Household standard deduction has increased from $9,550 to $18,000. Wayland says that filing as Head of Household is more favorable than the single filing status if the filer has income below $51,801. After this, the marginal tax rates for the different filing statuses converge and erase the benefit of the Head of Household filing.
Married Filing Separately No Longer Penalized
Married Filing Separately is another filing status that is used in divorce situations for example where the couple has separated, they have little knowledge or understanding of each other’s finances (or one party isn’t in a position to file their taxes for whatever reason) and still remain married as of the end of the tax year.
Historically, using the Married Filing Separately status has resulted in both parties paying more in taxes and so people would be discouraged by their accountants because of the increased cost. That’s understandable from a financial standpoint but if you don’t know your spouse’s true financial picture, it’s very risky and creates a liability.
Under the new tax bill, that penalty has been eliminated for tax year 2018 and onward and the deduction for Married Filing Separately is now exactly half of married filing jointly, i.e. $12,000.
“I think it will be a positive change,” said Wayland. “Now people will be free to separate their bank accounts, separate their taxes and their income and not worry that the other person is going to do something dastardly tax wise.”
Mortgage Interest Deduction
Often, the decision about who retains the marital home depends on whether they can deduct mortgage interest and this in turn has a significant bearing on that person’s ability to survive financially post-divorce.
Under the new tax law, Wayland said, “because the standard deduction has been raised so significantly, the interest you pay will have to be that much higher to have an impact.” If you are divorced with one child, filing as Head of Household, if you have less than $1,500 per month in mortgage interest and no other itemized deductions, the mortgage interest has no tax benefit.
However, the tax law grandfathered mortgages in existence prior to November 15, 2017 and also allowed for the preferential treatment of these mortgages to be continued if they are refinanced but, and this is a big but, we don’t know the qualifying conditions for refinances. For people getting divorced now that’s particularly relevant since if one party is going to keep the marital home, it usually involves divorcing the mortgage to remove the other party’s name from the mortgage and we don’t know if this would be grandfathered. Nor do we know if a cash-out refinance where the party who is keeping marital home refinances for a higher amount than the existing mortgage to be able to buyout the other party will be grandfathered.
Similarly, interest on home equity loans is no longer deductible through 2025 if the home equity loan is taken after December 15, 2017.
This means that if you are considering refinancing, you need to now ask the mortgage lender how they will treat the new mortgage under these revised rules. Wayland suggests that working with a mortgage broker may give you more options here than working with a single lender.
Michael Wayland is assistant professor of Business at Methodist University in Fayetteville, North Caroline where he teaches classes in Personal Finance, Business Strategy and Business Management. Wayland is also a family and divorce mediator for Christian Divorce Services. You can download a copy of his White Paper here.
Winter is here, and while most people are trying to stay warm at this time, some individuals who are dealing with a divorce may find that the gloomy weather can have an impact on their mood and well-being. Going through a divorce is tough enough as it can affect your finances, your children, and other relationships. But perhaps the hardest thing about splitting up is coping with the loneliness and depression that you may feel as your relationship ends. It can be even more difficult to deal with these feelings during the winter season as scientific evidence has found that people are more likely to feel down during the cold months. Trying to overcome the winter blues when you’re already coping with your divorce can be a challenge, but it can be done. Here are a few ways to beat the winter blues while going through a divorce.
Some people who are going through a divorce have a tendency to distance themselves from their loved ones when they’re overwhelmed or feeling sad. However, hiding out in your room won’t help you cope with winter sadness. To feel better and avoid being isolated, head outside and spend some time with your family and friends. Meet up at a coffee shop or do some window shopping at the mall. If you like walking in the snow, then bundle up and enjoy the cold, crisp air which can help to reduce stress and calm the mind.
Take Care Of Your Body
There’s a connection between food intake and divorce—either people will restrict their calorie intake to look good as a form of revenge, or they overindulge in food for comfort. However, these behaviors can lead to an unhealthy relationship with food, and it can also lead to an unhealthy body and lifestyle. Treat yourself well and eat nourishing foods that can boost your energy and mood. Smart food choices can help ward off anxiety and depression, so make it a point to include plenty of greens, fruits, vegetables, and protein in your diet. Exercising can also help to chase the winter blues away as any form of moderate to intense physical activity can make you feel more active, happy, and optimistic.
Do The Things You Love
After a divorce, it may be difficult to get excited over the things that used to bring you joy. But one way to feel better this winter is to start engaging in these activities again. Doing things that can make you feel happy is a form of self-care, so taking the time to ensure your happiness can aid in the healing process. So go ahead and have a spa day with your friends, go to a karaoke bar and sing your heart out, have a movie marathon, or attend a concert. Whatever it is, make sure that it’s fun and a positive experience for you.
Going through a divorce during the cold, winter months can be tough, but by engaging in activities that feed your happiness and taking care of yourself, you can get through this difficult time and emerge as a stronger and happier individual. Try these tips to beat the winter blues and heal your emotional wounds.
Now working as a writer, Jackie started her career in health and social care, but after becoming a mom refocused and decided to spend more time with her family. When she’s not writing, she volunteers for a number of local mental health charities and also has a menagerie of pets to look after including a cheeky cat called Bertie.
If you have your own business and you’re ending your marriage, then you’re going to want to know what happens to your business in divorce.
Probably about half of my clients either have their own business or their spouse is self-employed and there’s a huge variety in what those businesses look like. I’ve seen blogs that are strictly a side-job that probably cost more to run than the revenue they generate, I’ve seen an Etsy site that generates over $100,ooo annually, to a consulting business with no employees, no assets and a healthy revenue, a well-established construction company, a medical practice, a tree service company ….
When the business isn’t making any money, people do often agree to ignore it but that’s not smart – there’s always one thing you should do…
When the business has hard assets or if you both invested in the start up costs, then you’ll likely want to discuss how the current value of the business is to be divided…
If all this sounds complicated, it is. And when it comes to valuing a business a quick Google search will tell you that it is not black and white. Ask three different professionals for a value and you might get three different answers from each of them. So what are you supposed to do? Where do you start?
Considering how often this situation comes up with my clients, I’m surprised that I haven’t written about it before now. I know this is an important topic and I’m excited to be joined by Chicago-based attorney, mediator and divorce adviser Karen Covy for this Converation about what happens to your business in divorce. You can listen in below (email subscribers click here) or, if you prefer … keep reading.
Is The Business A Marital Asset?
The first step in figuring out what happens to your business in divorce is determining if it is a marital asset. It’s not as complicated as it sounds.
“If someone created the business during the marriage, it’s a marital asset.” said Covy.
If you already had the business before you were married, then the business, up to that point is a separate asset. So the business itself then is a mixture been separate and marital property.
The business is a marital asset even if your spouse played absolutely no role in it and that can be difficult to accept.
“There’s something about that that feels inherently unfair,” said Covy. “You did all the work, you put in all the blood, sweat and tears. It’s your baby but it’s still a marital asset.”
Conceptually, it’s similar to the person who works for a company. All of the income and benefits from that employment are marital assets even though the other spouse had no involvement with that job.
If anyone else is involved in your business, then hopefully you have a written agreement that spells out how that impacts the ownership of the business. If, for example, you have a partner and you’ve agreed you are 50/50 owners of the business, then simplistically 50% of the business is a marital asset.
Is The Business Worth Valuing?
Covy says that formal business valuations start at $5,000 so the first step is to decide if your perceived value of the business warrants spending that kind of money to get an independent valuation.
A business that is knowledge-based, with few assets beyond a computer, with no employees may have no value beyond the income that gets generated and you might agree in this situation to forgo a formal valuation. You might also argue that the client-base is an asset that could be sold and so has value. But even that is not straight-forward. Some businesses are prohibited from selling their client list. For others, the client list could be sold but the question then is will those clients stay with the new company, if the previous owner is no longer involved.
“There are many different ways to value a business,” said Covy. “But no matter the approach, the value is what a willing buyer will pay to a willing seller on the open market.”
Even if you are financially literate, Covy believes that most people would find it helpful to have a financial person review the business’s tax returns and financial statements. They would be able to tell you what revenue is being generated, what’s really going on and if there is any worth independently of the owner. With this assessment, you would then know if investing in a third-party valuation was called for.
What About Start Up Expenses?
Every business has start up expenses and these may have been paid for from household finances, especially if they were put on a credit card or charged to a home equity line of credit. Even if the business has no tangible value, these still represent an investment by you in your spouse’s business (or vice versa) and you can request that you be reimbursed for these.
Such reimbursement could be made as a series of payments over time, secured with a promissory note. Covy recommends that whatever agreement is made for reimbursement, is included in the divorce paperwork because that then becomes a court order and enforcing a court order is easier than the process for enforcing a promissory note.
Review The Financial Records
To get even a basic understanding of a business, you need to review the financial records – that means tax returns, the balance sheet and the profit and loss statement. It is a sad reality however, that for many small businesses, these records are an after-thought or woefully incomplete.
I’ve seen people running a business with no formal separate legal entity. I’ve seen businesses where there is no separate bank account. I’ve also seen a business where the only record of sales and expenses is a file folder with receipts. And, yes, there’s the cash transactions that don’t get recorded.
And it’s not just record-keeping that can be lacking. It’s common for non-business expenses to be paid from a business account and business owners have a great degree of latitude.
There may not have been an explicit agreement between you and your spouse to run household and personal expenses through the business, but if those expenses are not hitting the household accounts then there’s a tacit agreement.
These practices may have been going on for years and this makes valuing the business more challenging. Certainly, if business expenses weren’t so high, then the net revenues would be more and that would impact discussions about spousal support.
Without a separate bank account for the business, someone is going to have to go through all your personal financial records, such as bank statements and credit cards, and create business records, one transaction at a time.
Another common situation is a business that is doing well up until the divorce and then all of a sudden, it’s losing money, revenues are down, there’s heavy capital expenses and there are times when this is absolutely intentional.
“It’s never 100% clear,” said Covy. “The truth is that one of the best places to hide money is a business.”
Impact On Spousal Support
Any business is two things: an asset and an income. An asset means it’s worth something on the open market. An income means that it generates revenue. It’s that income part that comes into play with spousal support.
Covy cautions that the law with respect to spousal support varies from state to state and even jurisdictions within a state so there is not clear cut answer.
What we want to avoid however is a “double-dip.” That would be a situation where someone receives spousal support and a property settlement for the value of a business and that property settlement already includes a consideration for income.
Covy explains that an example of this situation could be one where there is a goodwill element to the business valuation that goes over and above hard assets, like equipment and tools. Let’s say Dr. Smith has a medical practice. The reason why clients got to Dr. Smith’s medical practice is for his reputation and expertise. Valuing Dr. Smith’s reputation is considered goodwill. Including Dr. Smith’s goodwill in the business valuation, for which there is a property settlement, and then expecting Dr. Smith to pay spousal support may be a double-dip situation.
A Business Is Also A Liability
In addition to being an asset and an income, any business is also a liability. This applies to all businesses even if you’ve determined that it has no value and even if it is not generating a profit.
There are two things you need to make sure are in your divorce papers. First, if you own the business, then you want it documented that the business is 100 percent yours, that you get to keep it, and that all of its assets and income is your sole property. This establishes the business as your separate property after the divorce and will protect you from future claims by your STBX to your business.
The second element is often overlooked by people who are doing their own divorce but it is absolutely critical. If your STBX has a business then you want the divorce papers to state that your STBX is responsible for all debt related to the business and will indemnify you and hold you harmless from these debts and any liability claims that might arise in the future. This needs to be broad enough to include liabilities arising from tax returns that weren’t done properly.
If all this sounds complicated, it could be but it points more to the importance of getting competent, professional advice and with unbundled legal services, it’s not going to cost you an arm and a leg to do this.
“If you have a business, there is no reason why you wouldn’t spend a couple of hundred dollars to sort this out on the front end rather than being sorry that you didn’t do that on the back end,” said Covy.
My guest for this Conversation was Chicago-based attorney, divorce adviser and mediator, Karen Covy. You can learn more about Karen at her website where you can also download her free divorce toolkit.
One of the many things we struggle with as we recover from divorce is learning how to get your self-esteem back.
It’s easy to understand why this is such an issue. When your relationship ends, you may feel rejected. You may feel unworthy. You sit crying on your couch, a pint of Ben & Jerry’s at hand, wondering why your partner does not love you anymore. You may think, as you’re stumbling through the list of to-do’s and stress of everything else going on in your life, that nobody will ever find you attractive and worthy of love.
But I am here to tell you to knock it off, because it’s simply not true.
Never forget for a second that you are a bad-ass and that you are strong and beautiful.
So, today, as we get a quick lesson on rebuilding our self-esteem, you need to embrace the following self-esteem revelation.
What Happened Does Not Define You
Ending a relationship is not fun. It causes us to question who we are, what we thought our life was, and where we are in this universe. We tend to define ourselves solely within the terms of being a partner and we become dependent on that position as a means to validate ourselves. We start to place our entire value on being a spouse, rather than putting that focus on something healthy—the independent, kind person that you are.
So it’s no surprise that our self-esteem shatters when the one pillar we have used to define ourselves goes away. We make this false connection that end of a relationship = bad unworthy person. It’s no wonder you’re feeling like crap.
But think about this for a second. When you stumbled and sprained your ankle that one time, the way you defined yourself didn’t go negative just because your ankle hurt. And if you were ever in a car accident, or if you have ever been hospitalized, you didn’t tie your identity and your self-worth into that one event happening in your life. Hell no. You knew that it was an inconvenience, but you were soon back to life
So, why don’t you treat your break-up the same way? Sure, this is a hiccup in your life. But that doesn’t mean that you are any less of a person, or somehow not worthy or self-respect and love because you’re going through this situation. It’s quite the opposite. The fact that you have the grace to navigate through this stressful time, and the strength to carry on and taking care of everything else you have going on speaks volumes of your character, of your intellect, and your all-around awesomeness. You should applaud yourself for the amazing job you’re doing and give yourself credit.
But if you’re still struggling with rebuilding your self-esteem, I understand. And because it can be difficult to change your mindset, I have a few exercises for you!
Reclaiming your Self- Esteem Exercise
Embracing the fact that you’re freakin’ amazing.
Step 1: List all the things that you’re good at.
Don’t be shy with this one! Every day, you no doubt accomplish things that would cause others to whimper—things that you most likely don’t give yourself credit for. But it’s time to change that. What are things that you know you rock at? This has nothing to do with bragging or being immodest. Acknowledging your awesome skills is an important step to nurture yourself.
If you need some inspiration, take a look at my examples below.
My friends say I’m a good listener.
My mom says that I am good at thinking logically.
I’m a go-getter and know how to take initiative.
I’m good at planning things and getting stuff done.
Now it’s your turn! And if you can’t think of many things all at once, come back to this exercise to continue listing all of the amazing stuff you’re good at.
Step 2: List all the things that you love about yourself.
Many times, we struggle with celebrating the great stuff about ourselves. Many of us were taught to be modest, and that it was wrong and extravagant to “toot our own horn.” But that misguided thinking meant that many of us weren’t taught how to be self-confident and to hold ourselves in the high regard that we should. But it’s not too late to kick that negative thinking aside and start acknowledging how beautiful and amazing we really are. So, here are some examples to inspire you!
I love my long hair.
I love to read.
I love to explore new things.
I love that I am a good cook and know how to entertain.
See how easy it is? How about you? What do you love about yourself? Some things may come to you later, so it’s okay to come back to this list as often as you need to!
Step 3: The next time your self-esteem bothers you, how will you incorporate Step 1 and 2 to neutralize the Self Esteem Monster?
The next time my self-esteem starts playing tricks on me, I will consciously stop myself and remind myself of two things that I am good at, and two things that I love about myself, turning this negativity into kindness. As an example…
Now that my relationship is over, who in the hell would ever want me?
STOP. I am kind. I am a good friend. And I’m damn good at my profession.
I feel so stupid—this break-up is all my fault.
STOP. I did my best. I have a good heart. I have much to contribute to this world. This a break-up does not define me.
Okay, now it’s your turn! Are there self-esteem issues that you deal with when it comes to recovering from your relationship? What types of thought do you have when you are not feeling confident?
And, more importantly, what kind, loving messages will you start to tell yourself as you begin to repair your self-esteem?
Remember that no matter what anybody has told you in life, you are enough. You are worthy of respect and love. And you are stronger and smarter than you can imagine.
If you’re trying to save your marriage then a post-nup could be exactly what you need. The communication that goes into creating a post-nuptial agreement has the potential to create meaningful and lasting change to your relationship. And if that change doesn’t last, then having an agreement could certainly make divorce easier.
Tom Gardiner is a Chicago-based attorney and author of The Post-Nup Solution: How To Save A Marriage In Crisis-or End It Fairly (available on Amazon). Gardiner has worked with many business partners and shareholders to create business agreements. These people spend hours just planning the future and thinking through the what-ifs. “But with the most important relationship, the spousal relationship, people don’t do that,” said Gardiner. “If corporate clients can do this, why can’t couples?”
That’s a good question. To find out more about what goes into a post-nup, how to create one and when not to even think about such an agreement, listen in to the Conversation below (email subscribers click here) or, if you prefer, keep reading.
A Post Nup Is A Contract
Almost everyone has heard of a pre-nup. It’s a formal agreement couples enter into prior to marriage that spells out how their assets will be divided in the event of the marriage ending. They’ve been around for years and are especially common with celebrities and people who have significant assets going into a marriage.
A post-nup is same concept except that a couple makes the agreement when they’re already married. They’ve been gaining favor over the last five years and like pre-nups, cover what happens to property and assets in the event of divorce however, Gardiner says they should cover more.
“My argument is that it should also cover conduct because it’s the conduct that often leads to divorce,” said Gardiner.
To create a post-nup couples have to communicate and the lack of honest, open communication is often a factor in marital problems. Gardiner believes that post-nuptial agreements could be used by divorce professionals such as coaches, therapists and attorneys to help their clients.
“I think one of the problems that therapists have is that they try to counsel people and there isn’t necessarily a result if the problem isn’t resolved,” said Gardiner.
In a post-nup agreement a couple would cover what the problems are, that they are committed to working on their marriage, what they propose to do to resolve the problems and what will happen if the problems are not resolved. It’s that last step that is often missing from marriage counseling.
It’s A Problem-Solving Approach
If you tell your spouse, you’d like a post-nup, they may scoff at you and part of that will be due to their pre-conceived ideas about such agreements and part ignorance about what the agreement really is about.
Gardiner however sees them as a positive approach to solving problems, one that allows couples to act earlier on their problems when they both want to find a solution. Too often, Gardiner says people seek help too late when the damage has already been done. And, because these agreements are crafted when both parties still want to work on the relationship, what is agreed to for the division of assets is going to be more equitable than what is likely in a divorce without such an agreement.
How Is Conduct Included?
Gardiner recommends included whatever conduct is causing problems in the marriage. The obvious examples would be gambling, drugs, alcohol and infidelity but an agreement could also include things like working hours and the division of household chores.
The agreement needs to cover that if xyz happens i.e. the triggering event, then this is the consequence. The consequence doesn’t have to be divorce. It could for example be that if one party chronically overspends on the household budget each month, then access to the credit card for that party may be suspended for an agreed period of time.
Gardiner stresses that the consequences should not be black and white because it’s impossible to foresee all the circumstances that might lead to a triggering event. So it might read more like, ‘if this happens, then we will do this and we may decide to end our marriage.’
“Some of these problems are very difficult and so the other spouse needs to be reasonable about the goal.” said Gardiner. “You can have the flexibility in the agreement to account for human nature and the seriousness of the problem.”
The key however is that if you do end up deciding to end your marriage, then the post-nuptial agreement already spells out your agreement on what is and what is not marital property and then how the marital property is to be divided.
“The distinction here is that when the split up occurs, you have an agreement that was made when the couple wanted to maintain their marriage,” said Gardiner. “There’s a reasonableness part that occurs that doesn’t occur when the break up happens.”
Post-Nups Are Not For Every Situation
Gardiner doesn’t recommend trying to create a post-nuptial agreement when there is abuse or criminal behavior. In both of these situations the conduct is not likely to improve voluntarily or without significant professional help and most likely, there is an imbalance of power that precludes good faith negotiations.
“If someone is in an abusive marriage, they’re getting battered, they getting harmed, they’re psychologically abused, they can’t function, these are not remediable,” said Gardiner. “There has to be a strong possibility of healing to make the relationship healthier.”
You Can Include Your Parenting Commitments
A post-nup is not going to be a substitute for a parenting plan in the event that the marriage does end. While you might agree that it would be your intention to have 50/50 shared parenting, what that schedule would look like would need to be addressed at the time. And, if there were circumstances that indicated that parenting time should be restricted, the court is not going to treat those provisions of a post-nuptial agreement as binding.
That being said, Gardiner still suggests capturing in the agreement behaviors and conducts that might influence a parenting plan, such as one party admitting that they were high when they had the car accident with the children in the car.
Gardiner also suggests including commitments such as which activities the children will participate in and cost sharing, especially if the activities are particularly expensive or have been a source of disagreement.
Religion is another area to consider. For example, in a mixed faith marriage, one party may agree verbally that the children are to be raised in the faith of the other spouse and not their own. This is something you might want stated in your post-nuptial agreement because verbal agreements are always hard to prove in court.
Before you sign a post-nuptial agreement, it’s important that there’s been full disclosure about the finances about the marriage and the accounts that each party has. This is akin to going through the financial disclosure process that’s part of a legal divorce.
You can’t make a decision about how a particular asset should be divided unless you know the full picture. For example, you shouldn’t be agreeing that each party retains their own retirement assets unless you know the value of each other’s accounts. You shouldn’t be agreeing to how to share the house equity without knowing the total value of the marital estate.
It would also be helpful to understand how the marital property would get divided if you were to get divorced. This allows you to make an informed decision and creates the basis for an equitable agreement.
“Things have to be fair,” said Gardiner. “They can’t be one party gives up everything and the other party gives up nothing because the judge is going to look at it and say something was wrong about this.”
Have The Agreement Reviewed By An Attorney
One of the purposes of a post-nuptial agreement is to spell out how the agreed marital property is to be divided in divorce and as part of that process it will be reviewed by a judge.
Gardiner’s book, The Post-Nup Solution: How To Save A Marriage-Or End It Fairly, provides some examples of agreements that can be used as a starting point however, to ensure that the agreement is enforceable by a court, Gardiner recommends getting your draft reviewed by a family law attorney where you live since there are dramatic local differences in what courts find acceptable.
“A post-nuptial agreement can always be challenged in Court,” said Gardiner, “but it’s like a settlement agreement. The judge is going to look at it like any other contract. Was it fair when it was entered into?”
Keep It Updated
As with most agreements, a post-nuptial agreement should be reviewed periodically and updated. This is especially true when there are significant life events such as the birth of a child, a new home, new job, or the decision for one parent to stay home.
Just as with the original agreement, going through the agreement to update it for changes promotes communication and encourages couples to talk through the financial consequences of their decisions and this aspect is often overlooked or taken for granted.
Tom Gardiner is a Chicago-based attorney and author of The Post-Nup Solution: How To Save A Marriage In Crisis-or End It Fairly (available on Amazon).
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