Smarter Divorce Solutions provides services to individuals, couples, attorneys, and mediators to provide financial expertise to those embarking on divorce. With advanced training in all financial aspects of divorce including pension valuation, marital vs. separate property, taxes and tax optimization of settlements.
Welcome to the final installment of our three-part blog reviewing Creative Financial Co-Parenting strategies. Be sure to get caught up by reading Part I and Part II.
We’ll wrap up with lesser-used financial co-parenting options. As stated in Part I and Part II, parents must have an agreement in place regarding which child-related expenses should be shared in order for any plan to work. The options below require a special touch in order for them to work.
Manually Track Expenses
If either parent is a spreadsheet nerd, manually tracking expenses may be an option (though spreadsheets aren’t required – I just immediately think of Excel because I’m a nerd myself). In this type of arrangement, both parents maintain tracking in a format that works for them. They retain receipts for proof of expenses, and then submit their reimbursement requests to each other on a regular basis (bi-weekly, monthly, but ideally no less frequently than quarterly), depending on the frequency and amount of expenses. Typically, this will result in one parent owing the other the delta between the two reimbursement requests. (For example, if Judy’s reimbursement request is $240, and Mike’s is $140, then Mike will pay Judy the difference, or $100.)
For detailed-oriented folks, this is a cakewalk. But if either parent is the slightest bit opposed to this plan, or has organizational problems, it likely will not work.
Horror story: I once helped a friend with her expense tracking that she and her ex had put off for years. (Neither one of them were nerds, obviously.) It was a disaster! We had to sort through a box full of receipts, put it all in a spreadsheet, and then she had to present an $8,000 expense reimbursement request to her ex. He reportedly took that request in a calm and rational manner…NOT! His expenses only tallied $4,000, and getting him to write a check for the difference took several months of back and forth attempts to disqualify her submitted expenses. Rest assured, after that nightmare, my friend and her ex quickly moved to a co-parenting app.
Each Pays Off-Setting Expenses
For some parents, the thought of regular communication with each other is an unpleasant one. They wish to avoid conversations, except only the important or urgent ones needed regarding the kids. So, to take money conversations off the table, each pays designated expenses, commonly without reimbursement.
In this arrangement, parents assess the ongoing child-related expenses to determine the amount or approximate amount of each expense. Then, the parents divvy up the expenses between each other. Here’s an example of how that might look:
Cell phone plans – $50 per month Math tutor – $100 per month School lunches – $120 per month Extracurricular activities – avg. $175 per month
Pays all uninsured healthcare expenses – avg. $500 per month
If you sum each column, Mom ends up paying about $445 each month, and Dad ends up paying about $500 each month. The difference of approximately $55 each month is not reimbursed to Dad, nor is Mom reimbursed if her expenses exceed $500 per month. For couples in this situation, the +/- of approximately $50 dollars is worth every penny to not have to continually discuss child-related expenses. For expenses recurring less than monthly the parents agree each will pay half directly to the requestor (annual school fees are paid directly to the school, for example).
In order for this arrangement to work, both parents have to be cooperative, and even more importantly, be willing to NOT SWEAT THE SMALL STUFF. (If you’re divorced and holding on to a receipt for $2.84 to get your $1.42 reimbursed, this arrangement isn’t for you.) But the few clients I’ve worked with who made this type of arrangement said they felt such relief knowing they wouldn’t be nickeling and diming each other to death. They avoided the temptation to weaponize financial co-parenting!
It’s All About Cooperation
Bottom line, co-parenting is short for cooperative parenting…meaning parents should have a child-centric and ego-free approach to parenting. And this includes the responsibility of sharing child-related expenses. Here at Smarter Divorce Solutions, we work with divorcing couples on a daily basis, and enjoy assisting our clients with creating and living a vision of the best divorced family they can be. Call us today at 1-877-552-4017 to learn more about how we embrace Divorce Done Differently!
Welcome back to our three-part blog reviewing Creative Financial Co-Parenting strategies. If you haven’t yet read Part 1 about using a joint checking account, be sure to check it out!
Financial Co-Parenting – Yep, There’s an App for That!
There are a wide variety of apps available which help support co-parenting communication. In addition, many of these apps offer expense management tools for co-parents as well! Any and all co-parents are good candidates for using an app. For those who have a strenuous relationship, use of an app can be particularly helpful. (In fact, one of my friends has said the time the court ordered her and her narcissistic ex-husband to use a co-parenting app was the best year of their co-parenting – because he knew he could be held accountable!) Here are a couple that have expense management features for you to consider:
One of our favorite co-parenting apps is AppClose, a FREE co-parenting app, currently without subscription fees or monthly charges. It offers a plethora of features helpful for co-parents. For expense management, I love the “Requests” feature, which allows parents to send, receive and approve child-related reimbursement requests. This will also create a record of expenses, which can be exported or printed for free. Wouldn’t that be handy at tax time? AppClose also has an integrated ipayouTM feature, which can facilitate money transfers between parents, though transfer fees do apply to this feature.
Our Family Wizard
Our Family Wizard* is one of the original apps for co-parenting, and often the go-to for court-ordered use of a co-parenting communication tool. Their “Expense Log” feature is top-notch, tracking expenses, capturing receipts, and it creates a log with the math all done for you. They have an integrated electronic payment feature, OFWpayTM, though transaction fees apply. Our Family Wizard is $99 per year, per parent.
Another tool to consider is Coparently. Their expenses tool supports logging of all shared expenses and payments that have been made. It will also allocate the percentage of contribution per parent, if the payment contributions are something other than 50/50. The app is $99 per year, per parent, or $9.99 per month, per parent.
Make It Work
There are many more co-parenting apps on the market, though not all have the financial tools included. Many of our clients have shared positive feedback about using an app – it’s wonderful that technology can lend a hand in co-parenting!
Do keep in mind that use of any of these apps still requires basic agreements between parents as to what expenses will be shared outside of any child support paid. The apps don’t create or enforce the agreement – that’s on you as parents.
Stay tuned for Part III of Creative Financial Co-Parenting, coming next week! And give us a call at 1-877-552-4017 to learn how we can help divorcing parents to create a successful, child-centric co-parenting path.
*The Our Family Wizard link is an affiliate link, meaning, that at no additional cost to you, Smarter Divorce Solutions receives a commission if you click through and sign up for the service.
Parenting children after a divorce can be super tricky. There are many things to consider, such as parenting time schedules, transitions between homes, disciplinary responsibility, emergency preparedness, one or both parents re-coupling, and more.
One of the more challenging aspects of co-parenting can be managing finances as it pertains to child-related expenses. While child support is addressed in all divorce cases involving children, there is sometimes confusion and ambiguity as to what child support covers. In this three-part blog, we’ll review several options for financial co-parenting.
Using a Joint Account
For co-parents who are amicable (or close to), use of a joint account can be a great solution for financial co-parenting. Here’s how it works:
A joint account is established with both parents’ names on the account.
The parents agree on what expenses can be submitted to the joint account, how much each parent will contribute to the account and at what frequency, and special spending rules (such as purchases above a set dollar amount).
Both parents establish their own login for the account and agree that each will monitor the account on an established frequency to ensure an adequate balance remains in the account.
Both parents have checks and a debit card to access the funds in the account and agree who will pay for replacement card fees and additional checks (either the joint account pays, or each parent pays for their own).
The parents determine whose address will be listed as the account’s primary address.
A Case Study
George and Katrina have established a joint account for child-related expenses. George currently pays Katrina $400 per month in child support. George and Katrina each contribute $100 bi-weekly to their joint account as their incomes are nearly the same. The parties agree the following expenses being taken from the joint account:
Uninsured healthcare expenses
Kids’ cell phone plans
Mandatory school-related fees
Extra-curricular activities, lessons, camps, etc., but only if both parents agree to the activity and expense
Any other expense requires email or text notification and mutual consent. And, ANY one-time expense over $100 also requires email or text notification and mutual consent. George and Katrina agree to pay for their own checks and debit card replacement fees, if accrued. They each monitor the account on a weekly basis and notify the other if the balance is reaching the minimum required.
George and Katrina agreed to have electronic statements emailed to both. If mail is sent from the bank it goes to Katrina’s address and she will hand off anything to George that is addressed to him.
Make It Work
The key to joint accounts working is all in the PRECISION OF YOUR AGREEMENT. I had a client tell me that his joint account arrangement with his ex-wife fell apart because they didn’t agree on how check orders would be paid. He paid for his own checks; and when she later needed checks she charged the joint account. Seriously – an $8 charge to the joint account for checks, and the disagreement that followed, was enough to blow up the entire joint account agreement! (There was a great deal of financial distrust between the two, so it didn’t take much.
One downside to consider with a joint account is the ongoing enmeshment. If one party is still holding on to hope for reconciliation, or has a strong need for control, a joint account can be an excellent tool to increase communication needs and/or increase the use of manipulative tactics. And for some, the need to be completely DIVORCED and not be viewed as “DIVARRIED” will take a joint account arrangement off the table.
Stay tuned for Part II of Creative Financial Co-Parenting, coming next week! And remember – we’re here to help! We want to help you be the best co-parents possible with Divorce Done Differently! Give us a call at 1-877-552-4017 to learn more.
Divorce itself is an emotionally charged, troubling process. When you add major financial decisions to the mix it can create a recipe for disaster. Our goal is to help litigants make sense of the financial maze they face in divorce and navigate the process with confidence.
Consider couples who are going through divorce and simply don’t have the financial means to get professional assistance. They are reliant upon DIY divorce documents and are faced with navigating complicated legal issues reduced to fill-in-the-blank forms. It’s a means to an end, albeit less than ideal.
There comes a time after you and your spouse agree to divorce that you then have to start letting family and friends know about your plans. This is not typically an easy task, particularly when you have children involved.
While children are generally considered to be astoundingly resilient, how you tell your kids about your divorce can have a significant impact to their current and future selves. Take time to develop your plan for sharing and leverage some of the tips below.
Pick the Right Words and Location, and Consider Your Child(ren)’s Age and Maturity Level
It goes without saying that a preschooler will handle the news about a divorce much differently than a teenager. The following are general tips and should be adjusted based upon your child(ren)’s age and maturity level. It goes without saying that a preschooler will handle the news about a divorce much differently than a teenager. The following are general tips and should be adjusted based upon your child(ren)’s age and maturity level.
In most situations, parents should tell the kids about the divorce together, at the same time. Both parents need to take responsibility for the decision to divorce.
Avoid giving children too many details. Instead of details, children primarily need to know that they are still loved and how the divorce will affect them how the divorce will affect them in the short run.
Consider the environment in which you’ll share the news and avoid restaurants or public locations. (Who wants to get that kind of news in public?)
Open a dialogue with children by inviting them to ask questions. Be willing to come back later to let them ask questions after they’ve had some time to think about things.
Reinforce with the children that the decision to divorce is an adult decision. It’s common for children to devise ways to bring their parents back together, or they may think they did something wrong which caused the decision to divorce.
As they absorb their new reality, it is normal to observe clinginess, irritability, withdrawal and/or regression in development.
Be careful telling your kids, “Mom and Dad will still be good friends” unless you truly believe you will be able to model an amicable relationship able to model an amicable relationship. Think about how your children may define friendship. It includes spending time with a friend, sharing secrets, going on outings to the movies and mall, and having overnight stays. Better to say, “Mom and Dad are still focused on loving and caring for you.”
Once children are informed, make every effort to maintain their daily routines so they have a sense of normalcy in part of their lives.
Break the News With Care
Regardless of their age, your divorce is your child(ren)’s loss too. So, plan carefully before breaking the news. And if you and your spouse want the best process to ensure a peaceful co-parenting relationship post-divorce, give us a call. At Smarter Divorce Solution, we specialize in a divorce process that is cooperative, collaborative, and family focused. We truly offer Divorce Done Differently.
Whether your divorce was a high conflict or fairly co-operative experience, you will cross the finish line and look up at some point wondering what the next step is. Do you have names that need to change, titles that need to be revised, or beneficiaries that need to be re-named? What should you do first? What should you do next?
One Step at a Time
With so many things that you’ll need to do, figuring out the next step can be overwhelming. Not to mention the problems that can arise if you skip something. And the list will be different for everyone. So, one of the first steps that you’ll need to do is take inventory the items that need to be on your list. Start this with your settlement agreement, to see the items that you need to re-title or re-name and the processes that you need to get in motion.
With our clients, we take a comprehensive approach to the divorce process and the necessary next steps by making sure each client has a list of post-divorce steps to take. We also offer guidance through those next steps if needed. For most folks “QDRO” may as well be a Greek word and opening a Roll Over IRA account to receive assets sounds like an insurmountable task. Actually, even the things that seem simple, like creating your new budget, can feel insurmountable at this point. So, don’t be afraid to get help with these.
Don’t Be Afraid to Ask for Help
If you find that you need direction through these steps, reach out to the divorce professional that guided your process. They can usually offer recommendations to the other professionals you will need to take the next steps. You can also contact us! Wherever you are in the process, the beginning, the middle, right at the final decree, or at the title change stage, we are here to help.
So, you’ve made it to the finish line! You ran a great race. It’s okay to pause for a minute and take a breath, and look at how far you‘ve come. Just be sure to continue that walk into your future one step at a time to complete your transition to your new normal.
If you are wondering how to keep your house in a divorce, you are not alone. A lot of my clients have sentimental attachments to their houses. You’ve made memories there. Even if you are not particularly sentimental, you may not want to think about moving in the midst of all the other changes happening in your life.
That’s right. I said it. My key to co-parenting success with my ex is not “putting my children first” as so many professionals recommend. I remember the first year of co-parenting well. I would describe it as a complete failure and excruciating. My youngest son was three years old. Every time he had to go between my home and my ex’s, he would have a complete meltdown. I felt like my heart was being torn out of my chest.
As Dan and Sue prepare for their divorce, things seem pretty straight forward. Here is a list of their assets.
1. Principal Residence
2. Vacation Home
3. Dan’s 401k
4. Checking and Savings
Who is Keeping What
Dan says that he wants to keep the primary home and he will let Sue keep the vacation home. Sue agrees with this plan and therefore, to provide a 50/50 split, Sue will get half of the checking and savings, $15,000 and $125,000 of the 401k for a total of $440,000 each. Ah, a perfect 50/50 split. No problem!!
1. Principal Residence
2. Vacation Home
4. Checking and Savings
Dan plans to live in the primary home for 2-3 more years and then sell it and downsize. Sue plans to sell the vacation home and buy a new residence for herself. Since she’s only 50 yrs old, she is also going to take advantage of her one-time opportunity to withdraw $100,000 from the 401k subsequent to divorce with no penalty, although she will have to pay income tax on the money. Hmm, could these plans impact this settlement? Let’s take a new look at each party.
About 6 months after the divorce, Dan realizes that the upkeep on the home is more than he can afford on his own and decides to go ahead and sell. He’s able to sell it for $775,000. He pays off the $350k mortgage and HELOC and has to pay 6% for sales fees or $46,500 leaving him with $378,500 in equity. The original price of the home, bought with his wife 25 years ago, was $150,000. That means he now has a capital gain of $228,500. As a single person, he can exempt $250,000 of gain on a principal residence, avoiding any capital gains tax.
How did Sue fare? She moved into the vacation home for 6 months before putting it on the market. It actually sold for $325,000 with selling expenses of $19,500 leaving her with $305,500. The property had been in her family for generations and the basis was $60,000 so she assumed that her gain of $245,500 was well under her personal exemption and she sold the property and used the money to buy a new condominium. When tax time came around, her accountant looked at her with big eyes and broke the bad news. The personal exemption is only applicable to a primary residence and you must live there for 2 years in order to use it. Since she didn’t, the entire gain is taxable. She’s also a highly compensated individual so her rate is not 15% but 20% and oh, don’t forget to add the new Medicare surcharge which raises it to 23.8% so her tax bill is $58,429.
Who Really Kept What
We also have to remember that she withdrew some of her 401k assets in cash and had to pay tax on those too! Let’s look at a revised chart.
1. Principal Residence *net after sales cost & tax, no appreciation added
2. Vacation Home
3. 401k *Dan @ 28%, Sue@ 39% tax
4. Checking and Savings
Not a 50-50 Split After All
Dan’s assets are worth $98,179 more than Sue’s. Once Sue figures this out, how do you think she will feel about the “fair” division that she agreed to?
There were much better ways to structure this settlement that would have been more equitable. But as you know, once that decree is written, it’s pretty tough to go back and fix things. Take the time to really evaluate your settlement results or bring in an expert who can.
At the very least, review the plan with a CPA or CDFA®. Mistakes like these could turn your dream of the next phase of your life into a nightmare. At Smarter Divorce Solutions, we understand divorce financials and can prepare your documents fairly at an affordable cost. Give us a call at 877-552-4017 to get started!