Common financial mistakes to avoid in divorce

Divorce can drastically affect an individual’s financial circumstances if they fail to take precautionary measures.

Divorce is a deeply personal issue, but using the divorce as a means towards getting revenge can complicate the divorce and be counterproductive. As hard as it may be, experts recommend that couples going through a divorce keep their personal issues with one another out of the negotiations.

Joint credit accounts can pose a major problem after a divorce. According to certified public accountant Jerry Cohen, couples going through a divorce should not maintain joint credit. Cohen recommends closing any shared credit cards in order to prevent a spouse for becoming responsible if their ex fails to make a payment or accrues a large amount of debt.

If possible, all shared credits cards should be paid in full and closed prior to finalizing the divorce. If full payment is not an option, the balances should be transferred to one spouse and the other spouse’s name should be taken off the account.

Couples going through a divorce should not overestimate the persuasive power of a divorce decree. While a divorce decree states that one person must pay off the balance of a previously shared credit card, a credit card company can still hold the other person liable for that balance if the other spouse does not pay. This is because credit card companies are not a part of divorce decrees and will hold all borrowers responsible regardless of marital status. It is generally a good idea to check on joint accounts by running a credit report, which will tend to detect any anomalies and give you a chance to take action before you are exposed to any liability.

Cohen also recommends working with a financial planner to determine what your budget should be after the end of your marriage. Knowing the amount of money that you need in order to live comfortably will help you negotiate properly to ensure future financial security.

Source: Fox Business, “6 Financial Mistakes to Avoid in Divorce,” Teresa Bitler, 3/21/2011

Divorce rates expected to rise during economic recovery

An increase in the rate of divorce in Wisconsin and across the United States may be directly related to a rebound in the economy, according to recent statistical studies and family law attorneys who are now seeing more couples choose to end marriages. During the recession, the overall number of divorces dropped dramatically nationwide. Now that financial conditions have begun improving and stabilizing, more married partners are calling it quits.

The American Academy of Matrimonial Lawyers (AAML) says America, with the world’s highest rate-of-divorce, saw far fewer legal split-ups during the recession years. In 2008, divorces dropped 24 percent. In 2009, divorces were down 57 percent. This is not an unusual pattern, according to the AAML, which said bad economic times traditionally make couples less certain about major changes.

The recession has affected the rate of marriage as well as the rate of divorce. Fewer recession-affected couples choose to marry, have children and break up. A Pew Research poll, taken at the tail end of 2009, found that couples, younger than 35 years of age, decided to wait for better times to get married. Some 15 percent opted to stay engaged a little longer rather than wed and 14 percent held off adding a new child to their families. In addition, many couples who wished to end a marriage decided to stick it out a little longer for financial reasons.

Many couples, who thought about breaking up during the financial downturn, hesitated to separate because of worries over how the economic crisis would affect the division of marital assets. The costs associated with divorcing, including finding separate residences, and falling property values, caused a reluctance to split up.

Source: AFP, “Rising US divorce rate signals economic recovery,” Virginie Montet, 4/29/2011

Arnold Schwarzenegger and Maria Shriver announce separation

Two weeks after their 25th wedding anniversary and four months after Arnold Schwarzenegger end his term as the Governator, Maria Shriver and Arnold Schwarzenegger announced that they are separating.

In their statement, they characterized their separation as amicable and did not mention whether they were filing for divorce. They noted that this was a time of personal and professional transition and arrived at the decision to separate together. Many commentators believe that the split between Schwarzenegger and Shriver represents a growing trend of long-term marriages ending in divorce in the baby boom generation.

Many baby boomers with adult children and children in their late teenage years are beginning to explore divorce as an option. According to a survey conducted by the Pew Research Center, 66 percent of baby boomers reported being less than enthusiastic about staying in an unhappy marriage.

Shriver and Schwarzenegger have four children ages 14, 18, 20, and 21. They indicated that they plan to continue parenting their children together.

Important changes in a person’s life can contribute to stress on a marriage and it has indeed been a time of transition for Schwarzenegger and Shriver. Maria Shriver has had to deal with personal loss over the last year. Her mother died in August 2010 and her uncle, Senator Edward Kennedy died just weeks later. In January, her father died after a long battle with Alzheimer’s disease.

Now that Schwarzenegger has left the Governor’s office after nearly eight years, he has returned to his acting career and has reportedly signed on to appear in another sequel to the “Terminator” move franchise.

Sources: CNN, “Baby boomer breakups and the search for a perfect union,” Amy Wilson, 5/11/2011

CNN, “Arnold Schwarzenegger and Maria Shriver split,” Alan Duke, 5/10/2011

ABC, “Maria Shriver Bore Grief Over Family Deaths, Alleged Affairs,” 5/10/2011

Concerned that your divorce could negatively affect your children’s social skills?

If you have children and are considering divorce, you have probably heard a lot of claims that children of divorced parents don’t perform as well in school, have a greater chance of getting divorced themselves, or are otherwise negatively affected by their parents’ decision to end their marriage.

The truth is, life is more complex than social science research. While statistics may show trends, they can’t predict what will happen to individuals. What is useful about such research is that it can give us information about what risks our children may face so that we can take action.

That being said, the results of a recent University of Wisconsin at Madison study suggest that children of divorce are more likely to have lower scores in mathematics and may fall behind in social skills, as well. And, the researchers found, children are most likely to be negatively affected once divorce proceedings are underway.

According to the study, those children who appeared to be affected began to experience developmental challenges after their parents initiated the divorce, and any learning challenges they experienced continued after the divorce was over. This is interesting information because it had been previously assumed that the greatest negative impact on children came from the turmoil in their parents’ relationships prior to the decision to divorce.

Published in the American Sociological Review, the study followed the development of over 3,500 children ranging in age from kindergarten to fifth grade. They were followed at various times before, during and after their parents’ divorces.

The study suggests that math skills are the most likely to suffer, perhaps because math requires a progressive understanding of concepts and problem-solving over time. The suggestion is that conflict experienced by children during a divorce has an impact on the understanding and conceptualization students need to progress in math. The study also suggests that, without intervention, these kids are unlikely to simply catch up as their lives stabilize.

Contributing factors that affect children of divorce include stress arising from dealing with angry or depressed parents, interruptions in the normal routine and living arrangements, and reductions in family income.

For couples with children, going through a divorce involves legal questions, but it also involves relationship issues for the divorcing parents and the children. Good divorce planning involves working with your divorcing spouse on how to resolve problems and successfully co-parent your children as you move into a new phase of your lives.

Source: Reuters Life! “Children of divorce score worse in math, social skills,” Bernd Debusmann Jr., June 2, 2011

Wisconsin study suggests collaborative divorce on the wane

Not so long ago, collaborative divorce looked like it was the cutting edge of family law. The process was supposed to be less adversarial, less expensive and less difficult than traditional divorce. But now a report out of Wisconsin seems to indicate enthusiasm for the process has withered.

After sampling two years’ worth of Waukesha County divorce data, researcher Gregg Herman found collaborative divorce proceedings were actually on the decline in the study area.

Herman’s research found that the number of collaborative cases declined from 25 cases per year to 17.5. That’s a decrease from 2 percent of Waukesha County divorces to 1.4 percent of divorce cases. Also, the failure rate – or rate at which the collaborative divorce process did not meet the parties’ needs and expectations – went “way up” from 11 to 17.5 percent.

The research doesn’t point to a definitive answer for the decline, but Herman suggests one possibility could be that a weak economy may mean people are putting off divorce because they cannot afford it.

Herman cautions that collaborative divorce was never intended for everyone. It does not work well in cases of domestic violence, substance abuse, alcoholism or instances in which one spouse is trying to hide assets. The system also has its critics, who say it over-emphasizes cooperation and minimizes the zealous advocacy that people need to make sure they reach a realistic and just outcome.

If you are considering divorce, it is a good idea to think carefully about what option is best for you. Collaborative divorce may be a good option for some people, but it does not work for everyone and the study suggests that, locally at least, its utility isn’t living up to the hype.

Source:

•· The Milwaukee Journal-Sentinel, “Collaborative Divorce on the decline?” Bruce Vilmetti, 9 June 2011.

•· Wisconsin Law Journal

Winning can lead to losing when it comes to relationships

People feel good when they win because they have prevailed over challenges and, many times, over other people. This may be true for the world in general, but it can spell disaster when the strategy is attempted in a relationship.

According to Jeffrey Rubin, a noted psychotherapist, more divorce cases arise as the result of partners who try to defeat each other when they have disagreements. Trying to best your partner converts them into your opponent. Even though one person may prevail, both individuals lose. At worst, the losing partner may even try to retaliate against the winner often at inappropriate times or in destructive ways.

The signs of a lack of effort in understanding may include talking over your partner and telling them what you want them to hear rather than hearing what they are trying to tell you. A discussion that turns into a debate does not always have a positive outcome.

Standing your ground in an argument can be replaced with efforts to negotiate or to improve the overall relationship. It involves really listening to the other person and trying to understand their point of view rather than becoming defensive. Trying to understand someone’s position may not mean you agree with it, but it does let the other person know that you are taking them and their concerns seriously.

The same can be said for many divorces in Wisconsin. Although divorce can be a highly stressful time and it can be easy to fall into the trap of needing to win at all costs, such a strategy can be harmful to your interests. An experienced divorce attorney can help you chose your battles and develop an effective strategy to reach your goals.

Source: Huffington Post, “Winning in a Relationship is a Losing Strategy,” Jeffrey Rubin, 6/15/2011

Consider the tax implications of Wisconsin divorce

It seems natural to consider the tax consequences of financial decisions that we make, but many people overlook the fact that divorce involves making many financial decisions. Unfortunately, that often leads them to overlook the tax implications of their divorce agreement.

Whether you and your spouse are in agreement about nearly everything, or you are involved in a contentious battle, one thing is the same: your divorce will probably impact your taxes. It is important to consider the tax consequences of your divorce so that you can create a fair marital property settlement.

The following are some specific tax sensitive areas that should be considered by people who are considering divorce:

  • Alimony: Did you know that you can deduct alimony that you pay to a former spouse from your taxes? You must meet certain criteria, but this knowledge can make the lessen the impact of needing to pay alimony.
  • Qualified Domestic Relations Order, “QDRO”: A QDRO is a court order that will allow a spouse or former spouse to receive the benefit from the other spouse’s retirement account. Such amounts are included in income for tax purposes, so the receiving spouse must count the payments as income.
  • Divorce costs: Most of the legal fees and court costs for divorce are not deductible. However tax advice and legal fees to acquire alimony may be deductible, so it is a good idea to have a clear breakdown of the amounts you paid in your divorce.
  • Community Property: Wisconsin is a community property state. This means that there are special rules for determining the couple’s income after a divorce.

As you can see, the tax implications of a divorce are rather complex. Wisconsin couples who are considering a divorce, should consult with an experienced family law attorney who can walk them through these issues.

Source: Central Valley Business Times, “Tax provisions for 2011 regarding separation and divorce,” Alan Shattuck, Aug. 10, 2011

Health consequences may follow divorce

New research from the universities of Wisconsin and Chicago has found some surprising health consequences may follow divorce. While the findings are interesting, they by no means should be taken to indicate that divorce itself is unhealthy In fact, for many people it is the best option given their current relationship.

According to researchers, people who are divorced or widowed are 22 percent more likely than those who are married to have chronic health problems. Children of divorced parents can also suffer in school and can develop problems entering and maintaining relationships with they become adults.

Milwaukee readers should keep in mind that divorce could be a proxy for other things. If a divorce is stressful, for example, it could be the stress that leads to health conditions. While we have all heard stories about bitterly fought divorces that leave both parties hurt and angry, divorce does not have to be that way. And bear in mind that an unhappy marriage that continues past its expiration date can be stressful, too.

These days, many couples are turning to options like divorce mediation, which is supposed to make the whole process run more smoothly. In the event that divorce mediation is not right for your situation, hiring an attorney you trust and feel comfortable with will at least ease your mind by making you feel like your interests are protected and you are now less likely to get taken to the cleaners. One way to find an attorney you would like to work with is to contact your local bar association for a recommendation.

Source: The Herald-Tribune, “Silverberg: Divorce takes a toll,” Kathy Silverberg, Sept. 2, 2011.

A child-positive divorce can be fact, not fiction

True or false: divorce is invariably devastating to children.

The answer: false. A child psychologist who wrote a book on the behavior displayed by adolescents after their parents divorced said there is no question that children can thrive after their parents separate – as long as their parents do so with some thought and care.

There are plenty of frightening tales about the effects divorce has upon children, but in many instances, those stories contain merely a grain of truth and have been greatly exaggerated over time. It takes a little work to make sure your divorce is not unduly hard on your children, but it is not a Herculean task.

After one woman and her husband decided to divorce, for example, they made sure to stress to their two daughters that they would remain a family, that neither parent saw a divorce coming when they married and that each parent still loved both girls very much. It is probably a good idea to offer your children similar reassurances quite often. You may assume they already know you love them, but that’s the kind of thing it’s hard to repeat too often.

Another method many people have found to make divorce less acrimonious is to try divorce mediation. This less adversarial process doesn’t work in every circumstance, but in many cases it can be easier, cheaper and less draining for everyone involved than a traditional divorce might be.

If you and your spouse are thinking about separating, it might be best to speak to a family law attorney before the two of you agree on anything. Good divorce lawyers take the time to learn what sort of help and services you need and will be able to refer you to other professionals in the event that you need services, like financial advice or family counseling, which he or she cannot provide.

Source: The Wall Street Journal, “The Child-Focused Divorce,” Elizabeth Bernstein, Sept. 6. 2011.

Study finds men may gain weight after a divorce

Have you ever had a friend whom it seemed put on a few pounds after he got a divorce? You may not have been imagining it. A new study out of the University of Ohio in Columbus has found that while women tend to gain weight after marriage, men are more likely to gain weight after a divorce.

This study follows several others that have found other health risks associated with divorce, such as a shortened lifespan for divorced or widowed individuals and an increased susceptibility to chronic conditions. It is important to note, however, that these health consequences do not occur automatically when one divorces and can probably be overcome by consciously paying attention to one’s health.

The study’s author, a doctoral student in sociology at the University of Ohio, said that divorces for men and marriages for women seem to promote “weight gains that may be large enough to pose a health risk,” although in many cases the weight gain was not large enough to be a concern. In news coverage of his study, he has not publicized just how much of a weight gain may occur. Nor has he offered any reason for why men seem more likely to gain weight after a divorce, though some obvious factors may include changes in diet, exercise level and stress.

In both the case of women gaining weight after marriage and of men gaining weight after a divorce, the effects were less pronounced in people in their 20s and were more noticeable among those over 30. We gain weight more easily as we age, so there is obviously that correlation as well.

Of course, every person who is in the process of divorce has a laundry list of things to think about and health matters may not be tops on that list. It is vital to pay attention to one’s physical condition at any stage of life, however. If you are going through a divorce, make sure you do not forget to take care of yourself.

Source: United Press International, “Men pack on pounds after divorce,” Aug. 22, 2011.