Money & Divorce Blog
July 29, 2021
Misunderstanding What Really Happens When Dividing Debt in a Divorce
In a divorce you not only divide the marital assets but you also divide the marital debt. This may be a mortgage, credit cards, car loans, school loans. The divorce agreement will often itemize which party is assuming responsibility for each particular debt.
As an example: the wife had cosigned a student loan for her daughter and a car loan for her son. In the divorce agreement, the husband agreed to be responsible for the payment of both of those debts. The parties did nothing further and no additional explanation was given by the mediator or the attorneys. The parties divorced and all seemingly went according to plan.
One year later, two things happened: the husband lost his job and the wife decided she wanted to stop renting and buy a condo. Much to her dismay, she learned that the 2 loans counted against her in terms of her debt to credit ratio when applying for a mortgage. Worse, her husband stopped making payments and the creditors began coming after her.
When one party assumes payment of a debt, every effort should be made to refinance the loan in that party's name alone. Otherwise, the other party remains liable regardless of what the separation agreement says. If refinancing is not possible, consider setting side a sum of money that will be released and divided upon satisfaction of the debt.
This information is not intended to be a substitute for individualized legal advice. Please consult your legal advisor regarding your specific situation.
Posted by Renee Senes at 11:42 AM
June 9, 2021
10 is the Magic Number
Many women have insufficient credits to collect social security on their own record or will receive considerably less than their spouse at retirement. This may be due to years spent caring for children or lower earning.
If a couple is married for 10 years or more, the lower wage earner is entitled to receive half of her ex-spouse's Social Security at retirement. The higher wage earner's Social Security payments are unaffected.
Couples considering divorce who are close to that 10 year mark should wait just a little longer as that will increase retirement options for a wife with no reduction in her husband's payments.
Make certain you will pass the 10 year mark before the date of the final decree.
Posted by Renee Senes at 10:50 AM
April 6, 2021
Divorce, Alimony and Contributing to an IRA
With tax deadlines rapidly approaching, you may be wondering if you can contribute to your IRA based on the money you receive as alimony. The answer: It Depends!
The ability to contribute to an IRA requires that you have earned income. Usually, we think of earned income as money we get from our job. Earned income may include commissions, bonuses and income from self-employment. It also includes alimony on which you, as the recipient, pay taxes.
Prior to 2019 the spouse paying alimony received a tax deduction for the payment. These alimony payments were taxable to the recipient. Because they were taxable, they were considered earned income for the recipient. This enabled the spouse receiving alimony to make an IRA contribution even if that spouse had no other source of earned income.
The Tax Cut and Jobs Act (TCJA) of 2017 changed the taxation of alimony. For divorce agreements beginning on January 1, 2019, alimony is no longer deductible by the payor. It is now tax-free income to the recipient. This means that alimony no longer qualifies as earned income and cannot be used to fund an IRA.
Therefore, your ability to use alimony to fund an IRA depends on the date of your divorce, or divorce agreement modification. In short:
If you pay taxes on the alimony you receive you may count it to fund an IRA.
If you do not pay taxes on the alimony you receive you may not count it to fund an IRA
Even if you can no longer fund an IRA there are ways to set aside money on a tax deferred basis for retirement. Please consult with your financial advisor and accountant on how to manage money for your retirement.
This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.
Posted by Renee Senes at 12:14 PM
March 2, 2021
Tax Filing and Divorce
Right now you may be pulling together all of your tax records for last year and wondering if it would just be easier to file as single for 2020.
Here are some guidelines and considerations:
- If you are still in the process of getting a divorce and were not legally divorced on Dec. 31 you are not single. You generally must file jointly or married filing separately.
- If you were legally divorced by December 31, you are considered single for the entire year. Even if you actually got divorced on the 31st of the year, for tax purposes you are still single for the whole year – it is not a choice.
- If you were married on the last day of 2020 and are now divorced, you can still file a joint return with your ex-spouse.
In most cases, married filing jointly will be more favorable than married filing separately. Some reasons for going the separate route, even if it results in a higher tax bill may include:
- you do not trust your soon to be ex to honestly report income and you would prefer not to sign a joint return and expose yourself to liability
- your soon to be ex has significantly under withheld taxes or underpaid estimated quarterly taxes and will be liable for a big tax payment
- you will be entitled to a refund
- you have not filed tax returns for multiple years and wish to start cleaning this up before you get divorced.
Before making any decisions, please remember to consult with your accountant and with your divorce attorney.
Posted by Renee Senes at 1:26 PM
February 12, 2021
Eat the Big Frog First
Mark Twain is credited with having said, “If it's your job to eat a frog, it's best to do it first thing in the morning. And if it's your job to eat two frogs, it's best to eat the biggest one first.”
“Eat the big frog first” – this phrase has been widely used and written about with respect to things such as motivation, procrastination and time management. So, what is that frog and what does it have to do with divorce?
Your “frog” is your biggest, most important task. It's the one you have been delaying or postponing. It is likely also the one causing you the most anxiety right now.
What is your frog?
Perhaps it is finally taking the first step to get that divorce you have been thinking about for so long. This might include calling an attorney or mediator and setting up an informational appointment to understand your rights and the divorce process.
If you have already started the process your frog might be the financial statement you find so daunting. This might be a good time to set an appointment with a certified divorce financial analyst (CDFA) who can guide you through it.
Maybe your frog is the reality of selling your home and finding a new place to live. Reach out to a local real estate agent to come do a walk through and make recommendations on what repairs and cosmetic changes need to be done to put your house on the market for the best price.
Your frog may be telling your children. This is the time to set up an appointment with a family therapist so that you can carefully and lovingly prepare how to talk with the kids.
Whatever your frog, face it now and do it. Once that one task is done, the rest of the day will be an easier ride and you will gain both momentum and a sense of accomplishment.
We have relationships with wonderful attorneys, mediators, therapists, realtors, accountants and of course CDFA's. Reach out to us if you would like information.
With thanks to Debby McNulty of Thyme in the Garden, Maynard, MA who provided the inspiration for this blog entry http://www.thymeinthegarden.com/
Posted by Renee Senes at 12:57 PM
January 1st, 2021
Step Over the Line in the Sand
In the course of working as a CDFA I have had many clients who delayed getting divorced out of fear. I myself held on to my marriage way longer than I should have. I also agreed to things I never should have. Why? Fear.
The biggest fear, I believe, is not knowing what life on the other side of the divorce will look like: will I be able to support myself, will my children be okay, will I be able to keep the house, will I ever find someone to be with romantically, will I be able to retireÃÆ'Æ'¢ÃÆ'¢â€šÂ¬ÃÆ'‚¦. The list of “will I's” goes on and on.
A wonderful therapist once described this to me as “the line in the sand." Your life now is on one side of the line. You know just what it looks like from a financial and relationship standpoint. Even if it is not great, you know how to manage, how to cope and what to expect. Your life after divorce is the other side of that line. Once you step over, there's likely no turning back. This is scary to contemplate and even more frightening when you are not the one who wants the divorce.
This is where a CDFA can help. While I can't help with the relationship/romantic part, I can help with the financial piece. I can show you what your assets could look like after a divorce, whether you can afford to keep the house and what your cash flow will look like if you are paying or receiving child support or alimony.
If you have been struggling with the idea of getting divorced, my New Year's wish for you is to step over your own line in the sand. It's time to see what life on the other side looks like.
Wishing you a happy and a healthy 2021.
Posted by Renee Senes at 9:15 AM
September 23, 2020
Medicare and Divorce
Medicare open enrollment begins on October 15th. This is an annual period of time (October 15 through December 7) when current Medicare users can choose to re-evaluate part of their Medicare coverage (their Medicare Advantage/Part C and/or Part D plan) and compare it against all the other plans on the market.
If you are approaching retirement age and/or on a spouse's corporate plan, you need to understand your eligibility for health care coverage post-divorce. If you cannot remain on your spouse's plan as a divorced individual you may be entitled to 36 months of COBRA coverage (compared to 18 months if your employment is terminated). However, if you are 65 or older this is the time to enroll in Medicare. Ordinarily, if you did not enroll in Medicare when you were first eligible, you cannot use the fall open enrollment period to enroll. However, a divorce may trigger a special enrollment period if you got divorced or legally separated and lost health insurance. Note: Divorce or legal separation without losing coverage doesn't qualify you for a Special Enrollment Period. The special enrollment period is a 60 day window from the triggering event.
Most people become eligible for premium-free Part A Medicare coverage through their own work history or their spouse's work history. You are generally eligible for Part A coverage if you or your spouse worked and paid Medicare taxes for at least 10 years or 40 quarters.
If your own work history is not sufficient you may have options for obtaining Medicare benefits using your ex spouse's employment history. According to the Social Security Administration, in order to qualify for Medicare after a divorce you must meet the following conditions:
- Your marriage must have lasted at least 10 years or longer;
- You must be currently unmarried;
- You have reached the age of 62;
- Your ex-spouse is entitled to Social Security Retirement or disability benefits;
- The benefit you would receive based on your own work is less than the benefit you would receive based on your ex-spouse's work.
If all of those conditions apply, you may be entitled to premium-free Part A and Part B coverage with the same premium that all enrollees must pay for Part B coverage.
For additional information please visit the Medicare website: https://www.medicare.gov/
Posted by Renee Senes at 9:45 AM
June 15, 2020
Did COVID-19 end your marriage?
If your marriage was already on shaky ground before the coronavirus, it's possible that the stay-at-home advisories may have exacerbated your issues. If that happened to you, check out this article from MarketWatch.com-
Posted by David Chwalek at 7:50 AM
June 10, 2020
Senes presents at Family Law Conference 2020
At the end of May, Renee attended, and presented at, the 23rd Annual Family Law Conference 2020 (via Zoom, of course!). Sponsored by Massachusetts Continuing Legal Ed (MCLE), the annual family law conference is an opportunity to learn and network. For our clients who are divorcing, or contemplating divorce, Renee has updated information on the Courts and procedures going forward.
Posted by David Chwalek at 8:08 AM
June 9, 2020
Divorcing couples may get some relief from provision of CARES Act
Getting divorced is often described as one of the hardest things many people ever go through. Going through a divorce during a global pandemic when one or both spouses may be out of work is downright frightening. As our office mate, family law attorney Karla Mansur, explains in her recent blog post, Americans who have been impacted by COVID-19 can take retirement account withdrawals penalty free to help ease the financial burden of divorce. See the entire article here https://www.mansurlaw.com/retirement-account-withdrawals-penalty-free-under-cares-act-2020/
Posted by David Chwalek at 8:56 AM
May 26, 2020
Massachusetts Letter Regarding Reopening of the Courts
Posted by Renee Senes at 11:40 AM
May 5, 2020
Divorcing Couples Turn to CDFA Professionals
Renee was featured in an article in the May issue of Advisor Magazine... a good read about how Certified Divorce Financial Analysts can be integral to the divorce process.
Posted by David Chwalek at 11:35 AM
April 14, 2020
Cororavirus poses challenges for divorced parents
I saw this article online and thought it may be of interest...
Sheltering in place- with your ex-wife?
Posted by David Chwalek at 7:18 AM
April 11, 2020
Transitions: Divorce, Coronavirus and Starting Over
For those of you who are contemplating or in the midst of a divorce my heart goes out to you. Divorce, even in the best of times, is a difficult process. In the midst of a pandemic it may be positively overwhelming. You may be living/self-isolating/staying home with your spouse under tense circumstances. You may be co-parenting and concerned about children safely transitioning between homes. You may be worrying about finances, job layoffs, your ability to pay bills and how all of that will affect child or spousal support.
A dear friend of mine, who is also a therapist, recently sent out an email to a group of friends. In it she made note of the book Transitions by William Bridges. His theory is that transitions clear the ground for new growth. She explained that, according to Bridges, going through a major life transition is a three-phase process:
- The End – a letting go
- The Neutral Zone – a moratorium from the conventional activity of our everyday existence
- The Beginning – walking into our new selves and our new lives
My friend reasoned that you could apply this to what we are now experiencing globally with the pandemic. I feel you can also apply this personally to what you may now be experiencing with your divorce.
The End – In the midst of a pandemic, we are all going through a time of withdrawal, a separation from the people and the lives we had been living up until now. There are feelings of loss of the world we knew and were a part of.
A divorce has its own ending: your life is changing; you may find yourself estranged from some you counted as friends; you may be leaving a home you loved; you may be separated from your children. The family unit and lifestyle you knew is over and the vision you had of your future is gone.
The Neutral Zone – We are letting go of what was, what we've known and realizing we are in a new phase. There is a feeling of disorganization from the contexts in which we have known our lives to be. Things that used to seem important don't seem to matter as much now. Our structure is gone. We aren't sure what is happening, when it will be over and what it will look like when it is over. Nothing feels solid anymore.
A divorce has its own neutral zone: this is the part where you are in the midst of litigation or mediation; you find yourself letting go of a desired outcome in order to reach resolution; you no longer feel married but you're not yet single; every day is uncertain and you don't quite know what life post-divorce will offer you.
The Beginning – We start anew with who we have developed into and what we have learned. We have experienced separation, transition and then hopefully, incorporation.
The other side of a divorce offers your new beginning; a chance to build the life you want, to create the relationships that nourish you and, very importantly, to let go of the hurts and anger of the past.
Transition of any kind is not a neat and clean process but it is, hopefully, temporary.
With thanks to Joan Rubin-Deutsch, LICSW
Posted by Renee Senes at 5:24 PM
March 26, 2020
Co-Parenting During the Coronavirus
I am sharing with you an open letter from Chief Justice John D. Casey regarding co-parenting during Covid -19. I hope you will find it helpful.
Stay well, stay safe.
Posted by Renee Senes at 11:21 AM
March 5, 2020
Alimony as Available for an IRA
I hope you enjoyed the long hours of daylight savings time. Spring is right around the corner!
Also right around the corner, unfortunately, is tax season. So just a few tax highlights and reminders for you along with one big change:
1. IRA and Roth IRA contributions for 2019 and 2020 are $6,000 ($7,000 if you are age 50 or older). To contribute you must have earned income and certain limits and phase-outs apply.
2. For 2020 the limit on 401k plan deferrals will be $19,500 ($26,000 if you are age 50 or older).
3. The limit on deferrals to a Simple IRA is $13,500 ($16,500 if you are age 50 or older).
So, what is earned income?
- Alimony paid under a divorce agreement pre December 31, 2018, that is tax deductible to the payor and taxable to the recipient, will count as earned income to allow the recipient to fund an IRA
- For divorce agreements beginning on January 1, 2019, alimony will no longer be deductible by the payor and instead will be tax-free income to the recipient. This means that alimony no longer qualifies as earned income and cannot be used to fund an IRA. This is significant, as it changes the alimony tax law that has been in effect for more than 70 years.
Child support does not constitute earned income.
2019 contributions to your IRA, Roth IRA and SEP IRA can be made up until April 15th or until the deadline on your tax filing extension. Contributions for 2020 can be made now.
David and I are happy to assist you with your retirement plan contributions for 2019 and 2020.
Please give us a call. We look forward to talking with you.
This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.
Posted by Renee Senes at 6:45 PM
February 15, 2019
How Much is Enough to Have Saved at Every Age
As we approach tax season, I thought this would be an interesting piece for our divorcing clients.
In its February 4, 2019 issue, Investment News Magazine published a summary by Fidelity offering rules of thumb about how much you should have for retirement savings at various ages.
Since divorce means dividing assets, including retirement assets, this can be a useful guideline. Please remember, though, that it is just a guideline. You may need significantly more, or be comfortable with significantly less, depending on your own situation and lifestyle.
So, per Fidelity, the numbers please...
Ages 20-29: By age 30, you should have one year's salary saved for retirement
Ages 30-39: By age 40, you should have three (3) times your annual salary saved
Ages 40-49: By age 50, you should have six (6) times your annual salary saved
Ages 50-59: By age 60, you should have eight (8) times your annual salary saved
Ages 60-69: By age 67, you should have ten (10) times your annual salary saved.
Investment News: February 4, 2019
Following this rule of thumb, a person earning $50,000 annually would have $500,000 saved by age 67 while someone earning $100,000 annually would have $1,000,000 saved by age 67.
As an interesting contrast, Fidelity reports that the average 401(k) plan balance for those in the age 60-69 bracket is only $196,600 and the median 401(k) plan balance in the same age bracket is $63,000.
Post-divorce you may need to save a bit more aggressively for retirement. We are happy to run cash flow and income projections for you to alleviate some of the financial anxiety that comes with divorce.
Remember you have until the due date of your tax return to make 2018 IRA, SEP IRA and Roth IRA contributions.
Posted by Renee Senes at 12:25 PM
July 23, 2018
Special Considerations in a Grey Divorce
Although the hair on your head may or may not be grey (only your hairdresser knows for sure), if you are an older couple divorcing after a long-term marriage you are part of a phenomenon called The Greying of Divorce.
A grey divorce raises a number of challenging questions that are unique to aging and can be further compounded if one party is more than 5 years older or younger than the other. Among these are:
Alimony
You may be aware that in a long-term marriage, over 20 years, alimony typically continues until the payor reaches full retirement age (FRA) for social security purposes. This is somewhere between ages 66 and 67 depending on the year of birth. The court has discretion to order alimony to continue past FRA if the payor is still working.
Example: You are 60 and your spouse, the higher wage earner, is 65 and plans to retire at his/her FRA of 66. It is possible that you will not receive alimony. Are there sufficient assets to provide income? Can the assets be divided other than 50/50 to provide income?
Health Insurance
Massachusetts provides that a divorced spouse may stay on the employed spouse's health insurance so long as it is available. Using the same example as above, your spouse decides to retire at age 66. He/she is Medicare eligible however you are not for several more years. How will you obtain health insurance coverage? What will it cost and who will pay for the coverage?
Social Security
Many people overlook Social Security benefits when getting divorced. While these benefits are not assets that a divorce court can divide, the rules about benefits are relevant to your post-divorce life. This is especially true for those getting divorced in their later years.
If you are divorced, but your marriage lasted 10 years or longer, you can receive benefits on your ex-spouse's record (even if he or she has remarried) if:
- You are unmarried
- You are age 62 or older;
- Your ex-spouse is entitled to Social Security retirement or disability benefits and
- The benefit you are entitled to receive based on your own work is less than the benefit you would receive based on your ex-spouse's work (1/2 of his/her benefit at full retirement age).
http://www.ssa.gov/retire2/divspouse.htm
One issue that certainly needs to be addressed is that the social security regulations require that you may receive benefits if your ex can qualify for them, i.e. is at least age 62. However, if your ex has not applied for benefits you can receive benefits on his or her record only if you have been divorced for at least two years.
This two year restriction is of critical importance to an older couple contemplating divorce.
Example: Bob and Carol are getting divorced after 30 years of marriage
Bob is 66 (his FRA) but intends to delay taking social security until age 70 to maximize his benefit.
Carol is 62 with minimal social security of her own.
Because Bob has not applied for benefits, even though he is eligible, Carol will not be able to collect on his social security until the couple has been divorced for 2 years. Will Carol have sufficient income to cover her bills until she can claim at age 64?
Pensions
Although they are few and disappearing quickly, corporate pensions do still exist. Most corporate pensions allow you to create what is called a separate interest. This means that the pension can be divided, each party receives their own share and may begin collecting when they are individually eligible even if the ex-spouse has not begun collecting.
Public pensions (police, firefighter, teacher, government employee) typically do not provide for a separate interest. This means you may not be able to begin collecting until your ex-spouse decides to collect.
Example: You are 65 and your spouse, who has the pension, is also 65. Your spouse does not intend to collect on his/her pension until age 70. It is also very likely that he or she has no social security benefits as many public employees do not pay into social security. Would you be better off foregoing the pension and receiving marital assets in lieu of your share of the pension? Are there sufficient marital assets to do this? If not, how will you generate income between ages 65 and 70?
Looking at the unique challenges of a grey divorce, consider working with a Certified Divorce Financial Analyst (CDFA). A CDFA can assist by helping you to analyze your income and expenses, chart your cash flow and show you where adjustments need to be made to stabilize your income and assets.
Posted by Renee Senes at 12:50 PM
February 7, 2018
Since My Divorce blog
We were recently featured as guests on Mandy Walker's Conversations About Divorce podcast. In that episode, posted February 5th, we discuss the actions involved with preparing for divorce- namely the compilation and valuation of marital assets.
Ms. Walker is a divorce coach, mediator and Certified Divorce Financial Analyst based in Colorado. Her blog, Since My Divorce, and accompanying podcasts are excellent resources for people considering- or already going through- a divorce. Some recent topics include the following:
- What will happen to my business in my divorce?
- How you can embrace the holidays while dealing with your divorce
- The things you need to know about pets and divorce
- How to negotiate your parenting time without hurting your child
- Much, much more!
If you are looking for an excellent online resource covering a wide range of divorce-related topics, please check out Mandy's work.
Posted by David Chwalek at 8:15 AM
January 5, 2018
Alimony Under the New Tax Law
If you are contemplating divorce or in the midst of divorce, you are no doubt aware that the tax deduction for alimony will change on January 1, 2019. For agreements signed after that date alimony will no longer be tax deductible by the person who is making the payment.
What does this mean in practical terms? Let's look at a hypothetical example.
Dick and Jane have been married for 20 years. Dick earns $150,000. Jane earns $50,000.
Dick, feeling generous, agrees to pay Jane 35% of the difference in their incomes as alimony for a total of $35,000 annually.
Without considering the impact of taxes
Dick now has 115,000 in income
Jane now has 85,000 in income
Under current tax law, Dick may deduct the alimony he pays from his income. Jane will pay the taxes on the alimony she receives. Calculating Federal tax only, the parties' respective incomes will look like this:
Dick
150,000 income
-35,000 alimony
-19,010 federal taxes after deduction for alimony
$95,990 net to Dick
Jane
50,000 income
+35,000 alimony
-12,005 federal taxes with inclusion of alimony as income
$72,995 net to Jane
If their agreement is signed after January 1, 2019, Dick will no longer receive a tax deduction for paying alimony. Calculating Federal tax only, the parties' respective incomes will now look like this:
Dick
150,000 income
-35,000 alimony
-27,410 federal taxes with no deduction for alimony
$87,590 net to Dick
Jane
50,000 income
+35,000 alimony
- 4,373 federal taxes without inclusion of alimony as income
$80,627 net to Jane
The change in the tax law costs Dick $8,400 in income. It gives Jane an additional $7,632 in income.
In order to get back to “square 1”, the original 95,990 that Dick anticipated as his net, he will need to reduce the alimony that he pays to Jane by $8,400.
Dick now offers to pay 26,600 to Jane as alimony (26.60% of the difference in their incomes)
Dick
150,000 income
-26,600 alimony
-27,410 federal taxes with no deduction for alimony
$95,990 net to Dick
Jane
50,000 income
+26,600 alimony
- 4,373 federal taxes without inclusion of alimony as income
$72,227 net to Jane
Massachusetts alimony has typically been in a range of 30-35% of the difference in the income of the parties. Will this need to be changed?
This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.
Posted by Renee Senes at 1:25 PM
November 22, 2017
Will Alimony Still Be Tax-Deductible Under Trump's Tax Plan?
If President Trump's tax plan passes, it could be bad news for alimony payors getting divorced in 2018... check out the article from marketwatch.com for more details.
Posted by David Chwalek at 1:15 PM
November 13, 2017
Estate and Financial Planning After Your Divorce- or Why You Need the "Purple Book"
Here's another entry in our post-divorce TO DO list.
One of the nice things about being married - yes there are some nice things – is that there is someone in your life who knows where everything is should something happen to you. Now that you're divorced you are likely living on your own, perhaps traveling more and your spouse is no longer the default person on your financial or estate planning documents. How will anyone know where your estate planning documents are, where your bank accounts are, your investments and what you would like done with everything?
Enter the “Purple Book."
I first started my purple book shortly before a post-divorce trip to Europe when I realized that my kids would have absolutely no idea where to find anything if I didn't come back (which included fantasies of meeting a hot European guy and running away). I bought a large 3 ring binder in bright purple both because I like the color and also because nothing else in my home office was purple – it really stands out.
The binder has multiple sections and I update it yearly – usually before I take another trip.
Section 1 contains an overview of who to contact. My suggestion for you is to include the following names and contact information in here:
Accountant
Attorney
Financial Planner
Funeral home and cemetery
Church or synagogue
Section 2 contains a list of all bank and brokerage accounts. Behind the list is a statement for each account so that account numbers and locations are easily available.
Section 3 contains a list of all retirement accounts: IRA, ROTH, SEP, 401k. I would include annuities in here as well. Again, behind the list is a statement for each account along with an explanation for my kids of how to handle retirement accounts – "This money is taxable. DO NOT take it all out at once!!!!!"
Section 4 is an explanation of personal items such as jewelry, artwork, furnishings and things that have sentimental value.
Section 5 is a copy of my estate planning documents: will, trust, durable power of attorney, health care proxy.
Once set up, it's easy to maintain and update. And, of course, my kids know where to find it.
Posted by Renee Senes at 10:11 AM
October 24, 2017
Baby Boomers are Divorcing at a Stunning Rate
Last week I saw an article on Marketwatch.com that caught my eye so I thought I'd share it here.
The rate of "gray" divorce- or those occuring later in life- has skyrocketed. For why it's happening and the consequences, check out the article by Angela Moore.
Posted by David Chwalek at 9:20 AM
September 6, 2017
Doing the Numbers
Your attorney tells you that you will be receiving $60,000 a year in alimony. Are you thrilled or panicked?
How do you know if this is a good offer?
Let's do the numbers.
The alimony will be taxable to you. Assuming this is your only income and you are single with no dependents, you will pay:
- 8,145 in Federal taxes and
- 2,530 in Massachusetts state taxes.
This leaves you with 49,325 for living expenses or 4,111 per month.
Let's further assume that your rent is 24,000 per year or 2,000 per month.
This leaves you with 25,325 or 2,110 per month for all the rest of your expenses. Your expenses include:
Heat
Electricity
Cable and internet
Phone and cell phone
Food
Car insurance
Medical insurance if not covered by your ex
Medical co-pays
Haircuts, manicures
Clothing
Vacations
Pets
And oh, by the way, the $60,000 you receive in alimony includes 15,000 that will be paid from your ex-spouse's annual bonus, if and when received. What does this mean? It means that your alimony payment as a stream of steady income is now 45,000 or 3,750 per month and the additional 15,000 will show up in a lump sum when (and if) your ex gets paid.
Redoing the numbers, monthly you now have 3,750, your rent is 2,000 and you are left with 1,750 for everything else until the bonus arrives.
Can you make it work?
Posted by Renee Senes at 8:16 AM
August 7, 2017
The Long Term Benefit of Getting Along
Four years ago David wrote a post for this blog entitled Why Can't We All Just Get Along? In it he asked couples to look at whether they could work together to find an equitable solution that would truly benefit both parties.
Recently I had an opportunity to see first-hand the long term benefit of not throwing your spouse under the proverbial bus in your divorce. While I won't say that my divorce was amiable, it was civil. We didn't draw and quarter each other, shed too much blood, there was no loss of life or limb. All kidding aside, we left each other reasonably whole and agreed that the welfare of our children was paramount. At the time they were 16 and 11.
The 11 year old is now 26 and was recently promoted to Air Force Staff Sergeant in a big military graduation and awards ceremony. He asked his dad and me to join him for the event.
My ex and I drove to Logan Airport together, flew to Oklahoma, played tourist in Oklahoma while our son worked, met all our son's friends and superior officers, joyously attended graduation, played golf (I lost!), took his sports cars to a car show with him, watched him play soccer, walked his dog and did some construction on his house (I supervised while father and son did demolition). Our son proudly introduced us to everyone as his mom and his dad – not my mom and dad who are divorced, or my mom and dad who can't stand to be in the same room with each other, or my dad who is here but mom wouldn't come because my dad is here.
Five days later we flew home, missed our connecting flight, spent an unexpected night in Atlanta and flew to Boston the next morning. My ex drove me home, we hugged goodbye and went back to our separate lives.
I hope there will be many more life events that we will get to share.
Think about all of the life events you would like to share with your children. Wouldn't it be wonderful for all if your ex-spouse and you could be there together. What can you do today to make that tomorrow a reality?
Posted by Renee Senes at 10:04 AM
June 6, 2017
What's Important About Money to You?
Our clients always want to know:
How much money do I need for retirement?
How much money do I need in an emergency fund?
Will what I have be enough?
They always seem disappointed to learn that there's no easy answer.
Of course, we can give you lots of formulas:
- 3-6 months of expenses in an emergency fund
- 3x your current salary by age 40
- 4x your current salary by age 45
- 8 times (X) your salary by age 60
BUT
In the end, those are just formulas...
We have clients who live comfortably on social security and not much more.
We have other clients for whom millions is not enough.
What makes the difference?
Lifestyle certainly...
But more importantly – what's important about money to them.
Everyone has attitudes about money, many of which were shaped in our childhoods. Why we save, or don't save, why we spend, or don't spend, what amount of money in the bank makes us feel comfortable. These are all ingrained.
Money may mean:
- Security
- Love
- Power
- Status
- Independence
- Freedom
Money may be
- A tool
- A means to an end
- THE end
Most of us probably grew up with parents who didn't talk about money. In fact, most of us would probably rather talk about our sex lives rather than tell each other how much we earn!
Did you know, however, that understanding what money means to you can actually help you set financial goals that are realistic and comfortable for you? Goals that you will be able to keep because they resonate with you deep inside.
While I'm not certain of the question's origins, I first learned of it about a decade ago when I attended a seminar by Bill Bachrach. It was about the importance of understanding your values when making major financial decisions.
The purpose of the exercise I'm going to describe isn't to think in terms of goals. It's meant to go deeper than that, or to get at the reason why we have certain goals. The first answers people come up with are usually easy — things like security and freedom. But once we pause and really think, we can move even deeper still, or into what might be called the “why” of money. This question can get uncomfortable because it forces us to get really clear about our underlying reason for doing things. It also forces us to face some inconsistencies in our lives.
This is a great exercise to do when going through a divorce. In fact, at that seminar all those years ago, I was in the midst of my divorce and panicking about finances. If possible, do this with a friend but you can also do this by yourself.
Each of you asks the other – or yourself: What does money mean to you?
The answer to that question – let's say security – becomes the next question.
What does security mean to you?
The answer to that question becomes the next question – whether it's one word or a whole sentence.
Keep going until you've done about 7 or 8.
For me, the inconsistency is time – money to me is security, freedom from worry, which allows me to do the things I love, spend time with people I love, give back to the community, and learn new things.
But when I find myself working late nights and weekends am I losing sight of my own personal “why” of money. Am I working more hours to make more money and not having enough time? When you're arguing with your ex-spouse about asset division, child support or alimony are you losing sight of your own personal “why” of money?
This year I spent 10 days in Costa Rica with my son, Alec. Obviously, money, and some good financial planning, allowed me to do this. We kayaked, snorkeled, rappelled down waterfalls, went white water rafting, did a free fall Tarzan swing and went superman zip lining. The ability to have that time was precious.
In the Superman style zip line, the rope ties on your back, and you are “flying” forward with your body facing down, like Superman. I thought the scariness level of this Superman style was going to be like the regular zip line, having just done 10 of those. Nope! From the point of view of technique, it's actually easier, because you do nothing, while in zip line you need to know how to brake and stay positioned so you don't spin in midair. However, in the regular zip line, your hand is holding on to the rope. While in the Superman style, your arms are stretched wide to right and left like well Superman!
In the regular zip line there is a waist belt, a leg belt for each leg, a shoulder harness and a rope to hold on to connecting the zip lines and me attached through a big carabiner in front of my stomach. A safety rope, is attached just in case the main rope fails.
The shoulder harness is not used in the superman and because you are face down there's nothing to hold on to. I never thought of this before of this before, but apparently, at least for me, holding on to something, as useless as it is, brings a sense of security. When your hands can't hold on, you feel helpless. Powerless. Not in control. The worst thing was, not only that you “don't need” to hold on, but you “must not” hold on! You are sternly told, as they push you off “Don't touch the rope”!
Holding the rope on your back is virtually impossible anyway, holding the line in front is dangerous. Even if you don't hurt yourself, you might accidentally slow down and stop in the middle of the ride, hanging high from the ground.
Can you see all the comparisons to a divorce? I can! Holding on to your marriage when it's over by being unwilling to compromise and continuously arguing about money can also hurt you. Knowing what's important about money to you can help you quantify just what you're truly arguing about, how much is really enough and when you need to just let go.
What's important about money to you? The answer should be an emotion that is your inner driving force.
Posted by Renee Senes at 10:47 AM
Wednesday, April 5, 2017
What happens to the deed to my house after my divorce?
Here's another entry in our post-divorce TO DO list.
Very often one party keeps the house. Make sure to record a deed transferring ownership of the property. This is a simple transaction that can be handled by your attorney for a nominal cost. This of course assumes you have squared away all issues surrounding the mortgage as we discussed in prior blog posts.
But what happens if you continue to hold the property jointly for a period of years?
Massachusetts has a form of property ownership known as tenants by the entirety. This is a distinctive form of joint ownership available only to married couples. In addition to rights of survivorship it affords unique protection from creditors. Even if you continue to hold your home jointly post-divorce your status as tenants by the entirety will automatically be severed.
Upon divorce the tenancy by the entirety converts, by operation of law, into a tenancy in common. A tenancy in common is a way two or more people can own property together, in equal or unequal shares. Each owner has an undivided interest in the property, an equal right to use the property, and the right to leave his or her interest upon death to chosen beneficiaries.
What does this mean to you? If your spouse dies, his/her share could be passed by his or her will to someone other than you. Obviously, this was not your intent when you decided to continue to hold the house as a joint asset.
We consulted real estate attorney Chris Worthy for advice.
http://www.bullwinkelbrooks.com/christopher-c.-worthy.html
“If you and your ex-spouse have decided to continue to own the house as a joint asset after the divorce, the term “joint” has a very specific meaning. For people who are not married, joint ownership refers to Joint Tenants With Rights of Survivorship, or JTWROS. JTWROS is similar to Tenants by the Entirety, in that if one owner dies, the other owner will automatically own 100% of the property.
JTWROS is available to anyone, not just married couples, but JTWROS does not provide the same creditor protection that married couples have as Tenants by the Entirety. In certain post-divorce situations, JTWROS can be beneficial by keeping the “joint” ownership of the asset intact, so that in the event one owner dies, his or her share will not be passed to a third party.
JTWROS can be beneficial for the knowledge that if one owner dies, the surviving owner will automatically own 100% of the home without worrying about a will or dealing with a court, but you still have to be careful. JTWROS does not prevent one owner from selling or mortgaging the house without the cooperation of the other owner. Instead, such an attempt will automatically convert the ownership back to a Tenancy in Common.
If you wish to convert the Tenancy in Common that occurs automatically after a divorce to JTWROS, a deed needs to be prepared and recorded. In most cases this will be a simple, low cost process that a real estate attorney can handle for you.”
As you can see, there are issues for you to consider and that need to be addressed regarding your house post divorce. Put these on your TO DO list.
This information is not intended to be a substitute for individualized legal advice. Please consult your legal advisor regarding your specific situation.
Posted by Renee Senes at 1:35 PM
Friday, March 3, 2017
Could I Qualify as a First Time Home Buyer After My Divorce?
I recently had a wonderful opportunity to attend an informative meeting with Angelo S. Nuby, Business Development Officer for the Massachusetts Housing Finance Agency. I learned so much and the piece that I want to pass along to you in this blog post is –
You CAN be a first time home buyer even if you have already owned a house!
This is wonderful news for people going through a divorce because financing for 1st time home buyers could mean the difference between you being able to purchase a new home or renting for the foreseeable future.
Let's take this piece by piece and see how you might be able to use this:
Who is a 1st time home buyer?
A 1st time home buyer, contrary to what you may think, is not simply someone who has never owned a home. Rather, it is someone who has had no interest in real estate in the past 3 years. Therefore, if in your divorce, you have sold your house, or you deeded your house to your ex spouse as part of the settlement, you may be able to start the clock ticking on that 3 year period.
Why is it preferable to be a 1st time home buyer?
Unlike a conventional mortgage, which may require a 20% down payment, a loan through MassHousing only requires a 3% down payment. On a home selling for $350,000 that's the difference between coming up with $70,000 vs. $10,500.
Are there eligibility requirements?
- You meet the definition, above, of a 1st time home buyer – the 3 year rule
- You may be eligible if your gross income is under $126,900
- There is no asset test
- You are able to qualify for a conventional mortgage (FYI – your mom can't co-sign for you)
What should I do next?
MassHousing requires that all participants in their program complete a 1st time homebuyers class.
For more information please go to www.masshousing.com
Posted by Renee Senes at 7:45 AM
Wednesday, February 1, 2017
Getting a Mortgage Post-Divorce
Continuing with our post-divorce “TO DO” list, many of our clients find themselves needing to obtain a mortgage either to refinance their existing home or to purchase a new home. Hopefully this is something you have considered in the division of your assets and already planned for as a part of your divorce process.
Here are some good facts for you to know:
Establishing and maintaining good credit is of paramount importance. To check your credit history log onto www.annualcreditreport.com and obtain a free copy of your credit report.
Try to have at least 3 separate lines of credit in your own name, each having a 2 year history. These may include store credit cards, Visa or MasterCard and installment payments such as a car loan. Debit cards and gas cards do not count as lines of credit.
Your credit score can be negatively impacted if you have too many inquiries or if your outstanding balance on each card is greater than 1/3 of the limit. For example, if your credit limit is $5,000 you should try to keep your balance below $1,650 on that card.
Alimony and child support can be used as income for the purposes of obtaining a mortgage however most lenders will not consider them as income until you can show that you have been receiving payments for at least 6 months. Lenders need to verify receipt by showing the source of the direct deposit or copies of the checks. You can take a picture of the check before depositing it and keep it as verification to match up with your bank statements when applying for a mortgage. Keep the deposits separate from other deposits so the amount of the check can be matched with the deposit.
Child support, in order to be counted, must be guaranteed to continue for at least 3 years. This is important!!! Although child support in Massachusetts can run until graduation from college (age 23) there is no mandate that your child attend college. Therefore, the lenders ability to count child support as income for a mortgage can end if your youngest child is over 15. Please check with your lender about this.
If you agree to hold your house jointly, or not to refinance post-divorce, how does the spouse who is not living in the home (let's say “the husband”) obtain a mortgage? If it is written into your agreement that the spouse residing in the home (let's say “the wife”) is solely liable for the mortgage payment, then the husband can remain on the mortgage and not have it counted against him as a liability when he applies for a mortgage in his own name on a new residence.
Thank you to Chari Goodman for providing this helpful information, NMLS # 424923, Senior Loan Officer at Mortgage Network.
Chari Goodman and Mortgage Network are not affiliated with Senes & Chwalek Financial Advisors.
Posted by Renee Senes at 8:30 AM
Friday, January 6, 2017
Don't Forget to Update Your Estate Documents
Happy New Year to all. I hope this year brings the changes you were looking for or the comfort and acceptance you need.
David and I have written in the past about maintaining a post-divorce “TO DO” list. Many of our clients have young children, so high on our “to do” list is making sure that you redo all of your estate planning documents, especially to provide guardianship for your children.
Remember that should you die, your spouse is still the legal parent/guardian of your minor child. So selecting a guardian does not usurp your ex-spouse's parental rights. It selects a third party in the event that both of you were to die. Therefore, it would be best if you and your ex talked about this together.
Envision the scenario: you name your sister as the children's guardian; your ex names his/her brother. The guardian who ends up with the children may depend on which of you dies first- not what you truly wanted. Nor do you ever want a court battle about guardianship. Talk about this with your ex. It will be one of many discussions you will have over the years regarding your children, so get used to it now. My children are 30 and 25, and my ex and I are still having discussions about “the kids!"
There are many other documents you will need to update or redo. Here, compliments of David and Paula Feakes of The Parents Estate Planning Law Firm, P.C., Acton, Massachusetts is a partial list:
1. Make a new will
2. Create a living trust
3. Update your health care proxy
4. Update your durable power of attorney
5. Change your beneficiary designations
For more information, go to www.parentsestateplanning.com
You've worked hard going through your divorce. Take this last step to protect yourself, your assets and those you love.
Senes & Chwalek Financial Adivsors and LPL Financial do not provide legal advice or services. Please consult your legal advisor regarding your specific situation.
David and Paule Feakes and The Parents Estate Planning Law Firm, P.C. are not affiliated with Senes & Chwalek Financial Advisors.
Posted by Renee Senes at 9:48 AM