July 14, 2011 by wendy.

According to Jeff Landers in his most recent article, “ Financial Tips for Women Facing Gray Divorce,” (ForbesWomen, June, 2011) the number of older people getting divorced is increasing.  In my own practice, I have seen a series of older (ages 55 and up) as mediation clients, so his assertions may be accurate.  Divorce presents unique financial issues for older women.

In my experience, older women have longer life expectancies these days, are more often disabled, have traditionally earned less than their male spouses, have often spent more time out of the work force raising families, and are less likely to have a pension or a large retirement account.  These women may have been looking forward to retiring in 5 to 10 years, if they have not already retired, and so they were not exactly planning to have a long, successful, and lucrative career in their sunset years.  With the current recession, people with extensive experience are finding it difficult to land a job;  someone who has retired, hasn’t worked for a number of years, or is winding down their career will find it a challenge to produce sufficient income on which to live until or throughout their retirement.

Divorce can wreak havoc on the best-designed plans.  According to Mr. Landers, older women confronting divorce can help reduce the impact by paying attention to his tips. 

The first tip he suggests is to divorce-proof your business.  These days, either spouse can own a business, and often the business is a very large part of the marital assets. If the business needs to be split, sometimes it must be sold or somehow separated, especially of the court orders the sale of the business.  This may make income from the business vanish, decrease, or be uncertain.  Moreover, the business may only fetch pennies on the dollar if sold in a poor market.  Various techniques exist for avoiding such a split, such as a property settlement agreement, alimony (or maintenance), or trading for other assets.   (or be sure to get your share)

Retirement funds, such as pensions, employee retirement accounts, and IRAs often make up another very large portion of the marital assets.  Pensions and employee retirement accounts have special rules for transferring part or all of their benefits to the other spouse in a divorce.  Mr. Landers highly recommends that older women in divorce ensure that their attorneys (if they are using attorneys) completely follow up on finishing the transfers of such assets.

Death and disability can reduce or eliminate payments, such as maintenance, child support, or property settlements, which older divorcing women may depend on.   Having a life insurance policy in a sufficient amount to cover a sudden death of the payor is often critical in these instances. 

Mr. Landers also mentions that in the long run, income may be insufficient to meet the needs of some divorcing spouses.  He recommends consulting a divorce planner or divorce financial analyst to obtain assistance in cash flow requirements.  This is an excellent idea – you can find qualified experts at the Institute for Divorce Financial analysts website - www.institutedfa.com.

Finally, divorcing readers are reminded to finish the paperwork after the divorce by changing beneficiaries on their retirement accounts. I would suggest also changing beneficiaries on bank accounts, investments, insurance policies (unless the settlement agreement requires maintaining the spouse’s name on any of these accounts).  Divorcing people should also discuss will and/or trust account changes with an estate planning attorney.  

Mr. Landers has put together an excellent list of ideas for the graying divorce – and there are many more that can be used in specific instances, depending on the situation.

I think that older women getting divorced are very much at risk for poorer financial futures.  It is critical that they receive quality financial advice when going through divorce.

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July 12, 2011 by wendy.

The divorce rate seems to have dropped during the recession.  Some people who have contacted me told me that they have decided to stay together because they “cannot afford” to get divorced.  The reasons given to me are usually one or more of the following:  one spouse has lost their job, the couple’s house is “underwater”, or both are too deeply in debt to afford the court filing fees. 

A

nother set of reasons was offered by Susan Gregory Thomas in her article “The Divorce Generation,” published in the Wall Street Journal on July 9, 2011.  According to Ms. Thomas, many Generation X parents experienced traumatizing divorces when their own parents divorced.  Thus, many Gen X parents are convinced that they will stay together, for the sake of the children.   She describes the lifestyle for many Generation X couples – they may marry later, be more discriminating about who they marry, and live together prior to marriage to make sure they will be compatible roommates.  Although the statistics Ms. Thomas provided indicate that the divorce rate is lower, divorces still occur, even in the best of situations.

She discusses that although many divorces are painful, even wrenching, that some of the intensely negative feelings can be ameliorated by a so-called “friendly divorce.”.  Many Gen X parents are using alternatives to divorce, such as mediation, instead of the traditional  two-attorny, confilct-driven court case type of divorces.  Mediation does, indeed, help couples to reach their won agreements, develop workable parenting plans, and allows couples to retain a more cordial relationship.  After all, if they have children, they will need to be able to speak civilly and work out issues for quite some time into the futue.  It sounds like many Gen X parents are willing to try a different way of handling divorce - and kudos to them for being open-minded!

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March 24, 2011 by wendy.

I have seen a large number of couples come through my door for divorce mediation.  The reasons for the divorce are usually as varied as the relationship between the individuals involved.  However, almost all of my clients have told me that they are saddened by the divorce.  This sadness may involve any number of things, such as the loss of what was a wonderful romance between childhood sweethearts, or a view of a future without companionship, or maybe even the dissolution of hopes and dreams of a future together.  Sometimes one party really wants the divorce as soon as possible, and good riddance to the spouse.  Even in these instances, spouses have told me that they felt sad about how the marriage has ended. 

Psychologists have said that sadness or grief takes time to heal, and everyone heals in their own way.  Some heal faster, and yet other people take quite some time.  I used to wonder how people could dissolve a marriage without hurting the other person.  I am not sure it can be done, but certainly each parties’ actions can at least help to minimize the sadness and grief.  Sadness appears to generally be an inherent part of divorce.  I don’t think there is any way around it.  If any of my readers have any suggetions, please let me know!

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January 13, 2011 by wendy.

It is the New Year and it seems like people who held off from making major changes or decisions in their lives begin to make some movement.  Some begin making the changes, and others begin exploring the pros and cons of the changes.  It certainly is true about divorce.  Few people actually initiate divorces between mid-November and the end of the year.  I think it is just too depressing, and with people’s busy schedules, the holidays are too hectic to add additional stresses and work.  Some years ago, one of my friends waited until the first of the year to tell her philandering husband he was being dumped.  She said it was the longest month in her life!

Once she got through the month, she began to systematically act towards getting divorced.  She took early retirement, moved to another state, obtained legal residency, and then filed for divorce.  Divorce laws in her previous state were not advantageous to her financial situation;  thus the reason to file for divorce after she moved.

Every year I notice the increase in calls inquiring about my mediation and divorce services in January.  This continues throughout the first part of the year, and often drops of by mid- to late-October.  Many people know that they will need to make a decision and act on it.  It just seems like a fresher start when the new year rolls around.

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October 22, 2010 by wendy.

One of the values of having a qualified mediator helping clients resolve their differences is the element of calm that he or she can inject into mediation. Clients who may have developed unproductive and emotional ways of dealing with differences try very hard to be more respectful to the other spouse.  Spouses try to communicate in a more productive way and stick to the issue at hand.  People think more clearly when they are calm and their emotions are in check.

The same is true after the divorce.  I have had upset clients contact me after the divorce, often because the action items spelled out in their Memorandum of Understanding (Settlement Agreement) have not been completed within the time period specified.  I point out that it may not be simply a matter of the other ex-spouse being difficult or vengeful.  It is often contingent upon the other, now ex-spouse to perform some actions, such as transferring funds, refinancing a house, or moving their belongings from the family house, and a myriad of other items.  Sometimes the action is difficult or impossible for the client to complete in the time frame specified, such as refinancing the house.  The closing may have been delayed due to the request by the mortgage company for additional paperwork, or perhaps the spouse is unable to sell the family house because the neighborhood is full of similar houses for sale. 

I often first suggest that the client telephoning me speak with the ex-spouse to understand what is causing the delay.  Sometimes the delay is truly out of the control of the other party, but they are actively working on the issue to have it concluded as soon as possible.  In other instances, the ex-spouse may have forgotten about the action they were supposed to take, have been ill, or perhaps even overwhelmed with the process and establishing their new life.  I also suggest that the calling party offer to assist the ex-spouse in beginning or finishing the action or actions in question.  I point out that, after all, it is to their benefit to help the ex-spouse resolve the action item(s), even if it requires additional time and energy on their part. 

If all else fails, the parties can come back to mediation and re-negotiate the terms their settlement agreement.  Some have done so – especially due to the unexpected meltdown in the economy and the real estate market.  I have found that if parties have mediated in the past in good faith, there often remains at least some element of trust and partnership to be able to work through these issues, either by themselves or with the assistance of a mediator.  It is certainly a better alternative than going to court. 

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August 16, 2010 by wendy.

I have received calls and emails from mediation clients from a year or two ago about one of the party not fulfilling the terms of Settlement Agreement that they both signed.  In some cases, some former clients may have some substance or emotional issues impede their ability to deal effectively with their family situations and moving ahead on finishing financial issues. However, in other instances, the financial issues have surfaced as a major problem, instead of family or children issues erupting.  During these unusual economic times, it should come as no surprise that finances have risen to be the source of major post-divorce conflicts.

The poor economy has made clauses in some Settlement Agreements difficult to fulfill.  Who knew in 2008 that a couple with a very lovely and well-maintained home in a wonderfully upscale area would still be unable to sell it by 2010?  I am sure most people didn’t anticipate not being able to refinance their house after the divorce.  Unfortunately, concurrent with the financial industry meltdown, real estate values plummeted in most areas of the country.  Add in the dramatic change in mortgage refinancing regulations and within a few months, and a person’s financial picture and plans have drastically changed.

So – what to do if your spouse is supposed to sell the house, or refinance the mortgage in his or her own name?  Should you demand that they do so to meet their obligations in the Settlement Agreement?  Perhaps you should, if the individual is really procrastinating.  However, if the other party is unable to meet their obligations to sell the house or refinance the mortgage, he or she may have legitimate reasons for this delay.  The current mortgage may be more than the value of the house, the ex-spouse may have poor credit or insufficient income to meet the new mortgage requirements, and other reasons may be very real and legitimate.  I remind my clients that they do not need to do something rash that rebounds on them.  This is especially true if there is no real and compelling need to fulfill the Settlement Agreement except to have things final.  For example, if one ex-spouse insists that the other spouse sell the house and the value is considerably less that the mortgage, the spouse with the house may just decide to default on the mortgage.  This can seriously damage the credit of both parties.  Extending additional time to refinance or sell the house, or to fulfill other specific parts of the Settlement Agreement might just be to the benefit of both parties.

My suggestion to several clients has been to re-negotiate the Settlement Agreement.  If you can do so, you may want to refrain from involving legal counsel to force the situation unless absolutely necessary – it is expensive and often only inflames the situation.  Put any change to the Settlement Agreement in writing, after which you may want to have legal counsel review it.  Set specific dates by which the issue in question should be resolved.  Ask for proof that the ex-spouse is moving towards fulfilling their obligations, or proof that they cannot do so at this time.  For example, if your ex-wife is required to refinance the house and says that she needs more time, ask to see her mortgage application and any correspondence that is associated with this loan.  If the mortgage value is higher than the home value, ask to see a recent appraisal and a statement from the mortgage company showing the loan value.  You also may want to consider various “what-if?” situations, such as, what if the house really cannot be sold?  Will you then consider a short sell if possible, a default, or another extension?  Be sure to think about all possibilities – the economic situation these days can make any number of alternatives probable.

Often the issues that were some of the underlying cause of the breakup of the marriage still exist.  This means that some former couples are still unable to resolve their post-divorce disputes successfully.  In these cases, the people may wish to contact their former mediator to help them resolve the issues.  Their mediator is familiar with their case and with each of the clients and may be able to help them come to a satisfactory resolution.  This alternative may be better and less expensive than the litigation route, and is certainly worth serious consideration.

Post-divorce difficulties are common – and even more so these days.  It certainly makes sense for former spouses to try to work out things between them, write out their agreement clearly, and show progress being made towards fulfilling the terms of their agreement.  Divorced people have a chance to start fresh and, if possible resolve the difficult issues fairly and productively.  I am convinced it can be an excellent learning and growing experience for them.  It is at least the sensible and practical thing to do.

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April 2, 2010 by wendy.

After the Divorce – What Happens if You Can’t Agree? 

Just getting through a divorce is often quite a struggle – trying to agree on dividing assets, how children will be parented in two separate households, and coming to terms emotionally with issues from the former marriage.  It is only natural that formerly married people will have disagreements after the divorce.  Perhaps their settlement agreement is not entirely clear and both parties are interpreting it differently.  Possibly one party does not agree with the terms of their settlement and chooses not to comply.  The children may have different needs or changes in their lives.  More often, in these difficult economic times, the financial situation of one or both parties may have changed – and probably for the worse.  For example, what if the house doesn’t sell?  What if one party is laid off from work for an extended period or becomes seriously ill and cannot make their payments?  How can the settlement agreement be changed? 

Parties can change the terms of one or both of their financial agreement and the parenting plan if they both agree to the changes.  If they have difficulties in agreeing, they can certainly go to mediation to obtain the assistance of a neutral third-party.  Not only is a mediator skilled in helping parties to resolve their differences, but this type of professional can often can formally write the changes the parties wish to make.  Alternatively, the parties can request an attorney draft the changes they wish to make to their settlement agreements.

If mediation does not work, the parties can always contact attorneys for assistance.  Attorneys will be able to tell their client if he (the client) has a reasonable case if they need to go to court.  The attorney can also work with the other party’s attorney to try to resolve their differences between the couple.  If all else fails, the parties can go to court and present their case to the judge.  This can be expensive, time consuming, and stressful.  Moreover, there is no guaranteed win – for either party.  An added risk is the serious damage that can be done to what may already be a poor relationship with the ex-spouse.  In extremely difficult situations, however, utilizing an attorney may be absolutely necessary to making changes affecting large amounts of money or serious parenting issues.

My experience is that if parties can agree to changes, they are likely to save money, preserve a working relationship with the other party, and potentially obtain the agreement that works for both of them.  This is true whether consensus is obtained by discussions with each other or by using a mediator.  After the divorce, things may not necessarily set in stone.  It is possible to change things, but it is certainly easier if parties can negotiate and agree to the changes.

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March 24, 2010 by wendy.

Experts have said that the two biggest reasons for divorce are money and sex for first marriages, and blended family issues for second marriages.  I am not a therapist, and although I do not inquire about “what went wrong” with the marriage, clients often volunteer such information in the course of our meetings.  During the decade or so that I have offered divorce mediation and financial analysis services, I have certainly seen sex and money as probable primary causes.  However, during the mid-2000s, I also saw more “control issues” as root causes, in that one spouse often felt that the power imbalance was too great. Often clients would tell me that their spouse was too controlling, bossy,  wanting to run their lives, or to be in charge of everything, even the minutia of daily living.   

In 2008, I was seeing more couples getting divorced because of money issues.  Often one person was spending more and their partner was uncomfortable about the spending, feeling it was too lavish, too risky, and uncontrolled.  The person spending often felt that their partner was a cheapskate and overly concerned and controlling of money.   One client told me that she wanted out of the marriage before this “house of cards falls,” and she didn’t want to be anywhere near it when it collapsed.  I felt that many of these clients were seeing ahead quite clearly about the future of their personal financial situation, even though they were not aware about the impending downturn in the economy.  I was also seeing more clients on the edge financially, and so I was referring several of them to bankruptcy attorneys for assistance and advice.

In 2009, my divorce workload was down from 2008, and family law attorneys also told me that their caseload was much lighter.  Articles in journals indicated that more people were opting to stay married, at least for a while.  After talking with clients, attorneys and other divorce professionals, it confirmed the assertion of these articles that people were staying together instead of divorcing.  Indeed, many people were either too afraid of the horrible economic situation that America was in at that time, or they felt too poor to get divorced.  Therefore, they chose to stay together and try to make things work, at least until they were more financially stable.  That made sense.  If one party is out of work and the couple has children, it is pretty difficult to divorce and pay for separate households with 50% or more of the income gone.  Moreover, many couples found their house values were worth less than their mortgage balance, and that they would not be able to sell the property without taking a huge loss.  Many others were simply overextended with their credit cards, and moving towards bankruptcy. 

Fast forward to 2010.  I am seeing a new stream of couples coming to see me to help with their divorces.  They usually have the funds to get divorced, and their economic situation is not dire, but their personal relationship has fallen apart for any number of reasons.  I don’t know if this is beginning a new trend or not.  We’ll see how the rest of the year goes – other reasons may be revealed.  With the economy recovering slowly and the unemployment situation still dire, I think that money will resurface as a primary cause of divorce for the next year or two.

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October 12, 2009 by wendy.

The recession has changed the face of divorce.  Divorcing couples have a lot less money to spend, and the dividing the assets and debt has become even more important than ever.  Couples are often angry and emotional when going through divorce, and all too frequently, one or both parties’ initial reaction is to “get an attorney and go to court.”  In some cases, hiring an attorney is necessary and the smart thing to do.  There are some pitfalls, however.  Attorneys often help clients settle out of court, but the cost is high – both emotionally and financially.  And using attorneys to settle a case is often a matter of positional bargaining – one wherein more “stuff” for one person means less for the other party.  Litigation is even more expensive and emotionally draining. 

One way to potentially save money on divorce is through mediation – if both parties truly want to try to settle.  Mediation is usually “interest-based,” in that the mediator helps the parties to satisfy their interests and concerns in the divorce, rather than just dividing the pie.  So – not only can mediation be a more-cost effective solution, the outcome can be creative and include any number of issues that are important to the divorcing couple, but not necessarily to an attorney.  Moreover, the parties are more likely to adhere to the settlement if they have a role in creating their settlement.

These days, any settlement agreement (called a Memorandum of Understanding by many mediators) should be very thorough.  The rocky economic times in which we live dictates that a good agreement should contain any number of “what-if?” clauses.  What if the house doesn’t sell?  What if one of us loses our job?  What if one of us gets sick and can’t make the payments as agreed?  What if the spouse getting the house cannot refinance?  These and other questions that are germane to each couple’s situation should be included in a settlement agreement these days. 

In mediation circles, there is an expression, “If you litigate, you lose.”  Although a dramatic expression, there is some truth to this.  With mediation, couples maintain control of the process, expenses, and potentially, the outcome.  With litigation, couples put much of their control in the hands of attorneys, the expenses can increase dramatically, and the outcome is often a crapshoot in the courts.  Even if the couple does not go to court, and the attorneys are very involved in settling the divorce – and all too often their focus is strictly on dividing the marital assets.  They may or may help to resolve other, often personal, interests that are important to one or both of the parties.  Additionally, attorneys may or may not be aware of the taxes and the long-term impacts of the settlement on one or both parties. 

Be aware that just because you may be going to mediation for your divorce, you can still consult an attorney.  An attorney will be able to provide good, legal advice, especially for more complex cases.  At a minimum, an attorney can review your Memorandum of Understanding to make sure your legal interests are covered.  Moreover, if the mediation is not successful (and not all are have positive results), you always have the option of stopping the process and going to attorneys.

Mediation is a potential solution if both parties truly want to settle their divorce without attorneys and litigation.  It can achieve a win-win outcome, address the couples’ interests and concerns, and result in a more positive adherence to the settlement, all at a possible lowered costs.  It is not necessarily the right approach for each couple and each situation – but it is important that both parties know and understand their option.

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October 8, 2009 by wendy.

Although all economies go through cycles, our current economic situation is unusual.  In this particular situation, we had the “perfect storm” economically speaking.  People were in over their heads in credit card debt, their houses had second and even third mortgages, interest rates on debt were increasing, and the value of their homes was shrinking.  Add to this mix the unemployment rate rising, and business incomes dropping and the economy slid into a nasty recession.

Regardless of the economic situation, people will still get divorced.  How do people handle their debt situation, a house that is worth less than their mortgage, and a possibly lower income situation?  In addition to these money woes, what if they are also faced with a possible bankruptcy?

Bankruptcy and divorce become a dicey area.  Which should come first - the divorce or the bankruptcy? 

Let’s say that the divorce is final and your ex-spouse declares bankruptcy.  Even if the under the terms of the settlement agreement your ex is supposed to pay for certain debts, if he or she declares bankruptcy and your name is still on the debt, the creditors can still come after you. You could get stuck with the debt. You may be able to go after your ex in court, but only after the damage is done.  And – you may be able to get very little relief if he or she has very little income or property.  In this case you should consult an attorney. However, in addition to having the creditors hound you, your credit score could be adversely affected, resulting in higher interest rates, an inability to possibly refinance your house, or even to get credit.  To add insult to injury, if you have taken cash as a property settlement in lieu of other assets (such as a 40lK), you may be required to use the cash to pay the creditors.  You, too, may be forced to declare bankruptcy.

Before 2008, many bankruptcy attorneys used to generally tell clients to get divorced and then file for bankruptcy – because this way, the property settlement was firmed up, and clients would know what assets and debts they would receive.  Also, filing bankruptcy after the divorce is initiated, but before the divorce is final, only halts the divorce process until the bankruptcy is settled.  However, economic times have become so tough that many bankruptcy attorneys are now telling clients to declare bankruptcy and then file for divorce after the bankruptcy is settled.  Moreover, if couples file bankruptcy together, they can save the additional cost of another separate bankruptcy filing. 

There are generally two types of personal bankruptcy, and they depend on a number of factors and depend on the size and type of debt, income, etc. 

In a Section 7 bankruptcy, most debts are erased, but there are lower income limits for people to qualify.  In a Section 13 the debtor is put on a repayment plan and a very tight budget.  People with higher incomes are usually placed in this type of bankruptcy program. 

Seeing an experienced bankruptcy attorney before the divorce can help avoid numerous problems.  For example, a client with struggling business was taking money out of his IRAs to fund living and business expenses.  He was also taking a salary from his business.  Not only were taxes and penalties incurred for the early withdrawal of funds from his IRA, but he was being taxed on his salary as well.  Because of withdrawals from IRA, and his salary, he was making too much money to qualify for a Section 7 bankruptcy, which meant that his debt would not have been dismissible.  He would have had to file a Chapter 13 bankruptcy, whereby he would be on a strict repayment plan.  Not only did he create a large, unnecessary tax burden for himself and his ex-spouse, but he depleted an asset that didn’t need to be depleted – his IRA.  Remember - IRAs are generally protected from bankruptcies up to one million dollars.   See a bankruptcy attorney before divorce – or before you withdraw funds from your IRA if you even have an inkling that you might be headed towards bankruptcy.

These days, bankruptcy and divorce often go hand in hand.  It is critical that couples in tough financial situations who are considering divorce, also consult divorce attorneys and financial specialists early in the process.  These professionals can help them with the timing of their divorce and potential liquidation of retirement assets.  To do otherwise can potentially lead to couples losing money that they can ill-afford to lose.

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