Archives for June 2019

My Divorce is Over… Now What?

June 22, 2019 By Denise French, CVA, MAFF, CDFA, CRPC

Whether your divorce was a high conflict or fairly co-operative experience, you will cross the finish line and look up at some point wondering what the next step is. Do you have names that need to change, titles that need to be revised, or beneficiaries that need to be re-named? What should you do first? What should you do next?

One Step at a Time

With so many things that you’ll need to do, figuring out the next step can be overwhelming. Not to mention the problems that can arise if you skip something. And the list will be different for everyone. So, one of the first steps that you’ll need to do is take inventory the items that need to be on your list. Start this with your settlement agreement, to see the items that you need to re-title or re-name and the processes that you need to get in motion.

With our clients, we take a comprehensive approach to the divorce process and the necessary next steps by making sure each client has a list of post-divorce steps to take. We also offer guidance through those next steps if needed. For most folks “QDRO” may as well be a Greek word and opening a Roll Over IRA account to receive assets sounds like an insurmountable task. Actually, even the things that seem simple, like creating your new budget, can feel insurmountable at this point. So, don’t be afraid to get help with these.

Don’t Be Afraid to Ask for Help

If you find that you need direction through these steps, reach out to the divorce professional that guided your process. They can usually offer recommendations to the other professionals you will need to take the next steps. You can also contact us!

Wherever you are in the process, the beginning, the middle, right at the final decree, or at the title change stage, we are here to help.

So, you’ve made it to the finish line! You ran a great race. It’s okay to pause for a minute and take a breath, and look at how far you’ve come. Just be sure to continue that walk into your future one step at a time to complete your transition to your new normal.

Should You Keep Your House in a Divorce?

June 18, 2019 By Denise French, CVA, MAFF, CDFA, CRPC

The marital home is almost always a hot topic of debate in divorce situations. If you have concerns over your marital home in divorce, you are not alone. Not only do you have the financial issues to deal with, there are often sentimental attachments to the home. The home is where you raised your family, created memories and have comfort. You’re possibly worried about moving your children or making them switch schools if you sell the home. You may also have close relationships with your neighbors or other strong ties to the community.

Even if you are not particularly sentimental, you may not want to think about moving in the midst of all the other changes happening in your life. Moving is at the list of top 10 stressful things you can do – why add that to the divorce stress? Not only that, the interest rate on the home is so low, you don’t want to give that up.

However, you have to look at the overall financial picture and make the best decision for the long term. Keeping a house when you cannot afford it is one of the most common financial mistakes that people make when going through a divorce. Keeping the house in lieu of other assets which will grow faster and better may also not be the best decision. This is a tough decision and hopefully we can help you find viable answers. Here are 5 steps to follow to determine if keeping your home is in your best interest or not.

Step 1: Determine the value of your home.

This is a vital step. You must know how much your home is worth in order to make an informed decision. This can be accomplished in several different ways. The most solid option is to have the home appraised by an independent, third party appraiser both spouses agree to use. That is the most accurate and will provide a solid number. It will cost anywhere from $300 – $600. It may be well worth it for the peace of mind this solid number will give you.

If that is not an option or you don’t want to spend the money, ask a realtor to run comparisons on the house (referred to as “comps”). These are done for free usually. Ask the realtor to run comps on homes in your area which have sold with similar square footage and upgrades. You probably know your neighbors and have been in their homes. Ask for houses that you know are similar to yours as far as upgrades to the kitchen, bathrooms, flooring or a pool. The comps report will have several homes and this will help you determine which most closely mirrors the value of your home. You could also simply average the home comps values to determine the value of your home.

Another option is to look online in your county to see your tax appraised number. To do this visit the county in which you reside and search for your home or your street. Your name should come up if you dig around on the site for a bit. Some counties will have a tax valued number and a market valued number listed on their valuations. If so, we typically use the market valued number.

Lastly, you can run a Zillow report on your home. This is the least accurate, but at least is another point of information for you to use. To do this visit www.zillow.com and simply input your address. The Zillow numbers, we have found, are usually low.

With one or multiple of those 4 options, you now have a more informed number to value your home with. Once you know the value of the home, you can determine how much equity is in the home. Take the value of the home and subtract any loans on it. This gives you the net equity value of your home. If there are no loans, the value and the equity are equal.

Step 2: Determine the annual cost of home ownership.

The cost to keep the home is not just the mortgage and taxes, it’s so much more. How much does it cost for all the other monthly expenses and upkeep? Is the house large and has a big electric bill? What’s the difference in the home cost in January versus July? We suggest looking at each season and putting the cost of the home on a spreadsheet then averaging it out monthly. It’s not fun to do but grab a glass of your favorite beverage and get to it. This exercise can pay you handsomely in the future.

The following is a list of costs to consider regarding monthly costs: electricity, gas, water, trash, HOA, lawn care, pool care, home warranty, cleaning/maid service, seasonal costs of mulch, fertilization, deep cleaning, pool filter cleaning or chimney cleaning.

The following is a list of other items to consider: roof needs, condition of AC and water heaters(s), age of house and general repair needed on going, condition and maintenance of major appliances, past flooding issues and any other current needs you know of which need repair.

We encourage everyone to have an inspection completed on the house if you are leaning toward keeping it so that if you have issues, you can add the cost of repair to them into divorce negotiations. What if you have unknown foundation issues or termites? What if your roof needs repair and you didn’t know? Or, what if you have rodents in your attic, bees in your brick overhand or birds in a crawl space which are all issues I have personally dealt with and they cost money to fix.

You want to include the cost of repair to those in the divorce negotiations instead of finding out about them after the settlement is complete. We often consult with Check It Out Home Inspections for this as they do good work and are thorough.

Schedule a cost of living planning meeting

Step 3: Review the house within the overall context of your estate.

I often find couples are trying to figure out the finances themselves and they want to divide each piece of property or account separately. Doing this can skew the overall estate significantly toward one spouse and leave out vital details. You also lose the ability to build creative win-win settlements by doing this. We place the entire estate on a spreadsheet to value and view the overall picture. You also need to know the cost basis of each asset and resulting tax ramification of each asset. This will allow you to see how much of your estate you are truly retaining in the divorce.

The house is part of the estate as are the values of your bank accounts, brokerage accounts, retirement accounts, stock accounts, employee benefits, car values and debts. Not only are the values needed, but the net tax value is needed. Everything goes on a spreadsheet and is assigned a value. After you do this, you have a view of the estate. This enables you to make better decisions regarding what to keep and what to give up.

If you find the house is one of the largest assets in your estate and you are negotiating to keep it, you are likely going to be giving up other assets. What are you willing to give up in exchange for the house?

What is the long-term ramification of the decisions you are making? Is your net worth going to grow more with the house in your estate or the stock account? Are you going to be better off month to month with this home or with a smaller home in the same area and that bank account to use? If you find the house has a lot of debt and not much value, then why fight over it?

Schedule a review of your proposed settlement

Step 4: Consider creative settlement options.

If you decide to keep the house, you could choose to offset the house with other assets. For example, let’s say you are dividing the estate 50/50. Your house is valued at $350,000. There is also an investment account that is valued at $350,000. You might give up the investment account so that you can keep the house.

If you do not have other assets to offset the value of the home or you do not want to offset the value of the home with other assets, you might choose to get a loan to pay your ex out on his/her portion of the equity. If you are considering a loan, take extra care not to negatively impact your credit score during your divorce.

If there’s still a mortgage on the house, sometimes it can be a little more difficult to keep the house in a divorce. Ideally, you will refinance it in your name so that your ex is no longer responsible for the debt. Typically, you’ll have to walk through the refinance process and have the home on your own credit. If you are a non-working spouse, you can sometimes use child support or spousal support as income. There are rules and guidelines to this, so you’ll want to check with a lender now in order to plan for the near future.

Depending on how much equity is in the home, you might be able to refinance enough to pay your ex out on his/her portion of the equity. Let’s use the same example as before. Your home is worth $350,000 but you have a $150,000 mortgage on it. Thus, there is $200,000 in equity in the house. You will need $100,000 to buy out your spouse’s share, if you’ve agreed to a 50-50 split. To get the money, you refinance into a $250,000 loan in your name only, and cash out $100,000 to pay your spouse. (We are excluding the transaction costs to keep the example simple.)

If you prefer not to refinance for the higher amount, you could negotiate offsetting the equity with other assets you are dividing.

Step 5: Important steps to take after a decision is made.

No matter what option you choose, you’ll likely need some legal documents to make this official. Be sure to consult with an attorney on what deeds need to be created and signed. No matter if you are keeping the house or giving the house to your ex-spouse, you’ll need to complete some paperwork.

A Deed to change ownership will be needed and we encourage the spouse leaving the house, if there is a mortgage, to have a different deed for protection. Consult with an attorney to determine what is needed to protect your newly acquired asset and/or your credit.

No one (or court) can force a lender to assume the mortgage in just one person’s name where two currently exist. If the underwriting process is not an option to remove a spouse from the mortgage, there are other items of protection and possibly other negotiations to do in order to provide the spouse losing the asset but retaining the debt with an equitable offset.
You’ll also need to remove your ex-spouse from the insurance policy on the home and you’ll need to talk to your insurance company about this. We also recommend running price checks on the cost of the insurance at this point to see if you can get a lower rate. For a complimentary, multiple company rate quote visit Sig F&M Insurance Group.

The Big Picture…

Remember that deciding if you should keep the house in divorce is not a purely emotional decision. Make sure that it fits within your overall financial goals. If you are not sure if you can afford to keep the house, contact us. We can work with you to create a broader financial plan to determine if it makes financial sense. Contact Divorce Strategies Group for a divorce financial planning meeting today.

Planning Your End Game: Divorce Mediation

June 7, 2019 By Denise French, CVA, MAFF, CDFA, CRPC

Typically, if someone wants out of a marriage, you hire lawyers, dig up dirt, try to get all you can out of the estate and battle it out. The lawyer’s role is to advocate for the spouse that hired them, with the goal of achieving the most favorable outcome for their client. Divorce attorneys are the best people in the world when you need someone to fight for you!! We work with many and we love them.

But what if you don’t need to go to war? What if you just need sound guidance through the process of dividing the estate and determining how to live in separate homes with your shared children? What if you want to think through the issues instead of battling them out? What if you and your spouse are divorcing but you are still levelheaded and talking to each other? If this describes you, mediation for marriage dissolution may be an alternative to dueling it out in court for you.

Mediation as a venue for divorce is different. A mediator is a neutral third-party who can interview each party, review relevant documents, and help both parties understand what is fair and realistic in their situation. The goal of mediation is to help couples efficiently resolve issues that may be in conflict and eventually come to an agreement satisfactory to both parties. The divorce mediator actively facilitates the negotiations, but the spouses have full control and authority over the decisions affecting their lives. This can save time, money and emotional turmoil.

In our mediation process, couples have two choices: they may work with the mediator and hire one attorney for guidance and filings; or each party works with the one mediator and each party hires their own attorney.

In my own case, I hired an attorney as I wanted and needed legal guidance. My former spouse and I worked together with the mediator to help divide our assets and determine what we do with our children. My attorney reviewed everything before I signed it. I had my own legal advocate under the structure of the mediation process which provided me with a level of comfort, safety and security. My former spouse also chose to have an attorney review the documents prior to signing them.

Planning Your End Game – The Kids

Far and away, this was first on the list of the many benefits of divorce mediation for me. As a parent, I knew divorce was going to be tough. It could have been even tougher on my kids. However, we discussed our issues as parents, instead of litigants, which enabled us to outline the terms of our settlement, including time sharing and child support, so that we both stayed focused on what’s truly best for our children.

Let’s face it, like it or not, I still must have a parenting relationship with my children’s father. There were times when I had to remind myself that I love my children more than I love my pride and chose not to use them as a weapon to hurt their Dad. This can be a bitter pill to swallow, especially if you’ve been deeply wounded in the relationship.

I was very concerned that my kids would think they caused the rift, that my son would think he had to take the role of dad to his younger sibling, or that either child couldn’t talk about their feelings with me. The biggest gift for my children during the divorce process was being open to their questions, acknowledging their pain, and even when it was hard, have a civil parenting relationship with their dad. They didn’t choose my divorce and neither did I. Their father chose to leave so I have made the best out of a poor choice he made. A large part of my ability to do this daily is because we chose to mediate our parenting schedules. I would not fight over my children, make them suffer, or have a judge decide when I could and could not see my kids. Mediation gave me the option of staying in control over my kids and their lives.

Planning Your End Game – Time

When you look at the choice of a divorce mediation versus traditional divorce, mediated divorces typically take significantly less time. Typically, the traditional divorce process will take 6-12 months while the mediation process for divorce takes 2-3 months.

In mediation we had a set process and schedule. We filed for divorce so the standing orders as my lawyer explained were in effect. For me, this meant my bills were paid and life was ‘status quo’ for that time frame. He lived in the guest bedroom and I kept the master bedroom in the same home during the process. We shared our information with the one mediator, and she created a division plan. We each met with her individually, so she knew what each of us wanted and needed, during and after the divorce. We then met together with the mediator for our negotiation session where agreements were highlighted, and disagreements mediated. We chose to include attorney’s in this session which meant at the end we had a binding, legal document. Boom! We were done with the uncertainty and the negotiations. My former spouse then had a plan to move out, we divided our accounts, child support began, and my new life started.

In my case, I couldn’t get divorced fast enough. Once my ex-husband told me he wanted to leave, he couldn’t have left soon enough. The thought of waiting almost a year to get a divorce seemed unthinkable. That meant a year in limbo with an uncertain future and no way to plan a new path for myself. The state of Texas mandates a 60-day waiting period from filing for divorce until you can be divorced. It was in those 60 days that we worked through the process. By day 65, my mediation agreement had been signed, divorce papers were submitted into the court system, and I had started an entirely new chapter in my life.

Planning Your End Game – The Cost

Divorce attorney retainers typically range from $3,500 to $10,000 per person. So, if you work with lawyers in traditional litigation, you’re looking at spending a minimum of $7,000 to $20,000 of the family’s estate for your divorce case initially and that’s just the beginning. The cost of divorce only goes up from there, especially if disagreements and court encounters ensue.

If you use mediation, you can potentially save thousands on your divorce. The typical cost of a mediated divorce in our office, for a family can range from $7,000 to $14,000 including attorney’s fees. For my family, mediation cost us money, but it was a fraction of what we could have spent in the traditional litigation process. The typical traditional, litigated divorces we see in our office today cost the families anywhere from $15,000 to over $100,000. The price of this battle can be staggering. I didn’t want that for my family.

I had been a stay at home mother for 12 years, whereas my ex-husband was a 6-figure earner. I was fortunate enough during our marriage to stay home with my kids and support him in his growing career. The problem was when we separated, I had no college degree, no formal training and a 12-year gap on my resume. Even with a full-time job, I could not afford to stay in my home, pay for after school childcare, or even afford my car payment. I was terrified of spending all of our savings in litigation, being awarded half of whatever was left over, and still having to uproot my kids to live somewhere more cost-effective. This was a very large contributing factor to why I chose mediation.

Planning Your End Game – Your Future

The process of mediation allowed both of us to be fully empowered by educating us on how to handle child rearing, separation or dissolution of assets, future expenses, and other issues. During emotional upheaval, there is the temptation for me to just let someone else handle it. Fortunately, I knew I could not do this with my future and with my children. As we worked together with our mediator, we both felt heard, understood, and responsible for every aspect of our divorce.

As my lawyer explained Texas divorce, I was distraught to learn the laws in Texas really didn’t protect a stay at home parent. I had spent 12 years as a stay at home mom, built a family, and helped build my ex-husband’s career. What was the judge going to give me for it? Pretty much nothing, in my opinion. I soon realized that there was no way that I could have maintained our current lifestyle or household for more than a few months with 50% of our assets. I would have had to sell our home, sell my car, and go into debt to support my children on what I would be earning at a full-time job that didn’t require a degree. My ex-husband, conversely, would be able to maintain his current lifestyle, earn six figures and continue to advance his career. The tables were very much tipped in his favor and I felt that it was completely unjust. My mediator helped me make a plan that helped me build my future. This changed everything for me.

Divorce Mediation in Texas

Now that you know a little more about mediation and how it works, you have more information to help you decide what the best choice is for your family. Divorce is common but you’ll soon learn that each divorce is unique. If your goal is to divorce amicably, maintain a good parenting relationship with your soon to be former spouse, and not spend a small fortune, mediation may be for you!

For divorce mediation in Texas, contact Divorce Strategies Group. We offer a variety of services and options in a range of prices for you and your needs. Continue to visit us at www.DivorceStrategiesGroup.com for helpful articles and bits of information on divorce finance and mediation. We also offer one free 30-minute consultations to anyone facing or considering divorce. Contact us to schedule your complimentary consultation today!