In Texas, divorce mediation is a confidential process where a neutral third person (the mediator) helps divorcing couples reach a divorce settlement. The mediator facilitates communication between the parties to promote settlement and understanding between them. Mediation addresses child custody, child support, visitation, spousal support, and property division. The mediator does not act as a judge, attorney, or financial advisor, but assists the spouses in reaching a voluntary agreement.
Denise French founded Divorce Strategies Group, LLC in 2014 and since that time we have continuously guided clients through the divorce and mediation process. We believe mediation is an excellent tool for divorcing couples, especially when there are contentious issues. Our goal is to help you reach a satisfactory agreement with your spouse, without having to endure a lengthy, costly trial. Save time! Save money! Get on with your life.
How does Mediation work in a Texas Divorce?
The goal of mediation is to work through all the issues of your estate and the issues with minor children. An attempt at mediation is strongly recommended and often even required in many Texas counties. In mediation, you will most likely be in separate rooms while your mediator(s) walk in between the rooms. Sometimes, the parties will be in the same room, if they wish to be and it is productive. Without minor children, expect to mediate for a half day. When minor children’s issues are involved, expect to spend an entire day in mediation. At the end of mediation if agreements have been reached a binding, legal document called a Mediated Settlement Agreement or MSA will be signed by everyone. This document is irrevocable and binds your agreements legally. The fight is, in essence, over at this point which typically brings much peace and relief. The MSA is also a tool used to push your agreements through the court system as a judge cannot typically overturn a property drafted MSA.
After the MSA is completed a divorce decree will be drafted by an attorney which reflects the agreements you made in mediation. The divorce decree (which you will review and also need to sign) along with the MSA are presented to the judge in court (or remotely due to COVID-19) and used to finalize your divorce. The mediation document is usually 6 – 10 pages long while your actual divorce decree is 30 – 50 pages long.
Why Should I Use Mediation to Settle our Divorce Conflict?
- Mediation is flexible – While we have a process, we acknowledge every family and every divorce is different.
- Mediation is future oriented – We are going to focus on where you are headed, not where you have been. Everyone in divorce has some type of pain or fear. We understand and we are happy to listen and help you heal. However, in mediation we will focus on the future.
- Mediation works – Mediation has a high success rate, especially when both spouses are open to compromise.
- Your information is protected – Mediation is confidential.
- You and your spouse are in control of the outcome – Your future in not the hands of a judge hearing only a tiny fraction of your life story.
What sets our firm apart?
The founder of Divorce Strategies Group, LLC, Denise French, has been divorced herself and understands what you are going through! Her divorce was costly and long. Sadly, it was also damaging to her family, her finances and her children. She strives to help litigants avoid the heartache her family endured. This is personal for her. Denise is not a lawyer. She is a financial expert in litigation and fully understands divorce finance in Texas.
Denise works alongside several family law attorney mediators. These mediators, along with Denise, will walk you through every aspect of your child issues and your financial issues to help you achieve a win-win solution for your family. Our partner attorney mediators are Denise Khoury of Guajardo, Khoury Family Law and Manny Caiati of Caiati Law & Mediation.
Denise is a Credentialed Advanced Mediator through the Texas Mediator Credentialing Association with hundreds of cases both as a mediator and as a financial expert in mediation.
The decisions you make in mediation will have lasting, lifelong ramifications for your children and/or your lifestyle and financial wellbeing. We have a proven, 7 step process which involves the help of a financial expert and a family lawyer – both of whom are also mediators. Together, this is a place where you can work through all the child custody issues as well as the financial issues without the fight in court and with proper guidance.
Contact Divorce Strategies Group today!
Before you contact a divorce lawyer, call us. Need more information about divorce and mediation? We invite you to contact our office for a complimentary consultation. We are here to help you in every way possible!
The valuation and division of retirement accounts in divorce is more complex than most divorcing couples expect. We frequently see people after the fact who wish they had known better before they signed papers to finalize their estate division. The details are important. Below are four common items to know about before you sign on the dotted line.
1. Does a retirement account only belong to the person whose name is on the title?
What if only one spouse worked for most of the marriage while the other was the primary caretaker for the home and children? If that’s the case, most of the retirement assets are likely only in one spouse’s name. Despite the titling, these retirement assets acquired during the marriage belong to the community estate and are fully subject to division in a divorce. It is common for clients who own retirement accounts to believe they are entitled to the entire account since it’s in their name. However, money earned during the marriage is a marital asset and subject to division in a divorce within a community property state like Texas.
In contrast, retirement assets earned prior to the marriage are typically considered separate assets and not subject to division in the divorce. In addition, the growth on those separate assets during the marriage is considered separate property (but not the income, yes, it gets confusing). For an accurate appraisal of what portion of a retirement account is separate versus and what portion is marital, a separate property accounting must be conducted. The burden of proof is on the person making the separate property claim. All assets, no matter what the title says, belong to each spouse equally if the asset was acquired during the marriage, except for those assets which were inherited or gifted during the marriage or came from a personal injury suit.
2. How will we be taxed if we divide a retirement account?
You are not necessarily taxed on the division of a retirement account. Taxation happens only if you distribute the retirement account outside of the retirement vehicle. For example, if your spouse has a large 401(k) and you divide it during the divorce, no problem. You can move these funds into an IRA for yourself without paying any tax and let it continue to grow tax deferred. The same rules apply if you are dividing an IRA. You only acquire a tax liability when you redeem the funds from the retirement chassy and put them into your bank account or a non-retirement brokerage account.
3. Which retirement assets are best to keep in a divorce?
Not all retirement assets are equal as far as the IRS is concerned, which means what you get to keep in your pocket differs – sometimes substantially- between different retirement accounts! This is a synopsis of the different types of retirement assets we commonly see with divorcing couples in our office. We also provide a discussion of liquidity as having liquid, available cash is king in a divorce.
Pension plans typically rate lowest on the list of assets to obtain because those funds are not liquid today (unless you are at retirement age). Further, each plan has its own rules surrounding availability of the pension funds to the ex-spouse. Some funds mandate you wait for your ex-spouse to retire while others will let you retire on your own timeline after you have reached a certain age which can be anywhere from 50 to 65. Pension plans may also offer a lump sum option at retirement – it just depends on the company or entity offering the plan. There is also the issue of company solvency – will this pension plan even exist when you are retirement age? It is also important to know if you are entitled to assets if your spouse dies before the pension plan begins – some entities don’t pay you at all if your spouse dies before the payout has started, even with a divorce decree.
It is wise to involve a Certified Divorce Financial Analyst or CDFA in cases with a pension as they can help you understand your options and make those phone calls for or with you. Know the rules of your potential pension plan before you sign any binding documents
IRA’s typically rank lower on the scale of available, liquid assets because withdrawals are usually taxed at the owner’s highest marginal tax rate and incur a 10 percent penalty until age 59.5 (barring the exceptions of substantially equal periodic payments for those typically 50 and over, death and disability). There are no divorce exceptions to the penalty as there are in a 401(k) which is why we prefer our clients are awarded the 401(k) assets rather than the IRA assets if there is a choice.
401(k), Profit Sharing Plans and other ERISA-Regulated Plans
ERISA regulated plans (such as 401k’s and Profit Sharing Plans) are one step above the Traditional IRA regarding assets available for liquidity as you can redeem cash from your ex-spouses 401k plan without paying the 10% penalty, but you still must pay taxes. That is a big savings – especially in larger plans. You can save thousands in fees by just taking the 401(k) over the IRA if you are in need of cash from the retirement assets.
The down side is a federally mandated 20% withholding on all cash distributions. For example, if you want $80,000 in cash from your ex-spouses 401k, you’ll need to withdrawal $100,000 as 20% ($20,000 in this example) will automatically be forwarded to the IRS. You are not losing that money – you’d owe it in taxes anyway you are just forced to pre-pay your taxes. If you do not owe the full 20% at tax time you will receive a refund or if you owe more, they will certainly let you know when you complete your taxes the following year. The other negative is 401(k)’s can only be awarded via a Qualified Domestic Relations Order or QDRO. QDRO’s cost an additional fee of $500 – $1,500 and they take time and work to finalize.
ROTH IRA’s are the most advantageous retirement asset for liquidity needs during or after divorce. The principal put into a ROTH IRA can be withdrawn tax and penalty-free at any time for any reason. The earnings on the ROTH IRA are different. The earnings can be subject to taxation and the 10% early withdrawal penalty (before age 59.5) but you are able to take all of the principal before touching the earnings. For example, if you have a ROTH IRA worth $40,000 today which you originally invested 15,000 in; the $15,000 is principal and the other $25,000 is earnings. In this example, you can redeem the $15,000 with zero penalty and zero taxation while the rest can be left alone to grow.
4. Should you consider the value of retirement accounts after taxes when dividing assets in a divorce?
Many attorneys will “tax effect” retirement plans (discounting the account by the recipient’s marginal or effective tax bracket). Left unchecked, the spouse receiving more of the retirement accounts may benefit (possibly unfairly) in negotiations from this practice. However, if your spouse is not playing fairly and trying to stick you with all the retirement accounts while they take all the cash, a tax effecting is in order. Tax effecting can be as simple as taking 20% – 28% off the value of the retirement account and dividing that. Or, it can be as complex as determining your effective tax rate and considering what assets will actually have to be used and tax effecting just those by the actual amount of tax you will pay this year (and possibly projecting out to the next few years). By preparing financial projections, a CDFA can assess the amount and timing of the recipient’s anticipated withdrawals and tax liabilities from retirement accounts.
Questions About Divorce and Retirement Accounts? Let us help. Retirement accounts are complicated, especially in divorce. Understanding tax implications and liquidity are critical in divorce negotiations. You only have one shot to get this right. Ensure you are receiving the settlement that’s best for you by having the right people on your team. Contact Divorce Strategies Group for a complimentary 30 minute phone consultation to discuss your specific needs.
When you are facing divorce life can see overwhelming. To make matters worse, in the midst of emotional turmoil you are asked to make life altering financial decisions. This is tough!! We STRONGLY encourage you to hire a divorce team with experts in each area of needed expertise. An experienced, knowledgeable attorney is critical. Next, if you have financial concerns, it makes sense to hire someone to help you with the financial questions and issues in your divorce. A Certified Divorce Financial Analyst or someone trained and experienced specifically in the areas of divorce finance and tax can save you thousands of dollars in your overall settlement.
We have seen many people come into our offices after the divorce details are finalized only to discover they could have done better or they will lose 30% of what they were awarded to taxes. We don’t want this to happen to those still in the divorce process. Be informed! The following are mistakes we see repeatedly when it comes to divorce.
3. The settlement doesn’t take taxes into effect.
If the old saying, “death and taxes are the only sure thing we have in life” holds true, why would you settle divorce negotiations without knowing the tax implications of your settlement. You are going to be taxed, just know what those taxes will be!
What people often find is the tax burden on their half of the marital assets is significantly higher than their spouse’s. This means their “half” of the assets are worth significantly less than they thought! It’s also important to consider when you will be using the assets you were awarded. For example, what’s worth more – $100,000 in an IRA account or $80,000 in a savings account? Well, it depends! What is your tax bracket and how much cash do you need today? If you need cash now, you are better off taking the $80,000 in a savings account. The $100,000 in an IRA is going to have taxes and possibly penalties taken from it so in the end the $100,000 is probably only worth about $65,000 or $75,000. If you don’t need this money for years, the $100,000 in an IRA will probably be better as it will grow tax deferred for many years and will be able to compound on itself quicker than a taxable $80,000 in savings.
2. Pensions are split 50/50 but no one knows what that really means.
Over and over and over I see divorce decrees that order pensions split 50/50 but no one has any idea what will actually happen. When do you start collecting? How much money can you collect when the pension begins? Is there an option to take a lump sum?
Did you inquire about a separate interest Qualified Domestic Relations Order (QDRO) where you can take the funds on your own timeline? Are you subject to your ex-spouses retirement wants or do you have a say in when the funds begin? Will there be a cost of living increase each year? What if you or your spouse dies before you start collecting? Will it still pay you?
Pensions are complex financial tools with variables many do not consider. In addition, the devil is in the details with the pension plans. Know what you are getting and your options!! If you have a pension you really need a financial expert on your team who understands pensions and QDRO’s so you can make informed decisions.
1. The biggest mistake – keeping a house you can’t afford.
As a woman I understand becoming emotionally attached to a home – this is where my kids have grown up and where we made many happy memories. This spot on the stairs or the place by the front door is where we took pictures every year on the first day of school. This is where I want my kids to come home to when they are grown with their own children. I get it!! It’s tough to leave the marital home if you have such strong emotional ties. However, time and time again my older divorcing couples are told by their adult children – don’t stay in the house!! We don’t care. We just want you to be financially healthy and strong.
As a financial expert, the first thing I’m going to ask my divorcees to do is create a monthly budget. What does it cost to live in this house? I have witnessed where one or two years down the road the spouse who “won the house” has run out of cash and realized that they can’t sell a window to put food on the table, they can’t refinance because now they don’t have enough income, and they have no choice but to sell. Further, the selling costs are about 8% of the sale – all of which could have been split 50/50 with a spouse if the house had been sold during the pendency of the divorce.
The sum this up, please realize you don’t know what you don’t know. Bring in the right experts for your divorce to make sure you are smart, you are informed, and you make the best decisions you can with all the information! Don’t go this alone. As we say at Divorce Strategies Group, “You only have one chance to get it right!” Let us help. Call today for a complimentary consultation to discuss your situation and let us help you start on the right path.
Let’s face it. Change is tough for many people and divorce changes just about every facet of your life. Divorce can often test one’s ability to handle change to an extreme. Some people struggle more than others with change. They fight it, avoid it, fear it, and sometimes feel guilty about it. These notions would make anyone want to keep things as normalized as possible. One would think only adrenaline junkies and dysfunctional people would want to disrupt what could be a perfectly normal situation. However, change can be very positive and powerful, especially if you have been in an unhappy or abusive marriage. Here are five truths in my life I’ve experienced with change. Hopefully this will help readers cope with their own life changes.
1. Change is inevitable
While divorce may not be inevitable, relationships will evolve. Whether you cling to what you have or long for something more, change is unavoidable. Nothing can or will stay the same. You have power when it comes to change. Your actions or reactions to change will determine how positive or negative the change is. Get comfortable with the notion of change as part of the evolution of life and stop resisting.
My divorce meant not only losing a spouse, but losing his entire family, the life I had envisioned and dreams I had of being a stay at home mom. Oddly, I have a relationship with my ex-spouses family today. It’s different than it was, but it’s good. I also had the chance to be a “stay at home” mom for a year, and I found I really didn’t like it. I love to work and I’m a better mom because of it. I own two businesses today which I never would have had the chance to own if I had stayed in my marriage – he would not have given me the freedom to explore these opportunities. What was the absolutely worst thing in 2007 is a gift today.
2. Change helps your brain stay healthy
Science suggest our brains need new and varied problems to work on. When our minds aren’t working out problems, solving mysteries, or figuring things out we can become weak. Change is one of the best ways to keep our brains healthy. This means our lifespan will be healthier, and our mind will not be as susceptible to diseases like dementia. It’s good for your brain to embrace the change in your life as a puzzle you can solve.
I certainly fought the divorce in the beginning, and I went through the stages of grief for at least a year if not longer. No doubt, there was a grieving process to walk through. However, my divorce also brought about new changes which were fun and unexpected, like meeting new friends and having a fun, loving social environment. I was also able to thrive with my career after the divorce which meant learning a lot of new things and experiencing new challenges. When I was no longer subject to emotional abuse I was able to really thrive and grow.
3. Change creates maturity
Sometimes change comes with a price tag. Sometimes change comes with a penalty. Sometimes change requires risk, and sometimes change is forced on us. No matter how change occurs, it causes us to grow. From learning we are tougher than we realized and having to do some difficult things – change creates maturity.
When my divorce was over I made a list of gifts. To my suprise, I had three pages of small, single spaced gifts. Many of them had to do with personal strength and fortitude. I’m so much stronger today. While I certainly would not have chosen this path voluntarily, I’m so grateful today for it.
4. Change teaches you to overcome fear and anxiety
Whether stepping out towards change in doubt or being pushed into the unknown without your consent, change can be scary. The devil we know is easier to manage than the one we don’t. Once the fears are faced, they are often scarier in theory than reality. Change teaches you to overcome fear and anxiety as you learn new coping skills or how to talk yourself through fear.
I was a single mom of a 2 year old child when my divorce was final – that is big change. It was scary. Looking back I’m convinced there is no stronger force than a parent protecting their child. Being a single mom of a young child drove me to bigger and better things with my career. It also lead me to be a better mom and person. I no longer fear financial insecurity (for the most part). I no longer fear being alone. I no longer fear many things – all because of what I went through.
5. Change gives you choices
Once the spirit of change is validated and embraced, change can become part of your normal routine. If you choose something and don’t like it, that isn’t the end of the line. Change things again! From changing your coffee order to the brand of cereal your family eats this week, change can be fun. From picking a new wall color to a new genre of book to read, change can be exciting. From changing where you volunteer your time or which organization you donate to, change can matter to more people.
When my divorce was final I made big changes to my house – I repainted rooms, moved furniture around, rearranged the cabinets and made changes to the yard. These small changes made a big difference. Small things like which cabinet your plates are in can help facilitate change in your head and heart which can give you courage for more change. In my first marriage I really wanted multiple children. As a child I was much younger than my siblings and as a result raised as an only child. I did not like it. I decided very young I would have no children or multiple children – but not an only child! Even though my first husband and I had decided on two or three children when we married, after our first (and only) child was born he decided he didn’t want any more. Well, guess what. When I remarried it was to someone with three young children, and now we have five!! Talk about an evolution of change. It is a beautiful blended crazy mess which this extrovert absolutely loves.
There are many truths about change – some scary and some not so much. Embrace the concept of change, and it will lead to enjoying the realities of change. We at Divorce Strategies Group are here to help you navigate changes from married to single. Schedule a strategy session or call us at 281-210-0057 to schedule your first mediation session today. No matter what your situation we strive to help our clients walk through divorce with confidence, strength and courage!
If love is a battlefield, then co-parenting teens is a battlefield with landmines. Teenagers can swing from adolescent to grown-up feelings (and back again) in the snap of your fingers. This confusing age is hard enough already for them to navigate. Throw in the challenges of being a teen with divorced parents and watch the fun multiply!
Luckily, it doesn’t have to be fraught with turmoil and anxiety all the way. Knowing where some of the landmines are hidden, or what to do to avoid them outright, will make this period smoother for everyone.
The thing to remember is that right now, teens are becoming independent and striving to express themselves. They will have their own ideas about how things should be, and those ideas may go against what you’re thinking. At the end of the day, I know you want to keep them safe and happy. With these suggestions, you can navigate the challenges you may face as you co-parent your teen through divorce.
3 Things to Remember when Co-Parenting Teens
It’s important to recognize that teens are trying to figure out what they want and who they’re becoming. With that comes lots of hormones. Sometimes it’s easier for teens to mask shame, sadness, and loneliness they could be experiencing with anger. Other times, kids think they’re angry when really they’re feeling those deeper, more vulnerable feelings. At any rate, it’s your job as a parent to be there for them with support and compassion.
Home is where the safety is. Home should always be a safe haven for teens. Yes, they want independence, but that doesn’t mean they don’t also need safety and stability. Make sure you establish a family-first feeling. Let them know whatever is happening in the outside world, their parents both will support and love them.
Teens will have a different idea about how things are going to work. Teens, especially the ones on the cusp of having more independence with access to a license, job, and friends or activities outside the home (ie: that sweet spot of 14-16) will have a lot of ideas about how they want things to work. It’s important to listen to them and meet them where you can. Work as a team with your teens and your ex as you co-parent so they feel respected and heard. If you tend to blanket them with your opinions, they could feel like you have no regard for their wishes and act out. They want to know you’re working with your ex to support and nurture them, even though they seem to be pulling away.
Teens just want to be heard. Sometimes, it could be a challenge to decipher between normal teenage angst and when your kid is really in trouble. Add to that the reality that your teenager may not want to share their feelings with you for whatever reason. Perhaps they wish to avoid confrontation or they don’t know how to express themselves. When you co-parent your teen through a divorce, remember that your kid just wants to be heard. When they talk, listen.
4 Things to Consider in your Parenting Plan as you Co-Parent Through Divorce
It’s challenging to tell your teen what they’re going to do, but you are doing this for a good reason (safety, making sure your teen becomes a self-reliant adult, and so on). Communicate that with them! Let them know you aren’t just making rules because you’re power-hungry; you have a good reason behind that.
Having a parenting plan will help with this. It could also be a struggle at first as you establish new routines for your kids as they turn into teens. Remember: your teens don’t want to be told what to do.
Make them feel like they have a say in it, especially as they get older. Once they hit a certain age, they can communicate their wishes with both of you instead of you telling them what they want. Respect those wishes and honor them as much as you can.
Kids will have time constraints and want control over their own schedule.
In your parenting plan, consider that your kids will have new and different time constraints. Teens are busy bees between work, school, friends, and other activities like jobs and volunteering.
Have a plan in place for time for handling scheduling conflicts. When possible, make sure both you and your ex show up at events like sporting games, rewards ceremonies, and the like so your teens can see you’re both showing up for them. Not only will your teen still feel like an important member of the family, but you’ll also get to spend time with your teen and not miss out on activities that are important to them.
How will you navigate chores and other household responsibilities? When kids who are younger experience a divorce, it’s very important to keep a consistent routine between both parents’ households. That gives them a sense of stability and normalcy. Things like bedtimes, chores, and time outs or rewards should stay the same.
As kids get older, their responsibilities will change and they may not need that consistency between both houses. However, what they do need is to know the rules so they can play by them. Communicate your expectations clearly if there is a difference between households. Make sure they understand what happens if they break curfew or get in trouble. I’d recommend that the basic structure remains the same between households (ie: expectations, consequences, and rewards), while the specifics may vary.
What happens when your teen starts to become more involved with friends and begins to date? You may not want to think about your kid growing up and leaving the nest, but they will. As you’re co-parenting teens, you have to realize they are teens. They will have friends and they will want to date.
What happens if their boyfriend or girlfriend wants to sleepover (or they want to stay at their house)? This is another area I’d advise consistency. That way they can’t play you and your ex off each other. No one wants to hear, “Dad lets me!” or have them take advantage of you because the rules around friends and paramours are more lax at your house.
Who will have the final say? Teens will fight you on things, plain and simple. That said there are important considerations to make, like what happens if your teen is sick, wants to get a piercing, decides to join a branch of military service, wants to purchase a car, claims they’ll drop out of school… the list goes on, really. In that instance, these are big discussions that should be considered carefully. When you’re co-parenting your teen, it’s assumed that decisions are mutually agreed upon with both you and your ex involved. The reality is that some parents may think they should have the final word, especially if they are the ones paying for most of it.
Having a discussion about whose decision is final before these issues come up (in other words, when the tensions aren’t running high) will help you stay cool and focus on the matter at hand when it occurs. Will there be times when mom has the final say over dad or vice versa? In what situation does your teen get to make their own decision? Just like who has the final say, think about who pays. You may be sharing financial responsibilities, but what about your teen’s input? If they want a car, do they pay for it or do you? Whose responsibility is it to replace a broken iPad? What if they want a cell phone? Put that language in the parenting plan.
A Final Word About Parenting Plans
As your teen is navigating their own changes (and at times feeling like the center of the world), you, too, must navigate changes. It’s different when you’re co-parenting teens than when you’re co-parenting adolescents. Parenting schedules will have to be addressed. Discussions about school, friends, and time conflicts will have to take place. Consequences, structure, and what you present a united front on will be a point to consider. As you’re co-parenting teens, these issues (and more) will come up. So, the more clarity you can provide in your parenting plan, the better. Make sure you actually look at your parenting plan, too. It won’t do any good if you never use it. Help your teen take you seriously by giving them new structure and boundaries as they get older. It will make a huge difference when you have to make decisions for your teen on behalf of you and your ex.
We understand co-parenting teens because we have navigated co-parenting 2 who are grown and 2 more who are almost ready to leave the nest. We, personally, have sought after the help of professional counselors and therapists. For a list of who we recommend call us at 281-210-0057 and also visit us regularly to check out our latest blog on various divorce related issues.
The issue of health insurance is critical in many divorces we see in our office. It is a key issue in any divorce when at least one party is under age 65 and without means to obtain their own health insurance. It can also be a significant issue with children who have graduated from high school but have not yet entered the work world to obtain their own health insurance. Thus, there are two areas where decisions should be made regarding health insurance and divorce: your child’s coverage and your coverage. Here’s a high-level overview of what to know and how to plan for coverage post-divorce.
Health Insurance, Divorce, and Children
When do you, the parent, stop being financially responsible for your child? Some parents believe it’s never; others believe it’s when your child turns 18 and some believe when the child graduates from college. People who are married disagree on this, so certainly people who are divorced will, too!
In a Texas divorce, minor children will be identified and the parent providing health, dental and vision insurance for the minor children will also be identified. In a typical Texas divorce, child support and court ordered health insurance coverage ends when the child turns 18 or graduates from high school, whichever occurs later.
Currently, from a insurance company perspective a child can be covered by a parent’s insurance until they are age 26. After child support obligations are complete (again, either at age 18 or upon high school graduation), the parent can remove their child from health insurance. Even though the insurance company will keep your children on your ex-spouse’s insurance plan, health coverage after high school graduation or age 18 may not fall under a family courts jurisdiction. An ongoing parenting plan and/or a contractual agreement in this situation may benefit everyone. We encourage all parties to discuss how they will handle health insurance for young adult children through college and even up to age 26 during the divorce process. You’ll want to make these decisions while your attorney is present in the divorce process so you can understand what is legal and what is at least contractually enforceable.
Health Insurance, Divorce, and You
With an adult, it’s much simpler. A divorcing party must keep their spouse on their health insurance until the divorce is final – and then after finalization the ex-spouse must be removed from the policy. As an ex-spouse you cannot stay on your former spouses policy. However, you do have other options.
One option is to ask your attorney about extending the finalization of your actual divorce to extend your health benefits legally. For example, we have had spouses finalize the details of their estate division with a signed Mediated Settlement Agreement (MSA) which finalizes the DETAILS of the divorce, but doesn’t officially make you divorced. You can divide bank accounts and brokerage accounts and make agreements on how you will divide retirement accounts after the divorce with an MSA. This gives you the peace of mind in knowing who gets what (the fight is over) but at least a little more time to keep your health benefits at a lower cost. This option will have a limited time period, but it can give you a few more months while you find a job with benefits or find another source of health care.
Another option is to keep your current coverage via COBRA. When going through a divorce, you can receive coverage with COBRA for 36 months. The time period for COBRA is extended to the 36 month marker because of divorce versus the traditional 18 months when you leave a company. Your soon-to-be-ex should contact the HR department for a summary of COBRA options and costs prior to divorce. You ONLY have 30 days from the date of divorce to elect COBRA.
Since you would qualify as a “change of status,” you could also shop the Marketplace outside of open enrollment windows. If you’re looking for lower-cost options, you could consider health share programs such as Christian Health Ministries. Finally, insurance brokers are wonderful resources to seek when looking for individual health coverage on the open market.
To wrap everything up, health insurance affects you and your children after a divorce and needs to be carefully considered. Take advantage of mediation so you and your soon-to-be ex-spouse can talk calmly about your children’s health insurance plans both after the divorce while child support is available and how you wish to continue their coverage into early adulthood. In addition, have a plan in place for yourself so you know your options post-decree and you aren’t caught without health insurance coverage.
If you need resources to help you with your financial needs or health coverage schedule a 30 minute complimentary consultation today with Denise French at Divorce Strategies Group.
Is this your first marriage? Or your second marriage? Maybe your third marriage? Studies show the rate of divorce for first marriages has dropped to 40%. But the alarming statistic is the rate of failure for second marriages is 67% and for third marriages, it’s a whopping 74%!
What Most People Do
About 70% of people who walk through divorce will wind up remarrying once again at some point in their life. If cohabiting couples are included in this figure, the statistics show over 80% of people take the chances on another relationship. About 29% of all marriages in the United States involve at least one person who has been married at least one time before. Men generally remarry faster than women do after a divorce. Caucasians are more likely to remarry faster than any other racial demographic in both genders. The median amount of time that it takes someone to get married after a divorce is 3.7 years, which has been fairly stable since 1950.
Sadly, the average length of time for second marriages ending in divorce will typically just under eight years. Why do you think this is happening? Wouldn’t you think we would’ve learned from our mistakes? Wouldn’t you think we would be smarter, older, more mature and should know better and know what we want in a new partner?
What We Are All Looking For
Feeling lonely or afraid of being on your own is terrifying and can lead to jumping into a new relationship. Rebound relationships are quite common. Having someone adorn you with attention and praise can be intoxicating – especially if you were the one who was left. We’re just human beings and it’s natural to want to feel loved and desired. So here are what the experts say are the 3 biggest reasons why second marriages fail at such a high rate:
Money is a big issue for many couples, but it’s even more troublesome in second marriages due to child support or alimony payments. When there are children involved, it gets even more complicated financially. I’ve seen many clients who are resentful about how much money is going out to their new husband’s children. It can become a real challenge if it is not discussed openly and honestly.
We highly suggest having a conversation with a Certified Divorce Financial Analyst or CDFA. This person is a financial planner with a focus on divorce financial planning. This professional will likely understand how divorce in your area works and understand advanced financial planning concepts. They can help you find common ground in your new marriage and work through financial issues long before they lead to divorce.
Many couples stay together “for the children.” Where natural children might keep a marriage together, step-children can be a divisive factor in second marriages. Many parents deal with the frustration of having step-kids. The biggest issue here is partners not supporting each other when it comes to dealing with each other’s natural children. This can be extremely difficult and frustrating – especially when two families blend together.
A good therapist or parent facilitator can be invaluable. We suggest finding one in your area to help create a parenting plan for the blended family and to help walk through kinks and issues as they arise.
This really depends on the circumstances of the divorce. Typically, the person who was left, especially because of an affair, may be resentful and angry. They may be terribly unhappy that their ex is so quickly in a new relationship or remarried. They may even try to sabotage things to create emotional or financial tension for the new partners. Again, a good therapist is invaluable in this situation. Whether you are the ex struggling with your former spouse finding ‘love’ so soon or you are the one feeling sabotaged, having an unbiased third party trained in these issues helping you is critical.
If you’re struggling with a divorce – whether it’s your first, second or third marriage, let us help you work through this so that you can feel confident moving forward into the next chapter of your life. We also work with many therapists in the area and can help you find the right one for you. Contact our Divorce Strategies Group today to help you find your new you.
Year after year, you and your spouse have been saving for college through a 529 savings account. Now that divorce is pending, it’s time to think about spending the money you’ve put aside for your children as a co-parent. Who will be in control of how much is withdrawn and how it’ll be used? What are the rules? How do you put this in writing in a way that makes everyone feel secure about using these funds? How will you handle contributing to the account going forward? Use the following to learn how dividing 529 plans in divorce works and what steps to take going forward.
You can save up to $15,000 per parent in a 529 account or $30,000 total. Grandparents can also contribute up to $15,000 per person per year. Contributing more than $15,000 per person would need to be reported to the IRS as a gift. However, a 529 account can be “superfunded” with contributions of $75,000 per person or $150,000 per couple—which uses up your federal gift-tax exclusion for 5 years. So each parent and the grandparents can still contribute a considerable amount to the 529 accounts.
What can you use this money for? Which expenses trigger taxes and penalties? If you do things right, no penalties or federal income tax—and, in many states, no state income tax—will be due on your withdrawals. But learning by trial and error can be costly at tax time, and more importantly, your child could lose out on financial aid if you’re not careful. So learn the ins and outs ahead of time.
Here’s a guide to help you make your 529 savings go as far as possible.
Plan for tax-free withdrawals
Qualified withdrawals are federal income tax-free so long as the total withdrawals for the year don’t exceed your child’s adjusted qualified higher education expenses (QHEEs), discussed in #3 below. To calculate these, add up tuition and fees, room and board, books and supplies, any school-related special services, and computer costs, and then deduct any costs already covered by tax-free educational assistance. Examples include Pell grants, tax-free scholarships and fellowships, tuition discounts, the Veteran’s Educational Assistance Program and tax-free employer educational assistance programs.
You’ll also need to deduct costs used to claim or Lifetime Learning Credit. The basic rule: You can’t double up tax benefits for the same college expenses.
Know which expenses qualify
When you pay qualified education expenses from a 529 account, your withdrawals are tax- and penalty-free. As of 2019, qualified expenses include tuition expenses for elementary, middle, and high schools (private, public, or religious). Although the money may come from multiple 529 accounts, only $10,000 total can be spent each year per beneficiary on elementary, middle, or high school tuition.
Money saved in a 529 plan can also be used to pay qualified expenses associated with college or other postsecondary training institutions. Eligible schools include any college, university, vocational school, or other postsecondary educational institution eligible to participate in a student aid program administered by the US Department of Education.
While funds from a 529 account can be used to pay for expenses required for college, not all expenses qualify. Tuition and fees are considered required expenses and are allowed, but when it comes to room and board, the costs can’t exceed the greater of the following 2 amounts:
- The allowance for room and board included in the school’s cost of attendance for federal financial aid calculations
- The actual amount charged if the student is living in housing operated by the educational institution
In other words, if your child is planning to live off campus in housing not owned or operated by the college, you can’t claim expenses in excess of the school’s estimates for room and board for attendance there. So it’s important to confirm room and board costs with the school’s financial aid office in advance so you know what to expect. Also, keep in mind that in order for room and board to qualify, your child must be enrolled half time or more.
Textbooks count as an education expense, but only those included on the required reading for the course. Computers and related equipment and services are considered qualified expenses if they are used primarily by the beneficiary during any of the years that the beneficiary is enrolled at an eligible educational institution. Computer software for sports, games, or hobbies would be excluded unless the software is predominantly educational in nature.
It’s important to keep receipts and make sure that qualified items are purchased separately from nonqualified items. Be careful to avoid expenses that don’t qualify—for example, equipment used primarily for amusement or entertainment doesn’t qualify. These and other lifestyle expenses, like insurance, sports expenses, health club dues, and travel and transportation costs, will have to be funded through other resources. If you’re not sure whether a plan covers a particular college expense, the college’s financial aid office should be able to help.
Check with the school to find out exactly what’s required so you can avoid accidentally taking a nonqualified distribution. If you withdraw money for anything that doesn’t meet the qualified expense criteria, any part of the distribution that is made up of earnings on contributions will be taxed as ordinary income and could incur a 10% federal penalty. However, the penalty may be waived if there are extenuating circumstances, such as the disability or death of the beneficiary, or if the beneficiary receives a scholarship, veteran’s educational assistance, or other nontaxable education payment that isn’t a gift or inheritance.
If a distribution from a 529 plan is later refunded by an eligible educational institution, a recontribution can be made to the 529 plan. The recontribution must be made no more than 60 days after the date of the refund. The recontributed amount cannot exceed the amount of the refund.
Keep good records
Your 529 savings plan administrator will, in most cases, provide an annual statement that reports your contributions and earnings, including the amount you withdrew from the plan. But it’s you, not your program provider, who is responsible for accurately reporting to the IRS. If your withdrawals are equal to or less than your qualified higher education expenses (QHEEs), then your withdrawals including all your earnings are tax-free. If your withdrawals are higher than your QHEE, then taxes, and potentially a penalty, will be due on earnings that exceed your qualified expenses. For many people, keeping track is easy because large tuition bills use up most of their 529 savings. But if you are using your 529 plan for room and board expenses, it’s smart to keep those receipts.
When divorced, you’ll need to find a way to make sure the IRS receives the correct information. You’ll either need to work together with your spouse each year on what expenses each of you will turn into the IRS or you’ll want one only spouse to handle a particular child’s education costs and reporting needs.
Decide how to withdraw the funds
It’s important that withdrawals you take from your 529 savings account match the payment of qualifying expenses in the same tax year. Like some families, you may choose to pay the school directly from your 529 account for ease in recordkeeping and matching distributions to school expenses. In this situation, make sure you are aware of school payment deadlines and the time required to transfer funds from the 529 account to the school. It can take several days for investments to be sold out of your 529 account and mailed to the school and then a week or so for the payment to make it through the mail and then processed by the school.
Or you may choose to move money from your 529 account to your bank or brokerage account. Many colleges prefer payments to be made electronically through their website from a bank or brokerage account. You can choose to pay bills first and then reimburse yourself from the 529 account, or you can pull money from the 529 account and then use it to pay bills from your bank or brokerage account. This path also provides flexibility when paying smaller bills like those for books or off-campus room and board.
Keep in mind that you must submit your request for the cash within the same calendar year—not the same academic year—as you make the payment. If the timing is off, you risk owing tax because it’s considered a nonqualified withdrawal.
Prioritize which 529 accounts to spend from first
If your child has more than one 529 savings account, such as an additional account through a divorced co-parent or a grandparent, knowing which account to use first or how to take advantage of them concurrently could help. Don’t leave decisions to the last minute—instead, sit down with all plan owners and decide on a withdrawal strategy ahead of time to make sure the qualifying college costs are divvied up in the most beneficial way.
Also, if financial aid is in the picture, a distribution from a grandparent-owned 529 account may be considered income to the child on the next financial aid application, which could significantly affect aid. To avoid any problems, grandparents can take distributions from 529s as early as the spring of the student’s sophomore year—right after the last tax year on the student’s last undergraduate Free Application for Federal Student Aid (FAFSA), assuming the student finishes college within 4 years. Wait until the following spring to employ this strategy if it looks like your child will take 5 years to graduate.
Money left over in your 529 plan?
With careful planning, you can avoid having money left over in your 529 account once your child graduates. But if funds remain, there are several options available. You can let the money sit in the account in anticipation of your child continuing on to graduate school or another post-secondary institution. If so, you’ll want to rethink your investment strategy depending on how soon the funds will be needed so you can take full advantage of the potential for growth over time.
You also have the ability to change beneficiaries without incurring tax consequences. Here are 2 different options for maintaining your tax advantage and avoiding any penalty:
- Change the designated beneficiary to another member of the original beneficiary’s family. IRS Publication 970 has a lengthy list detailing which relatives count as family. This can be done for any reason, but is an option particularly if your child receives a scholarship or decides not to attend college.
- Roll over funds from the 529 account to the 529 plan of one of your other children of the marriage without penalty. This is a good option if there are funds left over after graduation.
Either way, we encourage you to draft in your divorce decree what you will do if your children don’t use all of the 529 account funds. Each child has until the age of 30 to use the funds. At that point, you can either withdraw the funds and gift it to the child or the parents can divide the remaining funds 50/50 at the end of the time period.
Regardless of which option you choose, you will want to spell it out in your divorce decree today. Also, each state has different restrictions on 529 accounts, so check with your financial advisor or ask your plan provider for the specific requirements of your plan.
What if the beneficiary gets a scholarship?
You’ll be happy to learn that there is a scholarship exception to the 10% penalty. You can take a nonqualified withdrawal from a 529 account up to the amount of a scholarship; although you will pay taxes on the earnings, you won’t pay the additional 10% penalty that’s imposed on a nonqualified withdrawal. Remember to ask for a scholarship receipt for your tax records.
Consider how college savings affect student aid and loans
While individual colleges may treat assets held in a 529 plan differently, in general these assets have a relatively small effect on federal financial aid eligibility. Because 529 plan assets are considered assets of the parent, they tend to have a small effect when the government calculates your financial aid eligibility, whereas accounts that are considered assets of the child, such as an UGMA or UTMA account, tend to have a greater effect on federal financial aid eligibility. (This does not affect 529 accounts that are owned by a grandparent.) For more information, read about financial aid planning.
If you’re thinking of taking out loans that start incurring interest immediately, you may want to spend 529 funds first, deferring these loans until later. Another situation that would call for using 529 plan funds first would be if there’s a chance your child may graduate earlier or receive some other funding down the road, such as a scholarship.
Create a Plan for Dividing 529 Plans in Divorce
At some point, you’ll actually need to start spending the money you’ve set aside. You will need to think about preserving gains you may have made so that funds will be there when they’re needed. If your plan relies on an age-based investment strategy, this process is already in place and your asset mix has slowly evolved toward more conservative investments like money market funds and short-term bonds.
Now’s the time to sit down with your divorce team and decide the best ways of dividing 529 plans in divorce, how to use these funds and who will be in control of the funds going forward. The more you decide today, the less you have to decide in the future when the safety of your divorce attorney in negotiations with your spouse is gone.
On March 30, 2020, the Treasury Department and the Internal Revenue Service announced the distribution of stimulus package payments to account for the coronavirus pandemic. When it comes to this tax stimulus and divorce – there are often some questions.
What is the Tax Stimulus?
Payments are intended for taxpayers only, therefore, most qualifying recipients must have a social security number. There may be a minimal exception for members of the military.
Qualifying single adults who have an adjusted gross income of $75,000 or less will receive $1,200. Married couples with no children earning $150,000 or less will receive a total payment of $2,400. Taxpayers filing as head of household will receive full payment if they earned $112,500 or less. Those with dependents age 16 and younger will receive an additional $500 per dependent.
If your income is higher than the thresholds listed, then your payment will be reduced $5 for each $100 over the threshold until it stops altogether for single people earning $99,000 or more, or married couples without children who earn $198,000 or more.
You will not receive payment if someone claims you as a dependent, even if you’re an adult.
What If I Was Married For The Applicable Tax Filing, But I Am Separated From My Spouse Now?
Funds will be direct deposited based on the bank information from your 2019 tax filing. If you have not filed for 2019, then your 2018 filing will apply.
If you filed “jointly” with your spouse for the 2018 tax year, but have separated from your spouse since filing, then it is best to file your 2019 taxes as soon as possible. You will need to notify the IRS of your updated status of “separated” or “single”.
It is not likely that the IRS will have updated information for couples who have separated since their 2019 tax filing. Couples who filed jointly for the 2019 tax year but separated after filing, may need to coordinate division of the stimulus funds. If you cannot coordinate with your spouse, then seek an attorney to divide the funds appropriately. The IRS will be sending a paper notice in the mail detailing information about where your payment ended up and in what form it was made.
How Are The Payments For Children Allocated To Co-Parents?
For each qualifying child age 16 or under, there will be an additional payment of $500. The stimulus payments are based upon the 2019 tax filing. This means that if you claimed your child on your taxes in 2019, then you are likely to receive the $500 benefit for each child that you claimed as a dependent. If you have not filed taxes for 2019, then you should refer to your 2018 tax return.
The $500 stimulus payment for each child will go to the parent who claimed the child as a dependent in the most recent tax return.
Will I Receive Payment If I Am Behind On My Child Support Payments?
No. The Coronavirus Stimulus Bill has not waived offsets for past due child support. This means that if you owe back child support, then you may receive a decreased stimulus check or no check at all. If your payment is intercepted by the department of the treasury, then the funds will be given to the child’s custodial parent.
What if I was married with a high income in 2019 but didn’t qualify, but I will be single in 2020 and likely qualify for the credit?
The law says the rebate is technically an advance credit against your 2020 taxes (the return you’ll file in early 2021). Thus, it eventually will be based on your adjusted gross income, filing status, and kids under the age of 17 for 2020. That is as it should be—the financial situations of millions of people will be worse this year due to the unprecedented pandemic shock to the world economy.
But here is the win/win: If your tax year 2020 rebate turns out to be bigger than the amount you received this year, you will get the excess, which can generate a larger refund when you file next year.
However, you will not have to give back the payment if your rebate based on 2020 income turns out to be smaller than the amount you get this year. Thus, some filers may have an opportunity to strategically time their 2019 returns–if they have not filed already.
Tax Stimulus and Divorce: Stay in the Know
To check on the status of your stimulus check, visit the IRS website. If you believe that your spouse has inappropriately withheld your portion of the stimulus funds or you need more assistance regarding the tax stimulus and divorce, discuss options with your attorney. Need help with your divorce finances? Contact us today!
Thanks to the COVID-19 pandemic, many small business owners face uncertainty. To compound this uncertainty, the White House announced this weekend it will extend social distancing guidelines until the end of April. Thankfully the government also recently completed the passage of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). With a massive $2 trillion allocated for businesses, individuals, federal agencies, and state and local governments, the CARES Act has been designed to distribute capital quickly and broadly. There are a number of provisions that impact small businesses. The regulations (and interpretations of the laws formatted as rules) are fluid, however here is a guide to what you need to know about COVID-19 and small businesses.
EMERGENCY ECONOMIC INJURY DISASTER LOANS (EIDL)
This program was already in existence through the Small Business Administration (SBA). In early March, the SBA’s disaster loan program was extended to all small businesses affected by COVID-19, but the CARES Act opens this program up further and makes it easier to apply.
- Businesses with 500 or fewer employees
- The term employee includes individuals employed on a full-time, part-time or other basis
- Tribal businesses, cooperatives, and ESOPs with fewer than 500 employees
- Non-profit organizations
- Individuals operating as sole proprietors or independent contractors
Details to Know
- EIDLs can be approved by the SBA based solely on an applicant’s credit score.
- EIDLs that are smaller than $200,000 can be approved without a personal guarantee.
- Borrowers can receive a $10,000 emergency grant cash advance that can be forgiven if spent on paid leave, maintaining payroll; increased costs due to supply chain disruption; mortgage or lease
payments or repaying obligations that cannot be met due to revenue losses.
- Expands allowable use to payroll costs, costs of group health care benefits during periods of paid sick, medical or family leave and insurance premiums; employee salaries, commissions or similar compensations; interest on mortgage obligations; rent; utilities; interest on other debt obligations incurred before the covered period.
- Coverage period January 31, 2020 through December 31, 2020
- Required to make good faith certification that the employer has been affected by COVID-19 and will use funds to retain workers and maintain payroll and other debt obligations
- No requirement that applicant is unable to obtain credit elsewhere
- Business MUST be operational on January 31, 2020
- Must be used for:
- Maintaining payroll to retain employees during disruption/slowdown
- Covering increased costs due to interrupted supply chains
- Paying rent/mortgage payments
- Replaying obligations that cannot be met due to revenue losses
How to Apply
To apply for this loan visit the US Small Business Administration. For everything you need to know about applying for a small business loan, see the U.S. Chamber’s Small Business Loan Guide.
PAYCHECK PROTECTION PROGRAM
The Paycheck Protection Program, one of the largest sections of the CARES Act, is the most important provision in the new stimulus bill for most small businesses. This new program sets aside $350 billion in government-backed loans. Currently, the SBA guarantees small business loans that are given out by a network of more than 800 lenders across the U.S. The Paycheck Protection Program creates a type of emergency loan that can be forgiven when used to maintain payroll and expands the network beyond SBA so that more banks, credit unions and lenders can issue those loans. The basic purpose is to incentivize small businesses to not lay off workers and to rehire laid-off workers that lost jobs due to COVID-19 disruptions.
- Businesses with 500 or fewer employees
- Select types of businesses with fewer than 1,500 employees
- The term employee includes individuals employed on a full-time, part-time or other basis
- Tribal businesses, cooperatives, and ESOPs with fewer than 500 employees
- 501(c)(3) non-profits with fewer than 500 workers and some 501(c) (19) veteran organizations
- Individuals operating as self-employed, sole proprietors or independent contractors
- Businesses, even without a personal guarantee or collateral, can get a loan as long as they were operational on February 15, 2020
Details to Know
- IDLs can be approved by the SBA based solely on an applicant’s credit score.
- The maximum loan amount under the Paycheck Protection Act is $10 million, with an interest rate no higher than 4%.
- The lenders are expected to defer fees, principal and interest for no less than six months and no more than one year.
- Generally speaking, as long as employers continue paying employees at normal levels during the eight weeks following the origination of the loan, then the amount they spent on payroll costs (excluding costs for any compensation above $100,000 annually), mortgage interest, rent payments and utility payments can be combined and that portion of the loan will be forgiven.
- Required to make good faith certification the employer has been affected by COVID-19
- No requirement of application being unable to obtain credit elsewhere
- No prepayment penalty
- No personal guarantee or collateral is required for the loan
- Business must maintain its March 24, 2020 employment levels through September 30, 2020 as much as practicable, and in any case shall not reduce its employment levels by more than 10%.
How to Apply
To apply visit your local bank or credit union who are conduits for the Small Business Administration (SBA) Loan process. Most firms that already participate in the Small Business Administration’s Loan program will provide a place to apply. Be forewarned, you cannot get a loan for this as of this writing. The SBA lenders have 30 days to gather the documents they feel will be necessary to facilitate the loans. Most lenders should have this information available in the next week or so.
While you wait for the loan process to be available, make good use of this time. Gather documentation supporting your payroll expenses over the last 12 months, netting out the portion of salaries in excess of $100,000 as well as other business expenses – mortgage/rent, utilities, etc. You will also want to gather your business documents – corporate articles, partnership documents, Bi-Laws, or equivalent as that will also be necessary.
CAN I RECEIVE BOTH AN EIDL AND PAYCHECK PROTECTION PROGRAM
Yes, small businesses can get both an EIDL and a Paycheck Protection Program loan as long as they don’t pay for the same expenses. However, be sure to check with your financial advisor or lender before taking both types of loans if you are not sure of the specifics of regulations related to COVID-19 and small businesses.
COVID-19 and Small Businesses
Struggling to keep up with the ever-changing regulations for COVID-19 and small businesses? Check back here frequently for up to date information or contact us for all of your divorce financial needs.