Divorce Preparation: Step 8 – Address the Credit Accounts
Written by Jim JeffriesDivorce Preparation: Step 8 – Address the Credit Accounts
We pick up with Step 8 in our series on practical steps to take when a divorce is imminent. Step 8 is Assess how to handle the credit accounts.
If a divorce is imminent you do not want to be liable on any accounts on which your spouse has charging privileges. It is not unheard of for an angry spouse, upon learning of a divorce, to go on a shopping spree. Likewise, some lawyers may advise their clients to take out cash advances on joint cards to provide a cushion while the divorce is pending or to charge a large amount in lawyer’s fees on to joint cards.
You will want to consider canceling such joint accounts or at least reducing the spending limits. If they are an authorized user on charge cards in your name, see what steps the credit card companies require to remove them as an authorized user.
Also consider home equity lines of credit. You may need to consider whether you should close it or restrict access pending the resolution of the divorce.
Whatever you do, do not neglect thinking seriously about how to handle this issue, and discuss it with your lawyer before making a final decision.
Divorce Preparation: Step 9 – Avoid additional debt or major purchases
Written by Jim JeffriesDivorce Preparation: Step 9 – Avoid additional debt or major purchases
We continue our series on practical steps to take when you are about to face divorce. We are now to step 9 which is simple, but important:
Avoid additional debt or major purchases.
This suggestion goes hand in hand with assessing how to handle the credit accounts, but deserves its own separate mention. If a divorce is going to happen, you want to be conservative with the finances. It is not time to be putting in a pool, buying a new car, or buying new furniture on credit. You want to simplify the financial situation not make it more complex.
When the divorce occurs, one of the primary things that has to happen is for the divorce court to allocate who will be responsible for what debts. Generally speaking, the less complex the debt situation, the easier task that will be.
I should note again, all of this is general information. Your own specific situation may cause you to need to vary from it. For example, there are times when you may have to get an automobile and it would be better to do it before the divorce because you won’t have sufficient credit on your own after the divorce. So, obviously you will want to get specific advice from your own lawyer – which is why Step 1 was find a wise guide (an experienced, competent divorce law specialist)!
Divorce Preparation: Step 10 – Stay Put (until further notice)
Written by Jim JeffriesDivorce Preparation: Step 10 – Stay Put (until further notice)
We are nearing the end of our series on practical steps to take when you are facing an imminent divorce. We have reached Step 10 – Stay Put (until further notice).
One of the most common questions I am asked by my clients is whether they can move out of the house. In most cases my answer to them is to stay put. It is not the answer most of my clients want.
I know that things are stressful. I know that they will likely get worse before they get better. Unfortunately, there are several reasons to avoid leaving. The most important ones are the following:
1. It could jeopardize your custody claim. If you end up in a custody dispute, then if you leave the house and the children remain there with your spouse you will almost guarantee that you will not receive primary custody. If the case becomes contested, it could drag out for many months (even a year or two). If your spouse has had primary physical custody that entire time and you’ve had alternate weekend visitation, then unless your spouse has made major mistakes in the interim, they will likely maintain primary custody.
2. It could affect your property interests. You’ve moved out. Your spouse pays the mortgage the entire time the case is pending. Some judges may factor that in when making the property division.
3. You will lose leverage in the negotiations. This is big. You want the divorce. Your spouse doesn’t. You decide you have to get out of the house. You move to an apartment and are paying your rent and the home mortgage. Now under the Pre-trial Status Quo Order you may be required to keep paying it as long as the case is pending. You have just given your spouse a major incentive to drag out the litigation. I see it happen all the time. Eventually you decide to settle for much worse terms because you can’t keep paying for two households. Do not make this mistake.
Moving out of the house can have dramatic effects on the case. Do not do it without discussing it with your lawyer and giving it a great deal of thought. You should know, also, that some judges will consider a motion for temporary possession of the residence pending the trial. This varies dramatically from county to county (and sometimes even from judge to judge) so you will want to discuss it with your lawyer.
It goes without saying that if domestic violence is an issue, then all of this is moot. You will need to take whatever steps you must to protect yourself. Just make sure you let your lawyer know what is going on. In the case of domestic violence, your lawyer may actually be able to have your spouse removed from the house.
Divorce Preparation: Step 11 – Keep a diary
This post continues are series on practical steps to take when a divorce is imminent. We are now on Step 11: Keep a diary/calendar.
It is important to documents all of the major events that occur until the divorce is final. Your lawyer will likely want your help in reconstructing a chronology (a list in order by date) of the major events that led to the filing of the divorce. Additionally, you should begin keeping careful records of new events and incidents as they occur. Simply note the date, what happened and any witnesses that may have observed it. In the unfortunate event that your case drags on, events will begin running together and your memory may fail you. Don’t rely on it.
Instead, keep an ongoing diary. Then provide this to your lawyer periodically so he is aware of any significant facts in your case.
I should note that you really should discuss this recommendation with your lawyer before implementing it. Some lawyers may not want you to have an ongoing record like this because it could be obtained by the other lawyer during the discovery phase of the trial (something that could have a negative effect on your case). Or, they may want you to take certain steps to attempt to protect it from begin discoverable by the opposing lawyer. These are technical legal issues beyond the scope of this blog. Suffice it to say that you need to talk this over with your lawyer first.
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Divorce Preparation: Step 12 – Consider a PI
Written by Jim JeffriesDivorce Preparation: Step 12 – Consider a PI
We continue our series on practical steps to consider when you are facing an imminent divorce. We are now on to Step 12 – Consider hiring a private investigator.
Alabama law does consider “fault” when deciding how to divide property in a divorce. Additionally, depending on the facts, adultery can affect custody determinations.
If your spouse is committing adultery, then you are better off having proof of it then not. This is the case even where you fully intend to settle your case. In fact, often having proof of an affair is what gets the case settled at terms that are fair to you.
It is not fun to find out your spouse has cheated, and you may be like many of my clients who have said they would rather not know. But, you should think carefully before making that decision. Talk to your lawyer. Assuming you’ve chosen a good one, listen to their advice. If you are going to get proof of it, now is the time. Your lawyer should be able to talk to you about the costs involved (it is not cheap) and how to improve your chances of making the surveillance effective, should you choose to go that route.
Divorce Preparation: Step 13 – Be Good
Well, we have finally reached the last step in this series of posts on practical steps to consider when you may be facing divorce. I will wrap up the series with two more posts to conclude and summarize the series. But, first, the final step which may seem a bit silly.
It is simply this: Be Good.
Here is the principle: you are about to be under a microscope. You are reading this blog, so I assume that you may be facing a divorce and you’d like to that unpleasant process to be as amicable as possible. Unfortunately, that is not always possible. Your spouse may not share that objective for some reason. They may be influenced by others (lawyers, friends, etc.) that convince them that what you are offering is not fair.
So, there is a chance that your case will end up going to trial no matter how diligent you and your lawyer are about trying to work the case out fairly and quickly. That being said, you should not put ammunition in the gun for your spouse to use against you.
That means no dating, no carousing, and no partying. If custody may be an issue it means making the children your number one priority (they should be that anyway, right?). Even things that are perfectly legal and harmless any other time can be twisted to look suspicious or worse in the hands of your spouse’s lawyer.
Suppose for example that you go out for dinner and drinks with members of the office to celebrate a fellow employee’s birthday. This sounds harmless enough. But, in a custody case these questions may be asked: While you chose to go out drinking with your friends, your spouse was at home taking care of the children, correct? Are you having a romantic relationship with Joe/Jane who was also at the party? How many drinks did you have that night? This is something you routinely did during the marriage, isn’t it (i.e. choosing social events over your family)? You drove home that night under the influence of alcohol didn’t you? Etc.
You get the point. This is a silly example, but why even open yourself up to this line of questioning. Don’t put the judge in the position having to decide whether you are telling the truth that this was a harmless and isolated event.
Spend time with your kids, work, stay around the house, exercise, and attend to your spiritual life. Be above reproach. Be Good. Come to think of it, Its not bad advice whether you are facing divorce or not.
As mentioned in the most recent post, we have reached the end of the series on steps to take when you are facing a divorce. Although there are other things to say on the subject, if you consider these steps and discuss them with your lawyer, it should ease the difficulty of the process.
I set out here the list of steps to consider in its entirety for easy reference:
2. Make an accounting of the family finances
2A. Determine what you own
2B. Determine what you owe
2C. Determine income (yours and your spouse’s)
3. Make photocopies of the financial records
5. Document and safeguard personal property
7. Assess the financial accounts
8. Address the credit accounts
9. Avoid additional debt or major purchases
10. Stay put
11. Keep a diary
12. Consider a private investigator
13. Be good
This recent article from The Oklahoman revisits some of the tax issues arising from divorce cases. According to the article and to my surprise, there are many divorcing spouses that do not realize that periodic alimony is included as income for tax purposes (don’t there lawyers explain this to them?). So, because taxes are not withheld, they are surprised in April to find out they owe taxes on all of the alimony received in a given year. The percentage will obviously depend on the recipient’s tax bracket.
My suggestion is to take 25% – 30% of each alimony check received and put it in a separate “tax account” to be used only at tax time to pay this obligation. I also recommend considering an ING Direct online account for this purpose. This account is currently paying 4% APR, which is better than most bank checking or savings accounts, and the money is liquid. Additionally, you link the ING account with your normal checking account and it is easy to make transactions into and out of the account online.
Also remember that if you want more in depth information, go to www.irs.gov and download publication 504, the tax guide for Divorced and Separated Individuals. Or you can access a pdf version here.
If you have any questions about the implications your divorce case will have on your tax situation, discuss it with your CPA or tax planner. The time to have that conversation is before the divorce is finalized.
A March 15, 2006, Wall Street Journal article points out the difficulty that spouses and former spouses are having in seeking Innocent Spouse Relief from the IRS. When you sign a joint income tax return with your spouse, you and your spouse are jointly responsible for the taxes, interest or penalties on those returns unless you qualify for innocent spouse relief. That means that under most circumstances, the IRS can collect the entire amount owed from either party.
When you claim the “innocent spouse” defense, you argue that you did not know and had no reason to know about any under reporting of income or other wrongdoing associated with the filing of the return and that therefore you should not be held responsible for paying any additional taxes, penalties or interest due.
According to the article the IRS has taken a renewed interest in enforcement, due in part to growing concern of the budget deficit. The article sites a recent report that states that of the nearly 50,000 innocent spouse claims received by the IRS in 2005, only 21% were allowed in full and another 8% were partially allowed.
The moral to the story: if you have even a hint of impropriety, do not sign a joint return. As a divorce lawyer, I would also add that if a divorce is imminent then before signing a joint return, talk to your lawyer about the implications first.
Note: I would link to the Wall Street Journal story but it is not available on wsj.com without a subscription. If you are a subscriber and have acces to the Journal online, you can go to the above link and do an article search for “Innocence in Tax Fraud” and it will pull up the article.
Also, you can download the IRS publication describing and explaining Innocent Spouse Relief here.
The Alabama Court of Civil Appeals recently issued an opinion in Buchanan v. Buchanan which addressed the issue of market fluctuations in retirement accounts. The facts in the case are common: husband and wife divorce, wife is awarded 50% of husband’s retirement account, the parties and/or their lawyers do not process the Qualified Domestic Relations Order to effectuate the transfer from Husband to Wife. Over three years later, the wife files a petition to hold the husband in contempt of court for failing to transfer her 1/2 of the retirement account.
Unfortunately for the parties, by then the value of the account had been reduced from $77,000 to $43,000 due to market fluctuations. The question was should the wife get 1/2 of $77,000 or 1/2 of $43,000? Who should bear the loss in value that occurred between the time of the divorce to the actual division of the accounts? The Appeals Court found that each party should share the market loss, which meant the wife would only get 1/2 of $43,000. The net result is that she lost $17,000 because a QDRO was not immediately prepared to divide the account.
I came across this article from the St. Louis Post-Dispatch. It is has some very good advice about the financial implications of divorce. I especially echo the advice regarding both spouses having a complete understanding of household finances. Not only is it helpful in the case of a divorce as this article points out, but it also seems to me to be a foundational communication issue in a good marriage. But, I continue to talk to clients who do not know their household financial picture because their spouse has kept them “out of the loop” regarding income, expenses, assets, and debts. That can be a costly mistake for a number of reasons. Don’t you make it.
I also found this nugget of statistical information that I had not heard before: Average length of a first marriage that ends in divorce: 8.2 years for men, 7.9 years for women, according to the Census Bureau. The eight year itch, I guess.
Here is a link to an article at MSN Money entitled 10 Steps to a Money Smart Divorce. The article generally contains good advice. Several of these steps are things that I routinely advise my clients to do (particularly the one about getting a copy of your credit report).
One word of warning though – one of the suggested steps is to close joint accounts. This can often be a good idea, but many jurisdictions in Alabama enter a standard Pre-trial Order of Court in every divorce case which expressly prohibits either party from closing joint accounts. So, before you do so, make sure you consult with your lawyer and that you understand any outstanding court orders that may prevent you from taking the proposed action.
According to a new study from Duke and the University Of Chicago that looked at the long-term health consequences of people who are married, divorced, widowed, remarried, and single.
Researchers found that people who had a disruption of marriage, like divorce or death, were in worse health than those who remained married.
Here is a link to the story.
A prospective client recently asked me whether or not she could receive a portion of her spouse’s retirement account in her upcoming divorce. I explained to her that in Alabama, if the parties have been married for 10 years preceding the filing of the divorce complaint, the court has the discretion to award them up to half of the value of the spouse’s retirement accounts that accumulated during the marriage.
The law firm of Ullman and Allen recently posted their Top Ten List of tax issues in divorce. The failure to consider the tax ramifications of a divorce settlement is one of the biggest mistakes made by parties and even their lawyers. #10 on their list is “Get professional advice.” I echo that and suggest that often that means getting your divorce lawyer together with your CPA to analyze potential tax consequences of a proposed divorce settlement. Thanks to Grant over at the Kansas Family and Divorce Law Blog for pointing me to the list.
9 Ways to Reduce the Pain and Expense of Divorce
Written by Jim JeffriesOne of my goals in helping families that are in the process of going through a divorce is to help them reduce the pain and the expense that is often associated with the process. I have written an article that outlines nine ways you can reduce the pain and expenses of your divorce case. I hope you find it helpful. And, if you know someone going through a divorce, feel free to pass it along.
9 Questions to Ask the Divorce Lawyer (Before You Write the Check)
Written by Jim JeffriesSelecting the lawyer that will represent you is one of the most important decisions that you will make in your divorce case. You should try to find a lawyer who is skilled, competent, and who regularly handles family law and divorce cases. Seek someone who is responsive and willing to communicate with you throughout the divorce process. Ask for recommendations from your friends and family members, but in the end, trust your own judgment.
Schedule a consultation appointment with the lawyer. This will give you an opportunity to evaluate how you are treated by the staff and will give you some time to interact with and interview the lawyer. After spending thirty minutes to one hour with the lawyer, you should have a good feel for whether he or she is the right lawyer for you. One factor that is often overlooked is whether a lawyer’s personality compliments yours. You divorce lawyer is someone with whom you will be sharing many intimate details of your life as well confidential financial information. He or she must be someone with whom you are comfortable and whom you trust.
I’ve included the questions to ask the lawyer in my upcoming book on Alabama Divorce. I will post an update here on the blog when the book is printed.
I’ve been reading a lot about the process called collaborative divorce.
Collaborative divorce is an alternative way for divorcing spouses to resolve their disputes without going to court. Although it is a relatively new approach, having only originated in the early 1990’s, it is quickly spreading throughout the country. The latest estimates are that there are approximately 200 different groups of lawyers that have joined together in associations to promotre and practice collaborative divorce. It seems like this might be an idea whose time has come.
For those of you that have had personal experiences in the collaborative divorce model, I welcome your feedback by direct e-mail or in the comments section. I am currently involved in a project to begin a collaborative divorce practice group in Alabama. As information on that effort develops, I will post about it here.
The Daily Breeze recently published an article on the finanical planning that divorcing spouses should consider. The article suggests that in addition to having good divorce attorneys involved, that divorcing spouses should also consider involving a “divorce savvy” finanical planner. One of the soundest pieces of advice that the artilce suggests is also something I always tell my divorce clients: get a copy of there credit report. You can usually get a free copy once a year from a service like www.freecreditreport.com.
The author also recommends removing your ex’s name from all joint bank accounts and considering whether you should refinance any joint debt that cannot easily be divided between the two of you.
Here is a link to the full article.
This is a question that comes up quite a bit in my work with couples going through a divorce in Alabama. It can often be a very emotional decision. Well, I recently came across a blog by Kansas divorce lawyer Shea Stevens. Shea is posting some great material. One of her recent articles was on this very issue – Should I Keep the House?
Take a look at the article, because although she addresses it to couples going through a divorce in Kansas, the same questions would apply in an Alabama divorce. The main point, like much of the divorce process in general is to make the decision with your head and not just your heart. Making an emotional decision to keep the house when you will not be able to afford it in the long run could lead to devastating finanical effects.
So, as Shea notes, before making any agreements with respect to your martial home, here are some things to think about:
- Can you afford to make the current monthly payment?
- Do you have the ability to refinance the home solely in your name?
- How much maintenance do you expect your home will need now, in the next year, 5 years? Can you afford this maintenance?
- What is your home really worth? How much equity do you have in the home? If you sold the home, would you come up short and have to pay off the mortgage, or would you make money? What is the home’s value in today’s market?
- If you are keeping the home, were you given enough assets on your side on the balance sheet to level out the division of property?
- Will your children have to switch schools if you move?
- Do friends and family live close by?
- Can you rent a home of the size suitable for your family for less or will you be paying approximately the same amount in rent as your mortgage payment?
Tips to Rebuild Your Life and Your Goals after Divorce contains some good advice. The information there is not really specific to Alabama divorce law. In fact, the article doesn’t really deal with divorce laws at all. Rather, the focus of the article is on how to move on with your life after divorce. And, on that note it is helpful.
Here is a summary of the tips there:
- Work through your grief
- Recognize your survival mechanisms
- Assess your talents
- Start living consciously
- Write your own story
- Develop a project for the future
- Plan for obstacles
- Deal with the fears
- Take incredible care of yourself along the way
Check out the link above to read the details for each step. If you are recently divorced or going through a divorce now, it is worth a read. The last tip is really what the entire article is about: taking care of yourself. When I am helping a client go through an Alabama divorce, I try to urge them to take care of themselves mentally, phyiscally, emotionally and spiritually. Often divorce attorneys are so focused on protecting our clients in their legal case, that it is easy to overlook these equally important issues of their health. So, not only is this a good article for someone going through divorce, it was a good reminder to me, as a divorce lawyer, to not lose site of this important aspect of my client’s life.
Alabama ranks high in divorce rates.
According to the U.S. Department of Public Health, Alabama’s divorce rate was 39% higher than the national rate in 2007.
A recent article in the Time Daily, reports that many churches in Alabama are responding by implementing Divorce care programs for their communities. Encouragingly, the article relates that many communities are also responding by implementing programs to strengthen marriage. In my experience as a practicing divorce attorney in Alabama, that is where the focus should be.
I encourage you to read the article.
A while back, I wrote a series of articles on Alabama Divorce Preparation. The article explored what someone facing divorce ought to do to best protect themselves under Alabama divorce laws. Recently, I have noticed that many people have been coming to this blog looking for information on Alabama divorce laws, but particularly on preparing for divorce.
For that reason, I thought it would be helpful to direct you to the final article I wrote on Alabama Divorce Preparation. If you visit that page, it will show you each of the 13 Steps I outlined and includes a link so you can get more information for each one. I hope it is helpful to you.
I read a lot of articles on divorce. I am always tracking what is going on in my field and trying to pass on good information to the readers of my Alabama Family Law Blog. Recently, I have noticed a lot of articles with the headline: How to Stop Your Divorce! I’ve noticed that most of these lead to sites that are selling some product to people facing divorce. Perhaps, some of these products are worthwhile. But, I can’t help but think some of these are simply an attempt to play on the emotions of someone going through one of the worst times of their lives.
The fact is, under Alabama divorce laws, if one of the spouses insists on a divorce, they are going to get it. There is nothing you can do to stop. You can make it take longer, and you can make it cost more money (but why would you want to?), but you can’t stop it. I tell my divorce clients all of the time, “It takes two people to decide to get married, it only takes one to decide to get a divorce.”
Can you try to convince your spouse to reconcile? Of course. Can you try to convince a spouse considering a divorce to not file and give it another chance. Sure. I always encourage reconciliation. And, if you are struggling in your marriage, a good book to take a look at is, The Divorce Lawyer’s Guide to Staying Married. The author is a divorce lawyer and in it, she interviews other divorce lawyers around the country. Because we see so many marriages that end in divorce, divorce attorneys have a unique perspective on the issue.
But, as far as these websites that promise to stop your divorce case, I would just be careful. A few sessions with a qualified marriage counselor or pastor will have a much better chance of being effective than an e-book slapped together by someone trying to capitalize on your desire to avoid divorce.
Resources
Mobile County Courthouse
Baldwin County Courthouse